The Federal Reserve Board will meet Thursday to consider a notice of proposed rulemaking implementing Basel II's standardized approach for risk management.

The Federal Deposit Insurance Corp. is also likely take up the proposal this week. The Office of Thrift Supervision and the Office of the Comptroller of the Currency are expected to follow suit.

The largest U.S. banks must begin moving to Basel II's advanced approach this year, but smaller ones have the option of adhering to the standardized approach, which is intended to give these institutions a more risk-sensitive capital tool.

FDIC Chairman Sheila Bair has argued that large banks also should have the option of using the standardized approach, but other agencies, particularly the Fed, have resisted that effort.

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