federal register
59943
Wednesday
November 5, 1997
Part II
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 3
Federal Reserve System
12 CFR Parts 208 and 225
Federal Deposit Insurance
Corporation
12 CFR Part 325
Department of the Treasury
Office of Thrift Supervision
12 CFR Part 567
Risk-Based Capital Standards; Recourse
and Direct Credit Substitutes; Proposed
Rule
59943
Wednesday
November 5, 1997
Part II
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 3
Federal Reserve System
12 CFR Parts 208 and 225
Federal Deposit Insurance
Corporation
12 CFR Part 325
Department of the Treasury
Office of Thrift Supervision
12 CFR Part 567
Risk-Based Capital Standards; Recourse
and Direct Credit Substitutes; Proposed
Rule
59944 Federal Register / Vol. 62, No. 214 / Wednesday, November 5, 1997 / Proposed Rules
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket No. 97–22]
RIN 1557–AB14
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R–0985]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064–AB31
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 567
[Docket No. 97–86]
RIN 1550–AB11
Risk-Based Capital Standards;
Recourse and Direct Credit Substitutes
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.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), Board of
Governors of the Federal Reserve
System (Board), Federal Deposit
Insurance Corporation (FDIC), and
Office of Thrift Supervision (OTS),
(collectively, the agencies) are
proposing revisions to their risk-based
capital standards to address the
regulatory capital treatment of recourse
obligations and direct credit substitutes
that expose banks, bank holding
companies, and thrifts (collectively,
banking organizations) to credit risk.
The proposal would treat direct credit
substitutes and recourse obligations
consistently and would use credit
ratings and possibly certain other
alternative approaches to match the
risk-based capital assessment more
closely to a banking organization’s
relative risk of loss in asset
securitizations.
The agencies intend that any final
rules adopted in connection with this
proposal that result in increased risk-
based capital requirements for banking
organizations apply only to transactions
consummated after the effective date of
the final rules.
DATES: Comments must be received on
or before February 3, 1998.
ADDRESSES: Comments should be
directed to:
OCC: Written comments may be
submitted electronically to
regs.comments@occ.treas.gov or by mail
to Docket No. 97–22, Communications
Division, Third Floor, Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
Comments will be available for
inspection and photocopying at that
address.
Board: Comments, which should refer
to Docket No. R–0985, may be mailed to
the Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551, to the attention of Mr.
William Wiles, Secretary. Comments
addressed to the attention of Mr. Wiles
may be delivered to the Board’s mail
room between 8:45 a.m. and 5:15 p.m.,
and to the security control room outside
of those hours. Both the mail room and
the security control room are accessible
from the courtyard entrance on 20th
Street between Constitution Avenue and
C Street, NW. Comments may be
inspected in Room MP500 between 9
a.m. and 5 p.m. weekdays, except as
provided in § 261.8 of the FRB’s Rules
Regarding Availability of Information,
12 CFR 261.8.
FDIC: Written comments should be
addressed to Robert E. Feldman,
Executive Secretary, Attention:
Comments/OES, Federal Deposit
Insurance Corporation, 550 17th Street,
N.W., Washington, D.C. 20429.
Comments may be hand delivered to the
guard station at the rear of the 550 17th
Street Building (located on F Street), on
business days between 7:00 a.m. and
5:00 p.m. (Fax number: (202) 898–3838;
Internet address: comments@fdic.gov).
Comments may be inspected and
photocopied in the FDIC Public
Information Center, Room 100, 801 17th
Street, N.W., Washington, D.C., between
9:00 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. 97–86. 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 or may be
sent by facsimile transmission to FAX
number (202) 906–7755; or by e-mail:
public.info@ots.treas.gov. Those
commenting by e-mail should include
their name and telephone number.
Comments will be available for
inspection at 1700 G Street, N.W., from
9:00 to 4:00 p.m. on business days.
FOR FURTHER INFORMATION CONTACT:
OCC: David Thede, Senior Attorney,
Securities and Corporate Practices
Division (202/874–5210); Dennis
Glennon, Financial Economist, Risk
Analysis Division (202/874–5700); or
Steve Jackson, National Bank Examiner,
Treasury and Market Risk (202/874–
5070).
Board: Thomas R. Boemio, Senior
Supervisory Financial Analyst (202/452-
2982); or Norah Barger, Assistant
Director (202/452–2402), Division of
Banking Supervision and Regulation.
For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Diane Jenkins (202/452–3544),
Board of Governors of the Federal
Reserve System, 20th and C Streets,
NW, Washington, DC 20551.
FDIC: Robert F. Storch, Chief,
Accounting Section, Division of
Supervision, (202/898–8906), or Jamey
G. Basham, Counsel, Legal Division
(202/898–7265).
