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US Basel II safeguards ‘highly appropriate’, says FDIC head

WASHINGTON, May 19 (Global Risk Regulator) – Safeguards placed on the US implementation of the Basel II bank safety rules are highly appropriate, given the uncertainty about the final outcome in terms of bank capital levels, a top US federal banking supervisor said today.

Federal Deposit Insurance Corporation (FDIC) acting chairman Martin Gruenberg said “some may question the prudential safeguards that the (federal banking supervisory) agencies have put in place for the proposed implementation of Basel II as unduly restrictive.” The FDIC insures customer deposits held by US banks.

The Federal Reserve Board, which oversees the US central banking system, approved a draft of the delayed and revised notice of proposed rulemaking, or NPR, on Basel II, and released it in draft form, at the end of March. But the formal approval process for the NPR is not expected to be completed before the end of next month.

Initial reaction to the Fed’s NPR among bankers was that it made the Basel II rules as proposed for the US more conservative and difficult than elsewhere in the world (see Global Risk Regulator newsletter, April 2006).