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    FED Adopts Rule on Basel II Interagency Pillar 2 Supervisory Guidance

    October 18, 2021

    The Board of Governors of the Federal Reserve System (FED) is adopting a proposal to extend for three years, without revision, the Basel II Interagency Pillar 2 Supervisory Guidance (FR 4199). The Pillar 2 Guidance is intended to assist banking organizations that are subject to the Basel II advanced approaches capital adequacy framework in applying that framework. As per the estimates provided in the Federal Register notice, this development is estimated to impact 15 state member banks and bank holding companies that use the advanced approaches framework.

    Advanced approaches banking organizations are required to use an internal ratings-based approach to calculate the regulatory credit risk capital requirements and advanced measurement approaches to calculate the regulatory operational risk capital requirements. Banking organizations are required to meet certain qualification requirements before they can use the advanced approaches framework for risk-based capital purposes. The Pillar 2 Guidance sets the expectation that such organizations maintain certain documentation (as described in certain paragraphs—37, 41, 43, and 46—of the guidance. FED had published a notice in the Federal Register (86 FR 30603), on June 09, 2021, requesting public comment for 60 days on the extension, without revision, of the Pillar 2 Guidance. The comment period for this notice expired on August 09, 2021. FED did not receive any comments.

     

    Related Link: Federal Register Notice

     

    Keywords: Americas, US, Banking, Pillar 2, Internal Ratings Based, Credit Risk, Operational Risk, Regulatory Capital, Basel, Advanced Approaches, FED

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