to publish for public comment a set of proposed rules that would provide an optional capital framework – basel committee on banking supervision announcement on strengthening the banking system, http : / / www. bis. org / press / p080416. htm. known as the standardized approach – for those banks not subject to the advanced approaches of basel ii. the proposed standardized approach would help increase risk sensitivity and foster competitive equity. since we have not yet formally issued the proposed rules for public comment, i will provide just a brief overview on aspects of the proposal that the agencies have already discussed publicly. the proposed u. s. standardized approach will be based on the approach of the same name in the international basel ii framework, modified in some areas to suit the u. s. banking system. the standardized approach would enhance risk sensitivity by increasing the number of risk - weight categories to which a bank would assign credit exposures. it also would increase capital requirements for certain off - balance sheet exposures, such as liquidity commitments, and allow for broader recognition of credit risk mitigants, such as collateral and guarantees. in addition, the approach will include a specific capital requirement for operational risk. banks not required to adopt the basel ii advanced approaches are facing a choice about whether to opt - in to them. some of these banks may be sophisticated institutions that exhibit sound risk management, but they might not wish to undertake the extensive effort to meet the advanced approaches of basel ii. the agencies recognize that such institutions should be afforded an alternative to more - risk - sensitive capital requirements, one not as complex as the advanced approaches. therefore, the proposal is being developed as an optional riskbased capital framework for all banking organizations not required to adopt the basel ii advanced approaches. we plan to retain our existing basel i - based regulatory capital framework for those banks that would prefer to remain under that regime. i encourage all interested parties to review and comment on this proposal once it has been issued. we are keenly aware of the need for capital requirements to make sense from a standpoint that considers safety, soundness, and competitiveness ; we recognize that a onesize - fits - all approach is probably not the best for our banking system, in light of our wide range of institutions. we remain sensitive to the principle that if we have multiple regulatory capital frameworks they must work together to support the safety and soundness of our entire banking system without artificially creating competitive inequalities. conclusion my remarks today have focused

credit, private parties may be persuaded that avoiding such an outcome is in their self - interest. but central banks must be careful that moral suasion is not perceived as coercion or an implied promise of official indemnification for private losses. if the central bank concludes that it must lend to individual depository institutions to avoid significant economic disruption, in most situations any such loans should be on terms sufficiently onerous to discourage reliance on public - sector credit. the federal reserve tries to find the approach that reduces the odds on economy - wide spillover effects while interfering as little as possible with the market and allowing people and institutions to suffer the consequences of decisions that turn out to be bad. nearly every major bout of financial instability has called for some degree of monetary easing - most often only temporarily until the threat of the low - probability but high - cost economic disruption has passed. other tools have been used occasionally, and an assessment of their costs and benefits has depended on the nature of the crisis. moral suasion was an element in dealing with the panicky private - sector actions associated with the sharp and apparently self - feeding market price breaks of 1987 and 1998. lending through the discount window helped to promote an orderly unwinding of distressed institutions in the period of prolonged and widespread problems among important intermediaries in the late 1980s and early 1990s. and such lending was crucial in getting liquidity to the right places after the disruption of 9 / 11. in each case, the nature of the response has depended on the state of the economy and financial markets before the event. when the economy is strong and financial systems robust, a shock to the financial system is less likely to feed back on the economy. information flows in a crisis clearly, judgments in a crisis must balance a number of difficult considerations in rapidly changing circumstances in which up - to - date, accurate, information is scarce. our experience suggests some of the key questions that might arise when confronting a crisis : how large is the financial disruption - how many firms or market participants are involved and how large are they? what is the potential for direct and indirect contagion, both domestic and international? who are the counterparties and what is their exposure? who else has similar exposures and might be vulnerable to further changes in asset prices that could be triggered by a firm ’ s failure and unwinding of positions? how long are the financial disruptions likely to last? are substitute providers of financial services available, and how easily and quickly