# O **NEWS RELEASE**

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| ## Comptroller of the Currency      | ##### NR 2002-17               |
|                                     |                                |
| Administrator of National Banks     |                                |
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FOR IMMEDIATE RELEASE Contact: Robert M. Garsson

March 4, 2002 (202) 874-5770

**Comptroller Hawke Says Good Progress is Being Made on Capital
Accord,**

**Although Many Thorny Issues Remain to be Worked Out by Basel
Committee**

WASHINGTON \-- Comptroller of the Currency John D. Hawke, Jr. said today
that the Basel Committee on Bank Supervision is making good progress
toward developing a new capital accord to replace the international
agreement that was put in place in 1988, although a number of thorny
issues remain to be worked out.

The Comptroller said that an overriding objective of his, as the
Committee works toward a new accord, is that the competitive vitality of
U.S. banks not be impaired and that banks not be placed at a competitive
disadvantage to other financial service providers.

The Comptroller praised New York Fed president William J. McDonough for
keeping the process moving forward. Mr. McDonough, he said, has kept the
committee on point and moving in the right direction.

One of the most difficult issues facing the committee, Mr. Hawke said,
is how to deal with operational risk.

"A one-size-fits-all approach to operational risk \-- such as a
formulaic capital charge based on some percentage of gross revenues or a
percentage of the charge for credit risk \-- while simple to apply,
would disadvantage the best managed banks and provide undeserved
advantage to the worst managed," he said.

Worst of all, he added, it would provide no incentive to improve
internal control systems. For that reason, Mr. Hawke has argued that
operational risk is particularly well suited for a Pillar 2 approach \--
supervisory review. The other two pillars of the Basel proposal are
minimum capital and market discipline.

Securitization is another area of concern, Mr. Hawke said. "While we
must address the real risks here, we need to do so with care, so that we
don\'t needlessly or unintentionally disrupt an important market," he
explained.

-more-

Finally, Mr. Hawke stressed the need to avoid excessive complexity in
the proposal. It is essential, he said, that the new rules be stated in
as clear and concise a manner as possible.

"Bankers, examiners, legislators, and policy makers need to be able to
comprehend the structure and content of the new accord without having to
plow through reams of mathematical minutiae," he said.

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