US regulators issue Pillar II guidance for AMA

US regulators have issued final Pillar II guidance for US banks using the advanced measurement approach

WASHINGTON, DC – US regulators have issued final guidance detailing the supervisory review process for the core banks adopting the advanced measurement approach (AMA) under the Basel II Accord.

The guidance was jointly issued by the Treasury, Federal Reserve, Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS) to help the banks meet standards set for the AMA on April 1 this year.

The final guidance lays out the regulators’ standards for Pillar II, ensuring each institution has proper processes for assessing overall risk-based capital adequacy, and an overall strategy in place for maintaining correct capital levels. The AMA breaks down into Pillar I (capital adequacy), Pillar II (supervisory review of capital adequacy) and Pillar III (market discipline through enhanced disclosure).

Some lessons have been drawn from the market experience and ongoing stresses of the past year, although the overall final guidance does not differ significantly from that proposed in February 2007.