Four U.S. federal banking agencies are to delay publishing new rules implementing Basel II to allow it to perform additional analysis on the impact of the new capital rules. And, they suggest that the new framework itself may have to be revised or delayed.

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision have agreed that additional analysis is needed before publishing a notice of proposed rulemaking with respect to the U.S. implementation of the Basel II capital adequacy framework for large banks.

The agencies had intended to publish the NPR at mid-year 2005, but agreed to a delay to better assess the results of a recently completed quantitative impact study (QIS4). The agencies agreed to issue the NPR at the earliest possible date after considering issues raised by the study’s results.

The impact study was designed to provide the agencies with a better understanding of how the implementation of the Basel II Framework might affect minimum required risk-based capital within the U.S. banking industry overall, at consolidated U.S. institutions, and for specific portfolios.

The agencies have received submissions from participating institutions and have completed a preliminary analysis of those materials, they report. And, they have determined that additional analysis beyond that previously contemplated is necessary before publication of an NPR. The study submissions suggest material reductions in the aggregate minimum required capital for the firms that participated in the study, and significant dispersion of results across institutions and portfolio types. Additional work is necessary to determine whether these results reflect differences in risk, reveal limitations of the study, identify variations in the stages of bank implementation efforts (particularly related to data availability), and/or suggest the need for adjustments to the Basel II Framework.

The banking regulators say that they remain committed to moving forward with the implementation of Basel II. The delay in issuing the NPR is intended to ensure that any proposed changes to the risk-based capital framework are consistent with safety and soundness, good risk management practices, and the continued competitive strength of the U.S. banking system. The agencies encourage institutions that seek to adopt Basel II-based rules at their inception to continue with their implementation efforts.

While the agencies continue to target the existing implementation timeline for Basel II, they note that the additional work they’re undertaking may cause them to revisit this timeline.