[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Proposed Rules]
[Pages 42565-42570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20639]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket No. 96-16]
RIN 1557-AB14
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R-0930]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 325
RIN 3064-AB78
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 567
[Docket No. 96-58]
RIN 1550-AA98
Risk-Based Capital Standards; Collateralized Transactions
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of
Governors of the Federal Reserve System; Federal Deposit Insurance
Corporation; and Office of Thrift Supervision, Treasury.
ACTION: Joint notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board
of Governors of the Federal Reserve System (Board), the Federal Deposit
Insurance Corporation (FDIC), and the Office of Thrift Supervision
(OTS) (Agencies) are proposing to amend their respective risk-based
capital standards to make uniform the Agencies' treatments for
transactions supported by qualifying collateral. The proposal would
implement part of section 303 of the Riegle Community Development and
Regulatory Improvement Act of 1994, which requires the Agencies to work
jointly to make uniform their regulations and guidelines implementing
common statutory or supervisory policies. The effect of the proposal
would be to allow banks, bank
[[Page 42566]]
holding companies, and savings associations (institutions) to hold less
capital for certain transactions collateralized by cash or qualifying
securities.
DATES: Comments must be received on or before October 15, 1996.
ADDRESSES: Comments should be directed to:
OCC: Comments may be submitted to Docket No. 96-16, Communications
Division, Third Floor, Office of the Comptroller of the Currency, 250 E
Street, S.W., Washington, D.C., 20219. Comments will be available for
inspection and photocopying at that address. In addition, comments may
be sent by facsimile transmission to FAX number (202) 874-5274, or by
electronic mail to [email protected]
Board: Comments directed to the Board should refer to Docket No. R-
0930 and may be mailed to William W. Wiles, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, N.W., Washington D.C., 20551. Comments may also be delivered to
Room B-2222 of the Eccles Building between 8:45 a.m. and 5:15 p.m.
weekdays, or the guard station in the Eccles Building courtyard on 20th
Street, N.W. (between Constitution Avenue and C Street) at any time.
Comments may be inspected in Room MP-500 of the Martin Building between
9 a.m. and 5 p.m. weekdays, except as provided in 12 CFR 261.8 of the
Board's rules regarding availability of information.
FDIC: Written comments should be sent to Jerry L. Langley,
Executive Secretary, Attention: Room F-402, Federal Deposit Insurance
Corporation, 550 17th Street N.W., Washington, D.C., 20429. Comments
may be hand delivered to Room F-402, 1776 F Street N.W., Washington,
D.C., 20429 on business days between 8:30 a.m. and 5 p.m. (Fax number
(202) 898-3838; Internet address: comments@fdic.gov). Comments will be
available for inspection and photocopying in Room 7118, 550 17th
Street, N.W., Washington, D.C., 20429, between 9 a.m. and 4:30 p.m. on
business days.
OTS: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, N.W., Washington, D.C., 20552, Attention Docket No. 96-58.
These submissions may be hand-delivered to 1700 G Street, N.W., from
9:00 a.m. to 5:00 p.m. on business days; they may be sent by facsimile
transmission to FAX number (202) 906-7755. Comments will be available
for inspection at 1700 G Street, N.W., from 9:00 a.m. until 4:00 p.m.
on business days.
FOR FURTHER INFORMATION CONTACT:
OCC: Roger Tufts, Senior Economic Advisor (202/874-5070), Christina
Benson, Capital Markets Specialist (202/874-5070), Office of the Chief
National Bank Examiner, or Ronald Shimabukuro, Senior Attorney (202/
874-5090), Legislative and Regulatory Activities Division, Office of
the Comptroller of the Currency, 250 E Street, S.W., Washington, D.C.,
20219.
Board: Roger Cole, Deputy Associate Director (202/452-2618), Norah
Barger, Manager (202/452-2402), Barbara Bouchard, Supervisory Financial
Analyst (202/452-3072), Division of Banking Supervision and Regulation.
For the hearing impaired only, Telecommunication Device for the Deaf
(TDD), Dorothea Thompson (202/452-3544), Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington D.C., 20551.
