Thursday, June 29, 2006
US FDIC - Basel II safeguards
US FDIC - Basel II safeguards not too restrictive
Fri May 19, 2006 9:45 AM ET
Printer Friendly | Email Article | Reprints | RSS (Page 1 of 2)
CHICAGO, May 19 (Reuters) - U.S. regulators should be careful and prudent in managing capital in the bank system because they should not assume economic conditions will continue to be benign, the acting chairman of the Federal Deposit Insurance Corp. said on Friday.
Martin Gruenberg, speaking to the Conference of State Bank Supervisors in Norfolk, Virginia, said safeguards proposed by regulatory agencies to control how much capital can decline under new international standards were not unduly restrictive.
"We should keep in mind that the United States has enjoyed an unusual period of sustained economic growth with only a mild recession over the past decade," Gruenberg said, according to a copy of his prepared remarks.
"It would be a mistake to take for granted that the next 10 years will be equally benign. We should be cautious and prudent in making changes to our system of bank capital," he said.
U.S. bank regulators have proposed rules to guide the domestic implementation of an international capital accord known as Basel II.
The draft rules aim to ensure banks maintain prudent capital cushions by slowing down and setting more conservative steps for U.S. adoption of the agreement.
Specifically, the proposal sets out safeguards that require continual regulatory review and a multiyear transition that includes capital floors to keep capital from declining too quickly or too far.
Gruenberg said that among regulators' objectives in the proposed regulations, they sought to broadly maintain the overall level of risk-based capital requirements and set a 10 percent downward limit on the aggregate reduction allowed in minimum risk-based capital.
The rules also aim to create a level playing field between institutions that adopt the Basel II rules and those that do not, among other things.
"This is a critically important point, in my view," Gruenberg said.
"Basel II should not tilt the playing field toward either group. The (proposed rule) makes clear that the agencies will be prepared to make fundamental changes in the framework, if necessary, to address this issue," he said.
The proposal was announced by the Federal Reserve in March. It is now being reviewed by the U.S. Office of Management and Budget, which is required for two bank regulatory agencies -- the Office of Thrift Supervision and the Office of the Comptroller of the Currency -- because they are part of the U.S. Treasury Department.
It is the second attempt at draft rules by the bank regulators and comes after a test-run of the standards yielded a surprising drop in capital at U.S. banks. That pushed Congress to call for a re-evaluation and led regulators to delay implementation even though banks elsewhere in the world moved ahead.
Basel II updates 1988 standards. If adopted in the United States, the rules would be phased in between 2008 and 2011 at the earliest.
They are intended to align bank capital standards around the world and prevent a financial crisis in one corner of the globe from spreading. At the same time, they seek to recognize that different assets pose different risks, and that banks should be allowed to hold less capital for less risky assets.
Only the largest internationally active U.S. banks are expected to adopt the new rules.
© Reuters 2006. All Rights Reserved.
http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=20 06-05-19T134503Z_01_N19449901_RTRIDST_0_FINANCIAL-BASEL.XML
Fri May 19, 2006 9:45 AM ET
Printer Friendly | Email Article | Reprints | RSS (Page 1 of 2)
CHICAGO, May 19 (Reuters) - U.S. regulators should be careful and prudent in managing capital in the bank system because they should not assume economic conditions will continue to be benign, the acting chairman of the Federal Deposit Insurance Corp. said on Friday.
Martin Gruenberg, speaking to the Conference of State Bank Supervisors in Norfolk, Virginia, said safeguards proposed by regulatory agencies to control how much capital can decline under new international standards were not unduly restrictive.
"We should keep in mind that the United States has enjoyed an unusual period of sustained economic growth with only a mild recession over the past decade," Gruenberg said, according to a copy of his prepared remarks.
"It would be a mistake to take for granted that the next 10 years will be equally benign. We should be cautious and prudent in making changes to our system of bank capital," he said.
U.S. bank regulators have proposed rules to guide the domestic implementation of an international capital accord known as Basel II.
The draft rules aim to ensure banks maintain prudent capital cushions by slowing down and setting more conservative steps for U.S. adoption of the agreement.
Specifically, the proposal sets out safeguards that require continual regulatory review and a multiyear transition that includes capital floors to keep capital from declining too quickly or too far.
Gruenberg said that among regulators' objectives in the proposed regulations, they sought to broadly maintain the overall level of risk-based capital requirements and set a 10 percent downward limit on the aggregate reduction allowed in minimum risk-based capital.
The rules also aim to create a level playing field between institutions that adopt the Basel II rules and those that do not, among other things.
"This is a critically important point, in my view," Gruenberg said.
"Basel II should not tilt the playing field toward either group. The (proposed rule) makes clear that the agencies will be prepared to make fundamental changes in the framework, if necessary, to address this issue," he said.
The proposal was announced by the Federal Reserve in March. It is now being reviewed by the U.S. Office of Management and Budget, which is required for two bank regulatory agencies -- the Office of Thrift Supervision and the Office of the Comptroller of the Currency -- because they are part of the U.S. Treasury Department.
It is the second attempt at draft rules by the bank regulators and comes after a test-run of the standards yielded a surprising drop in capital at U.S. banks. That pushed Congress to call for a re-evaluation and led regulators to delay implementation even though banks elsewhere in the world moved ahead.
Basel II updates 1988 standards. If adopted in the United States, the rules would be phased in between 2008 and 2011 at the earliest.
They are intended to align bank capital standards around the world and prevent a financial crisis in one corner of the globe from spreading. At the same time, they seek to recognize that different assets pose different risks, and that banks should be allowed to hold less capital for less risky assets.
Only the largest internationally active U.S. banks are expected to adopt the new rules.
© Reuters 2006. All Rights Reserved.
http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=20 06-05-19T134503Z_01_N19449901_RTRIDST_0_FINANCIAL-BASEL.XML
# posted by tagthatstock @ 4:45 PM
FOMC minutes- read slowly many times over
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.
Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.
Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.
Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas.
Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.
Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.
Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas.
# posted by tagthatstock @ 2:31 PM
wallstreets ignorance strike again
i remember a day in april when mr.b said 1 thing,,, the media and cnbc 'translated' and the market rallied big.thats when i got my families/friends 401k etc into cash. markets didnt re-listen/read what he said until he made the direct statement to maria something to the effect: no the markets re-acted wrong to what i said.
basically, wallstreet has taught people to ignore the actual words in favor of a tie (or suitcase in greenspans era) until a pretty face tells you otherwise.
housing/re bubble (all classes) next is retail bubble,, tech is starting to show us this NOW,, PALM (revs=sales= people at the checkout)
basically, wallstreet has taught people to ignore the actual words in favor of a tie (or suitcase in greenspans era) until a pretty face tells you otherwise.
housing/re bubble (all classes) next is retail bubble,, tech is starting to show us this NOW,, PALM (revs=sales= people at the checkout)
# posted by tagthatstock @ 2:29 PM
