organizations in the united states - those that our screening criteria determine to be core banks - should be subject to the most sophisticated version of basel ii. to be clear, we are not proposing to implement either the standardized or the foundation internal - ratings - based ( f - irb ) approaches within the united states. the twenty banks that we are assuming will be under basel ii in this country either by, or shortly after, the initial implementation date would account for about 99 percent of the foreign assets held by the top fifty domestic u. s. banking organizations. we believe that this high percentage clearly signals our intent to meet our obligation to ensure cross - border competitive equality of capital regimes. that the same twenty banks also currently account for approximately two - thirds of the domestic assets of u. s. banking organization indicates their importance to our banking and financial system. these entities must operate under the best risk - management standards with the most risk - sensitive capital treatment. we do not intend to require the thousands of other banking organizations in the united states, including u. s. subsidiaries of foreign banks that do not meet the mandatory criteria, to adopt basel ii. unless they choose to adopt basel ii, they will remain under our current regulatory capital rules, which are based on basel i. those banks remaining under basel i will not be subject to an explicit regulatory capital charge for operational risk. to be sure, any of these organizations can choose the basel ii requirements whenever they want, provided they meet the infrastructure prerequisites of the a - irb and the ama approaches to basel ii. we believe that the cost - benefit nexus will make this option infeasible for most of these banks in the years immediately ahead, but ultimately that decision resides with the banks themselves. nonetheless, as the cost of risk - management techniques decline with their wider dissemination and as counter - parties and stakeholders seek the comfort that comes with banks'application of more - sophisticated risk - management techniques, the larger regional banks may wish to migrate from rules based on basel i to those based on basel ii. even if larger regional banks do not formally choose to operate under basel ii for regulatory purposes, we expect they may wish to make use of the risk - management process that underlies basel ii. indeed, i should emphasize that the movement toward more - sophisticated risk management, the prerequisite of a - irb and ama, is occurring, and would continue to occur, independent of basel ii. this movement is clearly a market trend reflective

of banks. before highlighting some of the most significant provisions of the interim final rules that we believe must be modified, a brief background of the treatment of banks under the securities exchange act of 1934 and the purposes of the glb act's bank securities provisions is useful. history of the bank exception and bank securities activities in 1934, the congress first adopted a federal scheme requiring all entities that act as securities brokers or dealers to register with the sec. the securities exchange act of 1934, however, specifically exempted all banks from the definitions of " broker " and " dealer " and, accordingly, did not require banks providing securities services to their customers to register with the sec as brokerdealers. although the ability of banks to underwrite, deal in, and purchase securities was limited by the glass - steagall act of 1933, banks continued to have the ability to buy and sell securities for the account of their customers and to buy and sell securities for their own account when specifically authorized by law. the congress recognized that these permissible securities activities were already supervised and examined by the appropriate federal and state banking authorities and that subjecting these activities to an additional layer of regulation was not necessary or appropriate. in fact, one of the primary purposes of the securities exchange act of 1934 was to subject nonbank stockbrokers and securities traders to the type of government supervision and examination that was already applied under the banking laws to banks. long before 1934 and since, banks have offered their customers securities services in a variety of circumstances in connection with their banking activities. for example, banks have long bought and sold securities for their trust and fiduciary customers. these services are an essential part of the trust and fiduciary operations of banks - operations that have long been considered a core banking function. banks that have discretionary investment authority over a trust or fiduciary account purchase and sell securities for the account to ensure that the account is properly diversified and managed in the manner required by the governing trust agreement and applicable fiduciary principles. banks also provide investment advice concerning securities, real estate, and other assets to non - discretionary fiduciary accounts, and have long been able to execute securities transactions for these accounts. another core banking function is providing custody and safekeeping services. the five largest global custodians are banks, and banks, both large and small, act as trusted custodians for the securities, real estate, and other assets of customers. one