FDIC: For supervisory issues, Stephen G. Pfeifer, Examination
Specialist, Accounting Section, Division of Supervision (202/898-8904);
for legal issues, Gerald J. Gervino, Senior Attorney, Legal Division
(202/898-3723), Federal Deposit Insurance Corporation, 550 17th Street
N.W., Washington, D.C., 20429.
OTS: John F. Connolly, Senior Program Manager for Capital Policy,
(202) 906-6465, Supervision Policy; or Deborah Dakin, Assistant Chief
Counsel, (202) 906-6445, Regulations and Legislative Division, Office
of the Chief Counsel, Office of Thrift Supervision, 1700 G Street,
N.W., Washington, D.C., 20552.
SUPPLEMENTARY INFORMATION: Section 303(a)(2) of the Riegle Community
Development and Regulatory Improvement Act of 1994, Pub. L. 103-325,
108 Stat. 2160, 2215 (September 23, 1994), codified at 12 U.S.C. 4803,
provides that the Agencies shall, consistent with the principles of
safety and soundness, statutory law and policy, and the public
interest, work jointly to make uniform all regulations and guidelines
implementing common statutory or supervisory policies. In this regard,
the Agencies have been reviewing, on an interagency basis, their
capital standards to identify areas where they have substantively
different capital treatments for particular transactions.
Since December 1994, the four Agencies have had three different
rules for the capital treatment of transactions that are supported by
qualifying collateral. These rules constitute one of the more
substantive differences among the Agencies' capital standards. The
FDIC's and OTS's risk-based capital standards provide that the portion
of a transaction collateralized by cash on deposit in the lending
institution or by the market value of central government securities of
the OECD-based group of countries 1 (OECD securities) may be
assigned to the 20 percent risk category.2 The Board's general
rule is similar to the FDIC's and OTS's, but there is a limited
exception. Under the Board's risk-based capital guidelines,
transactions fully collateralized with cash or OECD securities with a
positive margin (that is, the market value of the collateral is greater
than the amount of the claim) may be eligible for a zero percent risk
weight. An institution must maintain a positive margin on a daily
basis, fully taking into account any change in the institution's
exposure to the obligor or counterparty under a claim in relation to
the market value of the collateral. The OCC's rule permits the portion
of a transaction that is collateralized with a positive margin by cash
or OECD securities, which must be marked-to-market daily, to receive a
zero percent risk weight.
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\1\ The OECD-based group of countries comprises all full members
of the Organization for Economic Cooperation and Development (OECD),
as well as countries that have concluded special lending
arrangements with the International Monetary Fund associated with
the Fund's General Arrangements to Borrow.
\2\ Portions of claims collateralized by U.S. government-
sponsored agency securities are also eligible for a 20 percent risk
weight. The Agencies are not proposing to change the risk weighting
for these collateralized transactions.
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The Agencies are proposing to amend their respective risk-based
capital standards to achieve uniformity in the treatment of
collateralized transactions. This joint proposal would permit portions
of claims (including repurchase agreements) collateralized by cash on
deposit with the lending institution or by securities issued or
guaranteed by the U.S. Treasury, U.S. government agencies, or the
central governments in other OECD countries to be eligible for a zero
percent risk weight. To qualify for the zero percent risk category, the
collateralized arrangement would have to specify the portion of the
claim that will be continuously collateralized either in terms of an
identified dollar amount or a percentage of the claim. In the case of
off-balance-sheet derivative contracts, the collateralized portion
could be specified in terms of an identified dollar amount or a
percentage of the current or potential future exposure.
Under this joint proposal, the arrangement must also require
maintenance on a daily basis of a
[[Page 42567]]
positive margin of collateral on the specified collateralized portion,
taking into account daily changes in the value of the institution's
credit exposure and the market value of the collateral. The Agencies
note that for certain transactions where the market value of the
collateral (e.g., the redemption value of cash on deposit) is fixed and
the value of the exposure seldom fluctuates, ensuring maintenance of a
positive collateral margin on a daily basis may not actually entail
daily mark-to-market calculations, such as in the case of a loan
collateralized by a certificate of deposit. Where only a portion of a
collateralized claim qualifies for the zero percent risk category, the
remaining portion should be assigned to the risk category appropriate
to the obligor, or if relevant, the guarantor or other collateral.
