The Federal Reserve has conducted substantial research about the potential effects of Basel II--published on our web site--and plans to continue those efforts. In an effort to mitigate those concerns, regulators have proposed changes to enhance the risk sensitivity of U.S. Basel I rules; we also remain vigilant about identifying potential competitive distortions that might be created with the introduction of Basel II.
We are also mindful that amendments to Basel I should not be too complex or too burdensome for the multitude of smaller banks to which the revised rules will apply. That is, in Basel I amendments we are trying to find the right balance between added risk sensitivity and low burden. As you are aware, this is not necessarily the easiest balance to find.