Joint Release
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
For immediate release September 12, 2003
Agencies Issue Rulemakings to Amend Risk-Based Capital Treatment of
Exposures to Asset-Backed Commercial Paper Programs and Securitizations with
Early Amortization Provisions
The federal bank and thrift regulatory agencies today requested public comment on an
interim final rule and a notice of proposed rulemaking (NPR) to amend their risk-based
capital standards for the treatment of assets in asset-backed commercial paper (ABCP)
programs consolidated under the recently issued Financial Accounting Standards Board
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). The NPR
would also modify the risk-based capital treatment of certain securitizations with early
amortization provisions.
An ABCP program is usually carried out through a bankruptcy-remote special purpose
entity generally sponsored and administered by a banking organization (banks, bank
holding companies, and thrifts) to provide funding to its corporate customers by
purchasing asset pools from, or extending loans to, those customers. The ABCP
provides funding for these assets through the issuance of commercial paper into the
market. These issuances may be credit enhanced by various means, usually by a
sponsoring bank.
Under the interim rule, sponsoring banking organizations may remove consolidated
ABCP program assets from their risk-weighted asset base for purposes of calculating
their risk-based capital ratios. However, sponsoring banking organizations must
continue to include any other exposures they have to these programs, such as credit
enhancements, in risk-weighted assets. The interim rule also amends the risk-based
capital standards to exclude from tier 1 and total capital any minority interests in ABCP
programs consolidated by sponsoring banking organizations under FIN 46. The interim
rule will be in effect only for the regulatory reporting periods ending September 30 and
December 31, 2003, and March 31, 2004.
The risk-based capital treatment set forth in the interim rule does not alter the
accounting rules for balance sheet consolidation as set forth under generally accepted
accounting principles. Consequently, banking organizations will be required to report
consolidated ABCP program assets in their tier 1 leverage ratio calculation.
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
For immediate release September 12, 2003
Agencies Issue Rulemakings to Amend Risk-Based Capital Treatment of
Exposures to Asset-Backed Commercial Paper Programs and Securitizations with
Early Amortization Provisions
The federal bank and thrift regulatory agencies today requested public comment on an
interim final rule and a notice of proposed rulemaking (NPR) to amend their risk-based
capital standards for the treatment of assets in asset-backed commercial paper (ABCP)
programs consolidated under the recently issued Financial Accounting Standards Board
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). The NPR
would also modify the risk-based capital treatment of certain securitizations with early
amortization provisions.
An ABCP program is usually carried out through a bankruptcy-remote special purpose
entity generally sponsored and administered by a banking organization (banks, bank
holding companies, and thrifts) to provide funding to its corporate customers by
purchasing asset pools from, or extending loans to, those customers. The ABCP
provides funding for these assets through the issuance of commercial paper into the
market. These issuances may be credit enhanced by various means, usually by a
sponsoring bank.
Under the interim rule, sponsoring banking organizations may remove consolidated
ABCP program assets from their risk-weighted asset base for purposes of calculating
their risk-based capital ratios. However, sponsoring banking organizations must
continue to include any other exposures they have to these programs, such as credit
enhancements, in risk-weighted assets. The interim rule also amends the risk-based
capital standards to exclude from tier 1 and total capital any minority interests in ABCP
programs consolidated by sponsoring banking organizations under FIN 46. The interim
rule will be in effect only for the regulatory reporting periods ending September 30 and
December 31, 2003, and March 31, 2004.
The risk-based capital treatment set forth in the interim rule does not alter the
accounting rules for balance sheet consolidation as set forth under generally accepted
accounting principles. Consequently, banking organizations will be required to report
consolidated ABCP program assets in their tier 1 leverage ratio calculation.
The NPR solicits comments on a permanent, risk sensitive risk-based capital treatment
for the risks arising from ABCP programs. In particular, it proposes to permanently
permit banking organizations to exclude from their risk-weighted asset base those
assets in ABCP programs consolidated onto sponsoring banking organizations' balance
sheets as a result of FIN 46. In addition, the NPR also would require banking
organizations to hold risk-based capital against liquidity facilities provided to ABCP
programs with an original maturity of one year or less. This treatment recognizes that
such facilities, which currently are not assessed a capital requirement, expose banking
organizations to credit risk.
The agencies are also proposing a risk-based capital charge for certain types of
securitizations of revolving retail credit facilities (for example, credit card receivables)
that incorporate early amortization provisions. The goal of these capital proposals is to
more closely align the risk-based capital requirements with the associated risk of the
exposures.
The interim final rule and NPR are being issued by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency and the Office of Thrift Supervision.
Comments on the interim final rule and NPR are due 45 days after their publication in
the Federal Register.
###
Attachments:
• Regulations H and Y; Docket No. R-1156 03-22 (PDF 240.5 KB File - PDF
Help or Hard Copy)
• Regulations H and Y; Docket No. R-1162 (PDF 267.8 KB File - PDF Help or Hard
Copy)
Media Contacts:
Federal Reserve Susan Stawick (202) 452-2955
FDIC David Barr (202) 898-6992
OCC Robert Garsson (202) 874-5770
OTS Chris Smith (202) 906-6677
FDIC-PR-90-2003
for the risks arising from ABCP programs. In particular, it proposes to permanently
permit banking organizations to exclude from their risk-weighted asset base those
assets in ABCP programs consolidated onto sponsoring banking organizations' balance
sheets as a result of FIN 46. In addition, the NPR also would require banking
organizations to hold risk-based capital against liquidity facilities provided to ABCP
programs with an original maturity of one year or less. This treatment recognizes that
such facilities, which currently are not assessed a capital requirement, expose banking
organizations to credit risk.
The agencies are also proposing a risk-based capital charge for certain types of
securitizations of revolving retail credit facilities (for example, credit card receivables)
that incorporate early amortization provisions. The goal of these capital proposals is to
more closely align the risk-based capital requirements with the associated risk of the
exposures.
The interim final rule and NPR are being issued by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency and the Office of Thrift Supervision.
Comments on the interim final rule and NPR are due 45 days after their publication in
the Federal Register.
###
Attachments:
• Regulations H and Y; Docket No. R-1156 03-22 (PDF 240.5 KB File - PDF
Help or Hard Copy)
• Regulations H and Y; Docket No. R-1162 (PDF 267.8 KB File - PDF Help or Hard
Copy)
Media Contacts:
Federal Reserve Susan Stawick (202) 452-2955
FDIC David Barr (202) 898-6992
OCC Robert Garsson (202) 874-5770
OTS Chris Smith (202) 906-6677
FDIC-PR-90-2003