In all cases, the collateralized arrangement should ensure that
institutions maintain control over the collateral. The proposal has an
accommodation for instances where an institution is acting as a
customer's agent involving the lending or sale of the customer's
securities that is collateralized by cash delivered to the institution.
In this situation, the transaction would be deemed to be collateralized
by cash on deposit with the lending institution provided that (a) any
indemnification provided by the institution to the customer is limited
to no more than the difference between the market value of the
securities lent or sold and the cash collateral received and (b) any
reinvestment risk associated with that cash collateral is borne by the
customer.
While the proposal would permit certain partially collateralized
claims to qualify for the zero percent risk category, the Agencies
reiterate their longstanding supervisory guidance and remind
institutions that engaging in transactions such as securities lending
or repurchase agreements on a less than fully collateralized basis may
be considered an unsafe and unsound practice.
Regulatory Flexibility Act Analysis
OCC Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Comptroller of the Currency certifies that this proposed rule would not
have a significant economic impact on a substantial number of small
entities in accord with the spirit and purposes of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.). Accordingly, a regulatory
flexibility analysis is not required. The proposed rule would reduce
regulatory burden by allowing banks to hold less capital for certain
transactions collateralized by cash or qualifying securities. This
proposed rule clarifies and makes uniform existing regulatory
requirements for national banks. The economic impact of this proposed
rule on banks, regardless of size, is expected to be minimal.
Board Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Board does not believe this proposal would have a significant impact on
a substantial number of small business entities in accord with the
spirit and purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). Accordingly, a regulatory flexibility analysis is not required.
In addition, because the risk-based capital guidelines generally do not
apply to bank holding companies with consolidated assets of less than
$150 million, this proposal would not affect such companies. The
amendment concerns capital requirements for collateralized transactions
which may be entered into by depository institutions of any size. While
larger institutions may enter into more sophisticated transactions, the
amendment would equally favor smaller institutions, even if their
collateralized transactions are less complex. The effect of the
proposal would be to reduce regulatory burden on depository
institutions by allowing the institutions to hold less capital for
certain transactions collateralized by cash or qualifying securities.
FDIC Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub.
L. 96-354, 5 U.S.C. 601 et seq.), it is certified that the proposal
would not have a significant impact on a substantial number of small
entities. The amendment concerns capital requirements for
collateralized transactions which may be entered into by depository
institutions of any size. While larger institutions may enter into more
sophisticated transactions, the amendment would equally favor smaller
institutions, even if their collateralized transactions are less
complex. The effect of the proposal would be to reduce regulatory
burden on depository institutions by allowing the institutions to hold
less capital for certain transactions collateralized by cash or
qualifying securities.
OTS Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
OTS certifies that this proposed rule will not have a significant
economic impact on a substantial number of small entities. The
amendment concerns capital requirements for collateralized transactions
which may be entered into by depository institutions of any size. While
larger institutions may enter into more sophisticated transactions, the
amendment would equally favor smaller institutions, even if their
collateralized transactions are less complex. The effect of the
proposal would be to reduce regulatory burden on depository
institutions by allowing the institutions to hold less capital for
certain transactions collateralized by cash or qualifying securities.
Paperwork Reduction Act
The Agencies have determined that this proposal would not increase
the regulatory paperwork burden of banking organizations pursuant to
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.).
OCC and OTS Executive Order 12866 Determination
The Comptroller of the Currency and the Director of the OTS have
determined that this proposed rule does not constitute a ``significant
regulatory action'' for the purposes of Executive Order 12866.
OCC and OTS Unfunded Mandates Reform Act of 1995 Determinations
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act) requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, Section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. As discussed in the preamble,
this proposed rule is limited to changing the risk weighting of
transactions collateralized by cash or securities issued or
unconditionally guaranteed by the U.S. Government or its agencies, or
the central government of an OECD country, from the 20 percent to the
zero percent risk weight category under the Agencies' risk-based
capital rules. In addition, with respect to the OCC, this proposal
clarifies and makes uniform existing regulatory requirements for
national banks. The OCC and OTS have therefore determined that the
proposed
[[Page 42568]]
rule will not result in expenditures by State, local, or tribal
governments or by the private sector of $100 million or more.
