European Committee Delays Capital Adequacy Proposals

Washington, DC, July 6, 2001 - The Basel Committee on Banking Supervision issued a press release in June stating that the Committee has decided to modify the timetable for completion and implementation of the new Basel Accord in light of numerous public comments received. The Committee intends to release a proposal for an additional round of consultations in early 2002 (instead of July 2001) and to finalize the new accord during 2002 (rather than the beginning of 2002). The Committee expects an implementation date of 2005 for the new accord.

In January 2001, the Basel Committee undertook a second round of consultations on a revised capital adequacy framework for banks, banking groups, and holding companies that are parents of banking groups. The Committee proposed to impose capital requirements for operational risk for the first time and to calculate those requirements based on operational risk of each business line, including asset management. The Institute submitted a comment letter to the Basel Committee because of the Institute's concern that the new Basel Accord that would take operational risks of asset management affiliates into consideration could have the unintended consequence of setting a capital adequacy standard for the asset management industry and would make judgements about operational risk in asset management without adequate analysis or consultation with securities regulators.

In its press release, the Committee highlights several decisions made with respect to the proposals. The Committee states that it intends to consider the numerous comments and suggestions it has received regarding operational risk.