OTS: John F. Connolly, Senior
Program Manager for Capital Policy
(202/906–6465), Supervision Policy;
Michael D. Solomon, Senior Policy
Advisor (202/906–5654), Supervision
Policy; Fred Phillips-Patrick, Senior
Financial Economist (202/906–7295),
Research and Analysis; Robert Kazdin,
Senior Project Manager (202/906–5759),
Research and Analysis; Karen Osterloh,
Assistant Chief Counsel (202/906–6639),
Regulation and Legislation Division,
Office of Thrift Supervision, 1700 G
Street, N.W., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction and Background
A. Overview
B. Purpose and Effect
C. Background
1. Recourse and Direct Credit Substitutes
2. Prior History
D. Current Risk-based Capital Treatment of
Recourse and Direct Credit Substitutes
1. Recourse
2. Direct Credit Substitutes
3. Problems with Existing Risk-based
Capital Treatments of Recourse
Arrangements and Direct Credit
Substitutes
E. GAAP Accounting Treatment of
Recourse Arrangements
II. Notice of Proposed Rulemaking
A. Definitions
1. Recourse
2. Direct Credit Substitute
3. Risks Other than Credit Risks
4. Implicit Recourse
5. Subordinated Interests in Loans or Pools
of Loans
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket No. 97–22]
RIN 1557–AB14
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R–0985]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064–AB31
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 567
[Docket No. 97–86]
RIN 1550–AB11
Risk-Based Capital Standards;
Recourse and Direct Credit Substitutes
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.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), Board of
Governors of the Federal Reserve
System (Board), Federal Deposit
Insurance Corporation (FDIC), and
Office of Thrift Supervision (OTS),
(collectively, the agencies) are
proposing revisions to their risk-based
capital standards to address the
regulatory capital treatment of recourse
obligations and direct credit substitutes
that expose banks, bank holding
companies, and thrifts (collectively,
banking organizations) to credit risk.
The proposal would treat direct credit
substitutes and recourse obligations
consistently and would use credit
ratings and possibly certain other
alternative approaches to match the
risk-based capital assessment more
closely to a banking organization’s
relative risk of loss in asset
securitizations.
The agencies intend that any final
rules adopted in connection with this
proposal that result in increased risk-
based capital requirements for banking
organizations apply only to transactions
consummated after the effective date of
the final rules.
DATES: Comments must be received on
or before February 3, 1998.
ADDRESSES: Comments should be
directed to:
OCC: Written comments may be
submitted electronically to
regs.comments@occ.treas.gov or by mail
to Docket No. 97–22, Communications
Division, Third Floor, Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
Comments will be available for
inspection and photocopying at that
address.
Board: Comments, which should refer
to Docket No. R–0985, may be mailed to
the Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551, to the attention of Mr.
William Wiles, Secretary. Comments
addressed to the attention of Mr. Wiles
may be delivered to the Board’s mail
room between 8:45 a.m. and 5:15 p.m.,
and to the security control room outside
of those hours. Both the mail room and
the security control room are accessible
from the courtyard entrance on 20th
Street between Constitution Avenue and
C Street, NW. Comments may be
inspected in Room MP500 between 9
a.m. and 5 p.m. weekdays, except as
provided in § 261.8 of the FRB’s Rules
Regarding Availability of Information,
12 CFR 261.8.
FDIC: Written comments should be
addressed to Robert E. Feldman,
Executive Secretary, Attention:
Comments/OES, Federal Deposit
Insurance Corporation, 550 17th Street,
N.W., Washington, D.C. 20429.
Comments may be hand delivered to the
guard station at the rear of the 550 17th
Street Building (located on F Street), on
business days between 7:00 a.m. and
5:00 p.m. (Fax number: (202) 898–3838;
Internet address: comments@fdic.gov).
Comments may be inspected and
photocopied in the FDIC Public
Information Center, Room 100, 801 17th
Street, N.W., Washington, D.C., between
9:00 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. 97–86. 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 or may be
sent by facsimile transmission to FAX
number (202) 906–7755; or by e-mail:
public.info@ots.treas.gov. Those
commenting by e-mail should include
their name and telephone number.
Comments will be available for
inspection at 1700 G Street, N.W., from
9:00 to 4:00 p.m. on business days.
FOR FURTHER INFORMATION CONTACT:
OCC: David Thede, Senior Attorney,
Securities and Corporate Practices
Division (202/874–5210); Dennis
Glennon, Financial Economist, Risk
Analysis Division (202/874–5700); or
Steve Jackson, National Bank Examiner,
Treasury and Market Risk (202/874–
5070).
Board: Thomas R. Boemio, Senior
Supervisory Financial Analyst (202/452-
2982); or Norah Barger, Assistant
Director (202/452–2402), Division of
Banking Supervision and Regulation.
For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Diane Jenkins (202/452–3544),
Board of Governors of the Federal
Reserve System, 20th and C Streets,
NW, Washington, DC 20551.
FDIC: Robert F. Storch, Chief,
Accounting Section, Division of
Supervision, (202/898–8906), or Jamey
G. Basham, Counsel, Legal Division
(202/898–7265).
OTS: John F. Connolly, Senior
Program Manager for Capital Policy
(202/906–6465), Supervision Policy;
Michael D. Solomon, Senior Policy
Advisor (202/906–5654), Supervision
Policy; Fred Phillips-Patrick, Senior
Financial Economist (202/906–7295),
Research and Analysis; Robert Kazdin,
Senior Project Manager (202/906–5759),
Research and Analysis; Karen Osterloh,
Assistant Chief Counsel (202/906–6639),
Regulation and Legislation Division,
Office of Thrift Supervision, 1700 G
Street, N.W., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction and Background
A. Overview
B. Purpose and Effect
C. Background
1. Recourse and Direct Credit Substitutes
2. Prior History
D. Current Risk-based Capital Treatment of
Recourse and Direct Credit Substitutes
1. Recourse
2. Direct Credit Substitutes
3. Problems with Existing Risk-based
Capital Treatments of Recourse
Arrangements and Direct Credit
Substitutes
E. GAAP Accounting Treatment of
Recourse Arrangements
II. Notice of Proposed Rulemaking
A. Definitions
1. Recourse
2. Direct Credit Substitute
3. Risks Other than Credit Risks
4. Implicit Recourse
5. Subordinated Interests in Loans or Pools
of Loans