Accordingly, the OCC and OTS have not prepared a budgetary impact
statement or specifically addressed the regulatory alternatives
considered.
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, National banks,
Reporting and recordkeeping requirements, Risk.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Crime, Currency, Federal Reserve System, Mortgages,
Reporting and recordkeeping requirements, Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 325
Administrative practice and procedure, Banks, banking, Capital
adequacy, Reporting and recordkeeping requirements, Savings
associations, State non-member banks.
12 CFR Part 567
Capital, Reporting and recordkeeping requirements, Savings
associations.
Authority and Issuance
Office of the Comptroller of the Currency
12 CFR CHAPTER I
For the reasons set out in the preamble, part 3 of chapter I of
title 12 of the Code of Federal Regulations is proposed to be amended
as follows:
PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n
note, 3907, and 3909.
2. In appendix A to part 3, paragraph (a)(1)(viii) and footnote 15
in paragraph (b)(1)(v) of section 3 are revised to read as follows:
Appendix A to Part 3--Risk-Based Capital Guidelines
* * * * *
Section 3. Risk Categories/Weights for On-Balance Sheet Assets and
Off-Balance Sheet Items
* * * * *
(a) * * *
(1) * * *
(viii) That portion of claims specified as collateralized by
cash on deposit with the bank or by securities issued or
unconditionally guaranteed by the United States Government or its
agencies, or the central governments of an OECD country, provided
that: 9a
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\9a\ Claims collateralized by securities issued or guaranteed by
the United States Government or its agencies, or the central
government of an OECD country include securities lending
transactions, repurchase agreements, collateralized letters of
credit, such as reinsurance letters of credit, and other similar
financial guarantees. Swaps, forwards, futures, and options
transactions are also eligible, if they meet the collateral
requirements.
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(A) The bank specifies in the collateral agreement the
collateralized portion of the claim either in terms of an identified
dollar amount or a percentage of the claim (or in the case of an
off-balance-sheet derivative contract, in terms of an identified
dollar amount or a percentage of the current or potential future
exposure); 9b and
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\9b\ See footnote 22 in section 3(b)(5)(iii) of this appendix A
(collateral held against derivative contracts).
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(B) The bank specifies in the collateral agreement that the
customer is obligated to maintain on a daily basis a positive margin
of collateral on the specified portion of the claim that fully takes
into account daily changes in the value of the bank's credit
exposure and in the market value of the collateral.
* * * * *
(b) * * *
(v) * * * 15
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\15\ * * * When the bank is acting as a customer's agent in a
transaction involving the loan or sale of the customer's securities
collateralized by cash delivered to the bank, the transaction is
deemed to be collateralized by cash on deposit with the bank
provided that any obligation by the bank to indemnify the customer
is limited to no more than the difference between the market value
of the securities lent or sold and the cash collateral received, and
any reinvestment risk associated with the collateral is borne by the
customer.
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* * * * *
Dated: July 26, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
12 CFR CHAPTER II
For the reasons set forth in the preamble, parts 208 and 225 of
chapter II of title 12 of the Code of Federal Regulations are proposed
to be amended as follows:
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
1. The authority citation for part 208 continues to read as
follows:
Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338a, 371d, 461,
481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, 1831p-1, 3105,
3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 78l(b), 78l(g),
78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 5318; 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
2. In appendix A to part 208 section III.C.1., the paragraph
immediately following the heading is designated as paragraph a. and the
second paragraph is designated as paragraph b. and revised to read as
follows:
Appendix A to Part 208--Capital Adequacy Guidelines for State Member
Banks: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. Category 1: zero percent. a. * * *
b. This category also includes the portions of claims (including
repurchase agreements) collateralized by cash on deposit with the
lending bank or by securities issued or unconditionally guaranteed
by the U.S. Treasury, U.S. government agencies, or the central
government in other OECD-based countries, provided that the
collateralized arrangement:
(1) Specifies the collateralized portion of the claim either in
terms of an identified dollar amount or a percentage of the claim
(or, in the case of an off-balance-sheet derivative contract, either
in terms of an identified dollar amount or a percentage of the
current or potential future exposure); and
(2) Requires the maintenance on a daily basis of a positive
margin of collateral on the specified portion of the claim that
fully takes into account daily changes in the value of the bank's
credit exposure and in the market value of the collateral.
