Starting with the parallel run, and both during and after the transition to Basel II, the Federal Reserve will rely upon ongoing, detailed analyses to evaluate the results of the new framework to ensure prudent levels of capital. Basel II represents a major shift in how we think about regulatory capital, especially as we will implement it in the United States.
It is complex, reflecting the complexity of risk measurement and management for the largest, most complex banking institutions, and the banking institutions and the supervisors will need to have ongoing dialogue and work diligently to make sure it is working as we expect it to. But we believe it is a powerful approach to making regulatory capital more risk-sensitive.