has already been amended more than twenty - five times in response to changes in banking products and the banking environment and as a result of a better understanding of the risks of individual products and services. the u. s. agencies believe that now is another appropriate time to amend the basel i rules. the u. s. agencies have issued an advance notice of proposed rulemaking discussing possible changes to enhance the risk sensitivity of u. s. basel i rules and to mitigate potential competitive distortions that might be created by introducing basel ii. we are now in the process of reviewing the comments and working on a draft notice of proposed rulemaking. we are mindful that amendments to basel i should not be too complex or too burdensome for the large number of banks to which the revised rules will apply. with regard to both basel ii proposals and proposed basel i amendments, we understand the need for full transparency. for that reason, we expect to have overlapping comment periods for both the basel ii npr and the npr for the proposed basel i amendments. in fact, we want all interested parties to compare, contrast, and comment on the two proposals in overlapping timeframes. accordingly, our proposals could change as a result of comments received or new information gathered by the u. s. agencies. cross - border implementation of basel ii as i noted earlier, each country must implement basel ii as appropriate for the particular jurisdiction. to that end, the u. s. agencies are taking actions to ensure that implementation in the united states is conducted in a prudential manner and without generating competitive inequalities in our banking sector. we recognize that the differing approaches to basel ii that are being adopted by various countries may create challenges for banking organizations that operate in multiple jurisdictions. it is good to remember that cross - border banking has always raised specific challenges that supervisors from various countries have worked hard to address. let me assure all bankers here that supervisors are aware that the process of change to new national versions of basel ii has heightened concerns about home - host issues. the federal reserve and other u. s. agencies have, for many years, worked with international counterparts to limit the difficulty and burden that have arisen as foreign banks have entered u. s. markets and as u. s. banks have established operations in other jurisdictions. the u. s. is working to complete its national standard setting process since we recognize that the lack of a final rule raises uncertainty for both banks and foreign supervisors about exactly what will be required

, and to limit the requirement of basel ii to only a small number of banking institutions that fit the definition of large, complex, and internationally active. it is also important to recognize that basel ii is a complete capital framework consisting of three pillars. while much of the focus to date has been on the calculation of minimum regulatory capital in pillar i, it should be remembered that pillar 2, which provides for supervisory oversight of an institution ’ s overall capital adequacy, and pillar 3, which requires enhanced transparency via disclosure, are also important parts of this new framework. let me assure you that we at the federal reserve would not be pursuing basel ii if we thought that it would in any way undermine the strong capital base that u. s. institutions now have. as a central bank and a supervisor of banks, bank holdings 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 for our largest and most complex banking institutions. that is why we supported moving ahead with the npr, which includes modifications to address concerns identified in the fourth quantitative impact study, known as qis4, and additional safeguards to ensure strong capital levels during the transition to basel ii. we will remain vigilant in monitoring and assessing basel ii ’ s impact on individual and aggregate minimum regulatory capital levels on an ongoing basis. as an extra degree of precaution, the u. s. banking agencies also decided to delay for a year the start of the parallel - run period. starting with the parallel run, and both during and after the transition to basel ii, the federal reserve will rely upon ongoing, detailed analyses to evaluate the results of the new framework to ensure prudent levels of capital. basel ii represents a major shift in how we think about regulatory capital, especially as we will implement it in the united states. it is complex, reflecting the complexity of risk measurement and management for the largest, most complex banking institutions, and the banking institutions and the supervisors will need to have ongoing dialogue and work diligently to make sure it is working as we expect it to. but we believe it is a powerful approach to making regulatory capital more risk - sensitive. to be quite clear, the federal reserve believes that strong capital is critical to the health of our banking system, and we believe that basel ii will help us continue to ensure that u. s. banks maintain capital levels that serve as an appropriate cushion against their risk -