* * * * *
3. In appendix A to part 208, the last sentence of section
III.D.1.i. is revised to read as follows:
* * * * *
III. * * *
D. * * *
1. * * *
i. * * * When a bank is acting as a customer's agent in a
transaction involving the loan or sale of the customer's securities
that is collateralized by cash delivered to the lending bank, the
transaction is deemed to be collateralized by cash on deposit with
the bank for purposes of determining the appropriate risk-weight
category, provided that any indemnification is limited to no more
than the difference between the market value of the securities lent
or sold and the cash collateral received, and any reinvestment risk
associated with the cash collateral is borne by the customer.
* * * * *
4. In appendix A to part 208, Attachment III, category 1, paragraph
5 is revised to read as follows:
* * * * *
[[Page 42569]]
Attachment III--Summary of Risk Weights and Risk Categories for State
Member Banks
Category 1: Zero Percent
* * * * *
5. Portions of claims (including repurchase agreements)
collateralized by cash on deposit with the lending bank or by
securities issued or unconditionally guaranteed by OECD central
governments or U.S. government agencies, provided that the
collateralization arrangement (a) specifies the collateralized
portion of the claim either in terms of an identified dollar amount
or a percentage of the claim (or, in the case of an off-balance-
sheet derivative contract, either in terms of an identified dollar
amount or a percentage of the current or potential future exposure);
and (b) requires the maintenance of a positive collateral margin on
a daily basis that fully takes into account daily changes in the
value of the bank's credit exposure and in the market value of the
collateral.
* * * * *
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
1. The authority citation for part 225 continues to read as
follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, and
3909.
2. In appendix A to part 225 section III.C.1., the paragraph
immediately following the heading is designated as paragraph a. and the
second paragraph is designated as paragraph b. and revised to read as
follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
III. * * *
C. * * *
1. Category 1: zero percent a. * * *
b. This category also includes the portions of claims (including
repurchase agreements) collateralized by cash on deposit with the
lending banking organization or by securities issued or
unconditionally guaranteed by the U.S. Treasury, U.S. government
agencies, or the central government in other OECD-based countries,
provided that the collateralized arrangement:
(1) Specifies the collateralized portion of the claim either in
terms of an identified dollar amount or a percentage of the claim
(or, in the case of an off-balance-sheet derivative contract, either
in terms of an identified dollar amount or a percentage of the
current or potential future exposure); and
(2) Requires the maintenance on a daily basis of a positive
margin of collateral on the specified portion of the claim that
fully takes into account daily changes in the value of the banking
organization's credit exposure and in the market value of the
collateral.
* * * * *
3. In appendix A to part 225, the last sentence in section
III.D.1.i. is revised to read as follows:
* * * * *
III. * * *
D. * * *
1. * * *
i. * * * When a banking organization is acting as a customer's
agent in a transaction involving the loan or sale of the customer's
securities that is collateralized by cash delivered to the lending
banking organization, the transaction is deemed to be collateralized
by cash on deposit with the banking organization for purposes of
determining the appropriate risk-weight category, provided that any
indemnification is limited to no more than the difference between
the market value of the securities lent or sold and the cash
collateral received, and any reinvestment risk associated with the
cash collateral is borne by the customer.
* * * * *
4. In appendix A to part 225, Attachment III, category 1, paragraph
5 is revised to read as follows:
* * * * *
Attachment III--Summary of Risk Weights and Risk Categories for Bank
Holding Companies
Category 1: Zero Percent
* * * * *
5. Portions of claims (including repurchase agreements)
collateralized by cash on deposit with the lending banking
organization or by securities issued or unconditionally guaranteed
by OECD central governments or U.S. government agencies, provided
that the collateralization arrangement (a) specifies the
collateralized portion of the claim either in terms of an identified
dollar amount or a percentage of the claim (or, in the case of an
off-balance-sheet derivative contract, either in terms of an
identified dollar amount or a percentage of the current or potential
future exposure); and (b) requires the maintenance of a positive
collateral margin on a daily basis that fully takes into account
daily changes in the value of the banking organization's credit
exposure and in the market value of the collateral.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, August 8, 1996.
