business. basel ii can also provide supervisors with a more conceptually consistent and more transparent framework for assessing the linkage of risk and capital over time at our most complex institutions ; identifying which institutions have deficiencies ; and, ultimately, evaluating systemic risk in the banking system. therefore, basel ii establishes a more coherent relationship between how supervisors assess regulatory capital and how they supervise the banks, enabling examiners to better evaluate whether banks are holding prudent capital levels, given their risk profiles, and to better understand differences across institutions. compared with the current framework, basel ii is more able to accommodate new products and transaction types and to provide meaningful capital measures for the risks embedded therein. as the central bank and the supervisor of banks, bank holding companies, and financial holding companies, the federal reserve is committed to ensuring that the basel ii framework delivers a strong and risk - sensitive base of capital. that is why we support safeguards to ensure strong capital levels during the transition to basel ii, and why we will remain vigilant in monitoring the ongoing impact of basel ii. this means that during and after the transition to basel ii, supervisors will rely on ongoing, detailed analyses to continuously evaluate the results of the new framework and ensure prudent levels of capital. to be quite clear, the federal reserve believes that strong capital is fundamentally important to the health of our banking system. we believe basel ii will be a strong contributor to our tradition of ensuring that u. s. banks maintain capital levels that provide an appropriate cushion against risk - taking. as we have stated before, we will continue to use existing prudential measures to complement basel ii. for example, the current leverage ratio requirement - - a ratio of capital to total assets - - will remain unchanged for all banks, whether or not they are subject to the basel ii framework. also, supervisors will continue to enforce existing prompt - corrective - action - requirements in response to declines in capital. both the leverage ratio and prompt corrective action are fully consistent with basel ii. proposed amendments to basel i before i end my remarks about regulatory capital, i would like to offer some thoughts about ongoing efforts to revise existing regulatory capital rules, known as basel i. first of all, we expect only one or two dozen banks to move to basel ii in the near term. that is, the vast majority of u. s. banks would be able to continue operating safely and soundly under basel i, as it is amended through the rulemaking process

roger w ferguson, jr : statement on renomination to the board of governors of the federal reserve system testimony of mr roger w ferguson jr, vice - chairman of the board of governors of the us federal reserve system, before the committee on banking, housing, and urban affairs, us senate, 13 june 2001. * * * chairman sarbanes, senator gramm, and members of the committee, i am pleased to appear before you today as president bush's nominee to serve on the board of governors of the federal reserve system. i am honored that the president has nominated me to serve a full term as a member of the board. as a governor, i am particularly mindful that the policy decisions of the federal reserve influence the economic well - being of all americans. it has been my privilege to serve our fellow citizens in this capacity since 1997, giving this role my undivided attention, and i hope to be able to continue in that service. during my tenure we have faced a rapidly changing environment in many of our areas of responsibility, and i would like to review briefly some of those developments and our responses to them. congress has given the federal reserve three monetary policy objectives : maximum employment, stable prices and moderate long - term interest rates. we have viewed these objectives as congruent with a goal of maximum sustainable growth, which can occur only in the context of long - run price stability. fostering financial conditions in which americans can realize the full productive potential of our economy has presented a number of challenges in recent years. the most important developments have been a step - up in the advance of technology – both in terms of the production of new goods and the more effective harnessing of past innovations – and a rapid accumulation of physical capital. these developments have made workers increasingly more productive. but faster productivity growth fed back on the demand for goods and services in ways that complicated the calibration of monetary policy. faster growth in productivity and the reactions of businesses and households to this acceleration of productivity have combined with other forces - particularly those associated with the growing interconnectedness of the global economy - to require substantial adjustments in the federal reserve's policy interest rate in recent years. but those adjustments in our policy instrument have been in the service of our objective of promoting maximum sustainable growth. making monetary policy has been only part of the challenge. during my tenure at the federal reserve we have also worked diligently to communicate to the public what we are doing with policy and why. transparency