variations of long - standing challenges faced by bankers and supervisors in the context of cross - border banking. that is, many of the issues under discussion are not necessarily new, but just made more complicated by the framework. however, we do understand the concerns of bankers surrounding basel ii and how it will actually be applied in various jurisdictions. the good news is that supervisors are already building upon their existing relationships to accommodate differences in national jurisdictions and minimize the burdens placed on banks. the federal reserve has a long history of working constructively with other national supervisors. to date, we have met many times about basel ii implementation and how proposed rules and practices might be reconciled. while such cooperation and information sharing can go a long way to reducing the burden placed on bankers, at the end of the day we must still realize that national jurisdictions still matter. we can work to harmonize differences, but it is probably not practical to imagine that they will be eliminated entirely. conclusion i hope that i have offered some useful information today about basel ii implementation in the united states and the federal reserve's position on certain issues. clearly, the qis4 results have generated some concerns and an element of uncertainty still exists about the full impact of basel ii in the united states. we at the federal reserve clearly see some 3 / 4 important issues that will require further analysis, but believe they would be best resolved by gathering better - quality data and information that can only come as banks progress in implementation of basel ii requirements. to facilitate that progress, it is important that the united states move forward with the basel ii npr to provide greater clarity with respect to expectations. additionally, qis4 estimates were not based on the finished models that banks will use to implement basel ii, and several years lie between now and when u. s. banks would operate under basel ii. perhaps more importantly, the federal reserve is unequivocally committed to maintaining adequate levels of capital in our banking system and at individual institutions, in order to maintain safety and soundness. one of the most important aspects of basel ii pertains to improved risk management, and having banks move forward in that area can only bring benefits. obviously, in moving ahead we would adhere to the established protocols and procedures for implementing domestic rules in the united states - - including additional comment periods and opportunity for the banking industry, congress, and others to express their views. at this point, we believe, the best way for the industry and others to provide useful comments is to

susan schmidt bies : basel ii developments in the united states remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, before the institute of international bankers, washington dc, 26 september 2005. * * * i would like to thank the institute of international bankers for the opportunity to offer some remarks today. i am honored to be on a panel with such esteemed colleagues. my remarks will touch on the latest developments with the basel ii capital revisions, including the u. s. implementation process and progress on home - host issues. background as some of you know, we are in our seventh year working on basel ii, and still several years away from full implementation. some might bemoan this long formative period, but we must all remember that an international undertaking of this magnitude takes substantial time to complete. part of the reason for the long gestation period is that we have been purposely transparent about the proposals, taken substantial time to listen to industry and other public comments, and worked diligently to make the framework better in response to those comments. in addition, this is an international agreement for which a certain " common denominator " had to be found to accommodate the variety of banking and financial systems involved. from the perspective of the federal reserve, we consider the work to be well worth it, given the objectives. as you know, in the united states we have decided to implement only the advanced approaches of basel ii and make it mandatory for only the largest, internationally - active banks. we are moving along a parallel path to amend current basel i rules for the vast majority of u. s. financial institutions. broadly speaking, in developing basel ii we are striving to establish higher standards for internal risk management at complex banking organizations, including capital adequacy, and to improve both the supervisors'and the public's understanding of banks'risk taking and risk management. indeed, one of the main reasons we started down the basel ii path was to better align regulatory capital with what banks are actually doing in practice to manage risks and the level of risk exposures. over the past two decades, major banking organizations have become ever larger and more complex ; most national banking systems look quite different than they did nearly two decades ago when basel i was developed. market changes and increased sophistication in risk - management techniques require that we now update that initial basel framework, as it applies to the largest institutions. a fundamental premise of basel ii