William W. Wiles,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR CHAPTER III
For the reasons set forth in the preamble, part 325 of chapter III
of title 12 of the Code of Federal Regulations is proposed to be
amended as follows:
PART 325--CAPITAL MAINTENANCE
1. The authority citation for part 325 continues to read as
follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat.
1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat.
2236, 2355, 2386 (12 U.S.C. 1828 note).
2. In appendix A to part 325, section II.C, the first two
paragraphs under Category 1--Zero Percent Risk Weight are designated as
paragraphs a. and b., respectively, and a new paragraph c. is added to
read as follows:
Appendix A to Part 325--Statement of Policy on Risk-Based Capital
* * * * *
II. Procedures for Computing Risk-Weighted Assets
* * * * *
C. * * *
Category 1--Zero Percent Risk Weight. a. * * *
b. * * *
c. This category also includes the portions of claims (including
repurchase agreements) collateralized by cash on deposit with the
lending bank or by securities issued or unconditionally guaranteed
by the U.S. Treasury, U.S. government agencies, or the central
government in other OECD countries, provided that the collateralized
arrangement:
(1) Specifies the collateralized portion of the claim either in
terms of an identified dollar amount or a percentage of the claim
(or, in the case of an off-balance-sheet derivative contract, either
in terms of an identified dollar amount or a percentage of the
current or potential future exposure); and
(2) Requires the maintenance on a daily basis of a positive
margin of collateral on the specified portion of the claim that
fully takes into account daily changes in the value of the bank's
credit exposure and in the market value of the collateral.
* * * * *
3. In appendix A to part 325, section II.C., the three paragraphs
under Category 2--20 Percent Risk Weight are designated as paragraphs
a. through c., respectively, the phrase ``portions of claims
collateralized by cash held in a segregated deposit account of the
lending bank;'' is removed from the newly designated paragraph a., and
the first sentence of the newly designated paragraph b. is revised to
read as follows:
* * * * *
II. * * *
C. * * *
* * * * *
Category 2--20 Percent Risk Weight. a. * * *
b. This category also includes claims on, and portions of claims
guaranteed by, U.S. Government-sponsored agencies, portions of
claims collateralized by securities issued or guaranteed by U.S.
Government-sponsored agencies, and the portions of claims (including
repurchase agreements) collateralized by cash on deposit in the
lending bank or by securities issued or guaranteed by OECD central
governments
[[Page 42570]]
that do not qualify for the zero percent risk weight category. * * *
* * * * *
4. In appendix A to part 325, section II.D.1, the eight paragraphs
are designated as paragraphs a. through h., respectively, and the newly
designated paragraph h. is amended by adding a sentence to the end of
the paragraph to read as follows:
* * * * *
II. * * *
D. * * *
1. Items with a 100 Percent Conversion Factor. a. * * *
* * * * *
h. * * * When a bank is acting as a customer's agent in a
transaction involving the loan or sale of the customer's securities
that is collateralized by cash delivered to the lending bank, the
transaction is deemed to be collateralized by cash on deposit with
the bank for purposes of determining the appropriate risk-weight
category, provided that any indemnification is limited to no more
than the difference between the market value of the securities lent
or sold and the cash collateral received, and any reinvestment risk
associated with the cash collateral is borne by the customer.
* * * * *
5. In appendix A to part 325 under Table II--Summary of Risk
Weights and Risk Categories, a period is added at the end of paragraph
(6) and a new paragraph (7) is added under Category 1--Zero Percent
Risk Weight to read as follows:
* * * * *
Table II--Summary of Risk Weights and Risk Categories
Category 1--Zero Percent Risk Weight
* * * * *
(7) Portions of claims (including repurchase agreements)
collateralized by cash on deposit with the lending bank or by
securities issued or unconditionally guaranteed by the U.S.
