The Government Accountability Office said the version of the Basel II capital rules finalized this year reduces competitive inequities that could have hurt domestic banks, though regulators could still go further.

"Regulators have not yet taken action to address areas of uncertainty that could have competitive implications," the GAO said in a report issued Tuesday. "For example, the final rule provides regulators with considerable flexibility and leaves open questions such as which banks may be exempted from the advanced approaches. Although the rule provides that core banks can apply for exemptions and regulators should consider these in light of some broad categories, such as asset size or portfolio mix, the rule does not further define the criteria for exemptions."

The government watchdog agency also said regulators need to provide more details about what they will consider in a study of Basel II effects. "Lack of specificity in criteria, scope, methodology, and timing will affect the quality and extent of information that regulators will have to help assess competitive and other impacts, determine whether there are any material deficiencies requiring future changes in the rules, and determine whether to permit core banks to fully implement Basel II," the report said.

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