IN THE wake of the sub-prime meltdown, US banking regulators are questioning whether the advanced approaches under the Basel II capital accord will deliver better risk management for the big banks.

As in Australia, the largest banks are expected by regulators to implement the advanced approaches set out in the Basel II capital accord.

But the Federal Deposit Insurance Corporation (FDIC) along with other banking regulators is considering whether large banks should also be able to use the standardised approach.

“The agencies are … seeking comment on whether the standardised approach should be made available to large banks,”said FDIC chair Sheila Bair.

“Given the turbulence in the credit markets, I take some comfort in the fixed risk weights established under the standardised approach as they provide supervisors with some control over unconstrained reductions in risk-based capital.”

The standardised approach capital framework is at present available to all banks except the largest and most complex.

The FDIC is the federal agency funded by the banking sector to insure all deposits up to $100,000 at more than 8000 US deposit-taking financial institutions.

It was set up following the Great Depression of the late 1920s and early 1930s.