Treasury, U.S. Government agencies, or the central government in
other OECD countries, provided that the collateralization
arrangement (a) specifies the collateralized portion of the claim
either in terms of an identified dollar amount or a percentage of
the claim (or, in the case of an off-balance-sheet derivative
contract, either in terms of an identified dollar amount or a
percentage of the current or potential future exposure); and (b)
requires the maintenance of a positive collateral margin on a daily
basis that fully takes into account daily changes in the value of
the bank's credit exposure and in the market value of the
collateral.
* * * * *
6. In appendix A to part 325 under Table II--Summary of Risk
Weights and Risk Categories, paragraphs (6) and (7) under Category 2--
20 Percent Risk Weight are revised to read as follows:
* * * * *
Table II--Summary of Risk Weights and Risk Categories
* * * * *
Category 2--20 Percent Risk Weight
* * * * *
(6) Portions of claims (including repurchase agreements)
collateralized \3\ by securities issued or guaranteed by the U.S.
Treasury, U.S. Government agencies, or the central government in
other OECD countries that do not qualify for the zero percent risk
weight category, or that are collateralized by securities issued or
guaranteed by U.S. Government-sponsored agencies.
---------------------------------------------------------------------------
\3\ Degree of collateralization is determined by current market
value.
---------------------------------------------------------------------------
(7) Portions of loans and other claims collateralized by cash on
deposit in the lending bank that do not qualify for the zero percent
risk weight category.
* * * * *
By order of the Board of Directors.
Dated at Washington, D.C., this 17th day of June, 1996.
Federal Deposit Insurance Corporation
Valerie J. Best,
Assistant Executive Secretary.
Office of Thrift Supervision
12 CFR CHAPTER V
For the reasons set forth in the preamble, part 567 of chapter V of
title 12 of the Code of Federal Regulations is proposed to be amended
as set forth below:
PART 567--CAPITAL
1. The authority citation for part 567 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828
(note).
2. Section 567.6 is amended by:
a. Redesignating footnotes 8, 9, 10, and 11 as footnotes 10, 11,
12, and 13, respectively.
b. Adding paragraph (a)(1)(i)(H); and
c. Adding a sentence at the end of paragraph (a)(2)(i)(E).
The additions read as follows:
Sec. 567.6 Risk-based capital credit risk-weight categories.
(a) * * *
(1) * * *
(i) * * *
(H) That portion of claims collateralized by cash on deposit with
the lending savings association or by securities issued or
unconditionally guaranteed by the United States Treasury, the United
States Government or its agencies, or the central government in other
OECD countries,8 provided that the collateralized arrangement:
---------------------------------------------------------------------------
\8\ Claims collateralized by securities issued or guaranteed by
the United States Treasury, the United States Government or its
agencies, or the central government of an OECD country include
securities lending transactions, repurchase agreements,
collateralized letters of credit, such as reinsurance letters of
credit, and other similar financial guarantees. Swaps, forwards,
futures and options transactions are also eligible, if they meet the
collateral requirements.
---------------------------------------------------------------------------
(1) Specifies the collateralized portion of the claim either in
terms of an identified dollar amount or a percentage of the claim (or,
in the case of an off-balance-sheet derivative contract, either in
terms of an identified dollar amount or a percentage of the current or
potential future exposure); 9 and
---------------------------------------------------------------------------
\9\ See paragraph (a)(2)(v)of this section.
---------------------------------------------------------------------------
(2) Requires the maintenance on a daily basis of a positive margin
of collateral on the specified portion of the claim that fully takes
into account daily changes in the value of the savings association's
credit exposure and in the market value of the collateral.
* * * * *
(2) * * *
(i) * * *
(E) * * * When the savings association is acting as a customer's
agent in a transaction involving the loan or sale of the customer's
securities that is collateralized by cash delivered to the lending
savings association, the transaction is deemed to be collateralized by
cash on deposit with the savings association for purposes of
determining the appropriate risk weight category, provided that any
obligation of the savings association to indemnify the customer is
limited to no more than the difference between the market value of the
securities lent or sold and the cash collateral received, and any
reinvestment risk associated with the collateral is borne by the
customer.
* * * * *
Dated: July 23, 1996.
Office of Thrift Supervision
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-20639 Filed 8-15-96; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P
