these data for banks, unfortunately, were for a limited period, and additional data that recently came to our attention for other lenders for a longer period produced conflicting evidence. although our supervisory judgment still is that some of these exposures have high asset correlation, the mixed evidence does not support our position to the standard we believe necessary for applying such a distinction in the regulatory framework. consequently, the anpr to be released next month will propose that all cre loans in the united states for in - place properties be on the low asset correlation function, as all c & i loans are. we will propose for comment the cp3 approach to adc loans, with certain exceptions. however, in reflection of supervisory concerns and judgment, we will propose that estimates of loss given default - a key risk parameter under basel ii - for cre loans on in - place properties be based on historical loss rates during periods of high default. this approach, we believe, will capture some of the risk that has historically accompanied such exposures. i would like to emphasize that this change in position reflects the evidence that was provided to us to supplement the evidence we gathered ourselves. it shows the willingness of the regulators to remain open - minded about the basel ii proposals, so long as comments are based on analysis and evidence and remain consistent with the objectives of basel ii. summary i will conclude by just noting a few highlights. the u. s. authorities are proposing that in this country the a - irb and ama approaches of basel ii be required of only the large, internationally active banks that meet certain criteria for size and foreign activity and be permitted to any bank that meets the infrastructure prerequisites of the a - irb and ama approaches. all other banking organizations would remain under basel i. the proposal does not offer the basel standardized or foundation irb approaches as additional alternatives. this proposal, the authorities believe, is consistent with a level playing field internationally in that it requires the banks that compete materially across national boundaries to be under a basel ii capital regime. it would apply the most sophisticated option to the largest u. s. organizations for which better risk measurement and risk management are most critical. it permits u. s. organizations that wish to choose the more - sophisticated approaches to do so. but it avoids additional costs and burdens on most u. s. banking organizations - those that have less pressing needs for improved risk - management techniques and already have high capital positions, are effectively subject to pillar ii supervisory oversight

to hold additional capital for risks, such as concentrations, that the basel i rules do not capture directly. for the united states banking authorities, pillar ii of basel ii requires nothing new. finally, banks in this country have for quite a while disclosed their capital ratios. the banks that are publicly held and those that issue publicly held securities are required to disclose even more data, although admittedly less than the requirement proposed under pillar iii of basel ii. moreover, even for smaller banking organizations, considerable information is publicly disseminated - for example, through our call reports - and is available for counterparties. when the u. s. authorities considered the cost - benefit ratio of requiring thousands of our banks to become subject to basel ii - presumably the standardized version - we saw the benefits as ( 1 ) only slightly more risk sensitivity in the calculation of the minimum regulatory capital requirements under the standardized version that presumably these banks would select, and ( 2 ) more disclosure under pillar iii. in exchange, smaller banks ( 1 ) would have to bear additional costs, even though they already maintain far more capital than any change in the required regulatory minimum would produce ; would not need, nor be required to adopt, any different risk - management techniques under the standardized approach ; ( 3 ) would benefit from no new supervisory oversight under pillar ii ; and already disclose considerable information. for all these reasons, the u. s. authorities did not believe that requiring most u. s. banks to bear the cost of shifting from basel i - based rules to basel ii was reasonable. of course, supervisors of banks using basel i - based rules in the united states will continue to seek a full understanding of each bank's process for risk measurement and management as part of their usual efforts to fully evaluate a bank's operations. asking questions about these important management responsibilities is simply a part of appropriate supervisory oversight. i underline that not many jurisdictions outside the united states have smaller banks - those likely to move to the standardized version if they adopt basel ii - with the capital position, the intimate supervisory review, or the existing disclosure rules of u. s. banks. thus, the proposal in this country has no implications for the desirability and benefit of applying basel ii to smaller banks in other jurisdictions that might benefit significantly from the standardized basel ii approach. indeed, the u. s. experience proves the value of enhanced supervision and greater transparency even for the smallest institution. implications for the treatment of u. s. banks abroad as many of