, let me briefly touch upon a few of the issues and challenges that could emanate from the adoption of basel ii framework, particularly, in the indian context. first, it is understood that the basel ii framework provides for as many as about 130 areas of national discretion to be exercised by the country supervisors, as per local conditions. thus, it has been argued that potentially, there could be 130 variations of the new framework under different jurisdictions. if that be the case, the international comparability of the bank - capital standards would be difficult to achieve across the countries and perhaps, the original objective of reducing the international competitive inequality amongst the banks could get compromised. second, with migration to the advanced approaches in future, the banks following the advanced approaches are likely to have a more risk - sensitive architecture for capital computation compared to those on the standardised approach. this could potentially lead to the riskier assets gravitating towards the banks on the less - risk - sensitive standardised approach, which would need lower capital for such assets than the banks on the advanced approaches, while the high quality assets flowing to the banks on the advanced approaches. this could ultimately result in a lower amount of capital in the system as a whole, which might not be a very welcome prospect, specially from the supervisory perspective. third, while the pillar iii disclosures could be quite useful for the market analysts and sophisticated users of this information, the utility of such disclosures for the common man remains a moot point. besides, the disclosures under basel ii will also need to be harmonised with those required under the international financial reporting standards so as to avoid any conflicts and excessive burden of disclosure. fourth, in the indian context, the rating penetration is very low and is generally confined to the larger corporates while the smaller entities are generally unrated. with the adoption of the standardised approach in india, which places heavy reliance on the external rating of the bank clients, a view has been expressed that the small and medium enterprises, which are below the rating threshold, may get somewhat handicapped in availing bank credit in the absence of credit rating. this may perhaps call for special efforts to maintain the credit flow to this segment of the borrowers. fifth, the risk sensitive approach of the basel ii framework is likely to give rise to procyclicality in the capital requirements of the banks since in an economic downturn, the capital requirements would rise but will decline during an economic boom. it is argued that such

john c williams : good day sunshine remarks ( via videoconference ) by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the midsize bank coalition of america, 21 june 2021. * * * hello, everyone. it ’ s a pleasure to speak with you today. the summer solstice was yesterday evening, making today one of the longest days of the year. but please rest assured that i won ’ t take advantage of that and go on for too long. that way, there will be plenty of time for me to answer your questions. the good thing about virtual meetings like this one is that i get to speak with people from across the country with the click of a button. but i also know that there is nothing more heartwarming than when families and friends are finally able to get back together in person after all this time. indeed, we are starting to see “ the smiles returning to the faces, ” and i mean that now quite literally. today i ’ m going to talk about three things : first, i ’ ll briefly discuss the transition away from the london interbank offered rate ( libor ), a topic of particular relevance to this audience ; second, i ’ ll talk about the outlook for the economy and where we are in the recovery ; and finally, what that means for monetary policy. before i continue, let me give the usual disclaimer that the views i express are mine alone and do not necessarily reflect those of the federal open market committee ( fomc ) or anyone else in the federal reserve system. the final countdown i ’ ve spoken about the libor transition many times before, 1 but the message bears repeating, especially now that we ’ re only about six months away from moving off of libor, once and for all. during this critical time, it ’ s important to focus on building a strong and robust foundation for the future so that we never have to go through a transition like this one again. that ’ s why when it comes to choosing a libor replacement, you need to be confident that the rate you use is appropriate and will hold up even under stress. at the financial stability oversight committee ( fsoc ) meeting earlier this month, fsoc members highlighted risks around reference rates that share many of libor ’ s shortcomings, such as being based on thinly - traded markets. 2 the alternative reference rates committee ( arrc ) studied this issue