Opening Statements of Committee Members


Opening Statement of Chairman Richard Shelby (R-AL)

Hearing: "A Review of the New Basel Capital Accord"
Wednesday, June, 18 2003, 10:00 a.m - Dirksen 538

WASHINGTON, D. C. — "The purpose of this hearing is to consider the New Basel Capital Accord proposal. This proposal addresses an area that is extremely important to the safe and sound function of our banking system. With only a quick glance at the economic history books one can readily determine that thinly capitalized banks pose huge risks to depositors, the banking system and to the overall economy."

"To protect against such risks, we have employed minimum capital requirements as a means to ensure that banks possess the financial integrity necessary to carry on banking activities. What this really means is that bank capital, the bank owners' money, is "on the line" with the other bank resources used to conduct business. Thus, bank losses translate to bank owners' losses."

"By ensuring the sharing of loss amongst bank depositors, creditors, and owners, capital requirements properly align the interests of these groups. And, alignment of these interests is crucial. Capital is a very, very valuable thing. There is tremendous competition for it. Those who provide it, expect something in return for it. Those who obtain it, must protect it and must make sure it produces. Thus, with their own capital in the breach, banks have developed very sophisticated risk identification, analysis, and management tools to achieve these ends. Ultimately, the combination of capital requirements and risk management techniques have served us well."

"Today, we are considering proposed changes to the current capital regime, changes which could have very serious effects on the amount of risk based capital banks are required to hold, on the risk management techniques they employ, and even on the domestic and international competitive landscapes."

"Because of the significant nature of these issues, I believe this Committee has a responsibility to closely scrutinize the proposal and, at a minimum, become aware of its ramifications so that we can draw our own conclusions regarding its merit."