One of its key advantages is the combination of a decentralised set-up of responsibilities for financial stability with the co-ordination mechanisms provided by the Level 3 Committees. A decentralised approach allows drawing on the advantages of geographical proximity and of the established experience and knowledge of local authorities.
Indeed, many factors other than minimum regulatory capital requirements - including domestic and international tax policies, economies of scale and scope, risk-management skills, and the ability to innovate - also affect competition and profitability. On balance, the Federal Reserve believes that an appropriately conservative approach to capital adequacy serves the United States' interest in maintaining the safety, soundness, and resiliency of our banking system.