Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429-9990
Financial Institution Letter
FIL-27-2012
June 18, 2012
REGULATORY CAPITAL RULES
Standardized Approach for Risk-Weighted Assets; Market Discipline and Disclosure
Requirements
Summary: The federal bank regulatory agencies (the agencies) have jointly issued the attached Notice of Proposed
Rulemaking (proposed rule) that would revise the measurement of risk-weighted assets by implementing changes
made by the Basel Committee on Banking Supervision (BCBS) to international regulatory capital standards and by
implementing aspects of the Dodd-Frank Act.
Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter is
applicable to all banks. Attached to this FIL is an addendum that also is included in the proposed rule. The addendum
offers a summary of the proposed rule designed to clearly and succinctly describe how it would typically apply to
smaller, less complex banking organizations. Additional technical assistance explaining the proposed rule also will be
made available.
Distribution:
FDIC-Supervised Banks (Commercial and Savings
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer
Related Topics:
Risk-Based Capital Rules
12 CFR Part 325
Basel III
Attachment:
Regulatory Capital Rules: Standardized Approach
for Risk-Weighted Assets; Market Discipline and
Disclosure Requirements (PDF Help)
Contact:
Bobby Bean, Associate Director, Capital Markets
Branch, at bbean@fdic.gov or (202)
Ryan Billingsley, Senior Policy Analyst,
at rbillingsley@fdic.gov or (202) 898-3797
Karl Reitz, Senior Policy Analyst,
at kreitz@fdic.gov or (202) 898-6775
898-6705
Note:
FDIC Financial Institution Letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2012/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/
subscriptions/fil.html.
Paper copies may be obtained through the FDIC's
Public Information Center, 3501
Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-
275-3342 or 703-562-2200).
Highlights:
The proposed rule:
Revises risk weights for exposures to foreign sovereign
entities, foreign banking organizations, and foreign public
sector entities.
Revises risk weights for residential mortgages based on loan-
to-value ratios and certain product and underwriting features.
Increases capital requirements for past-due loans, high
volatility commercial real estate exposures, and certain short-
term loan commitments.
Expands the recognition of collateral and guarantors in
determining risk-weighted assets.
Removes references to credit ratings consistent with Section
939A of the Dodd-Frank Act.
Establishes due diligence requirements for securitization
exposures.Inactive
550 17th Street NW, Washington, DC 20429-9990
Financial Institution Letter
FIL-27-2012
June 18, 2012
REGULATORY CAPITAL RULES
Standardized Approach for Risk-Weighted Assets; Market Discipline and Disclosure
Requirements
Summary: The federal bank regulatory agencies (the agencies) have jointly issued the attached Notice of Proposed
Rulemaking (proposed rule) that would revise the measurement of risk-weighted assets by implementing changes
made by the Basel Committee on Banking Supervision (BCBS) to international regulatory capital standards and by
implementing aspects of the Dodd-Frank Act.
Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter is
applicable to all banks. Attached to this FIL is an addendum that also is included in the proposed rule. The addendum
offers a summary of the proposed rule designed to clearly and succinctly describe how it would typically apply to
smaller, less complex banking organizations. Additional technical assistance explaining the proposed rule also will be
made available.
Distribution:
FDIC-Supervised Banks (Commercial and Savings
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer
Related Topics:
Risk-Based Capital Rules
12 CFR Part 325
Basel III
Attachment:
Regulatory Capital Rules: Standardized Approach
for Risk-Weighted Assets; Market Discipline and
Disclosure Requirements (PDF Help)
Contact:
Bobby Bean, Associate Director, Capital Markets
Branch, at bbean@fdic.gov or (202)
Ryan Billingsley, Senior Policy Analyst,
at rbillingsley@fdic.gov or (202) 898-3797
Karl Reitz, Senior Policy Analyst,
at kreitz@fdic.gov or (202) 898-6775
898-6705
Note:
FDIC Financial Institution Letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2012/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/
subscriptions/fil.html.
Paper copies may be obtained through the FDIC's
Public Information Center, 3501
Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-
275-3342 or 703-562-2200).
Highlights:
The proposed rule:
Revises risk weights for exposures to foreign sovereign
entities, foreign banking organizations, and foreign public
sector entities.
Revises risk weights for residential mortgages based on loan-
to-value ratios and certain product and underwriting features.
Increases capital requirements for past-due loans, high
volatility commercial real estate exposures, and certain short-
term loan commitments.
Expands the recognition of collateral and guarantors in
determining risk-weighted assets.
Removes references to credit ratings consistent with Section
939A of the Dodd-Frank Act.
Establishes due diligence requirements for securitization
exposures.Inactive
Key Aspects of the Proposed Rule on Regulatory Capital Rules: Standardized Approach for Risk-
weighted Assets; Market Discipline and Disclosure Requirements
Overview
The agencies are issuing a notice of proposed rulemaking (NPR, proposal, or proposed rule) to harmonize and address
shortcomings in the measurement of risk-weighted assets that became apparent during the recent financial crisis, in part
by implementing in the United States changes made by the Basel Committee on Banking Supervision (BCBS) to
international regulatory capital standards and by implementing aspects of the Dodd-Frank Act. Among other things, the
proposed rule would:
revise risk weights for residential mortgages based on loan-to-value ratios and certain product and underwriting
features;
increase capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-
term loan commitments;
expand the recognition of collateral and guarantors in determining risk-weighted assets;
remove references to credit ratings; and
establish due diligence requirements for securitization exposures.
This addendum presents a summary of the proposal in this NPR that is most relevant for smaller, less complex banking
organizations banking organization that are not subject to the market risk capital rule or the advanced approaches capital
rule, and that have under $50 billion in total assets. The agencies intend for this addendum to act as a guide for these
banking organizations, helping them to navigate the proposed rule and identify the changes most relevant to them. The
addendum does not, however, by itself provide a complete understanding of the proposed rules and the agencies expect
and encourage all institutions to review the proposed rule in its entirety.
A. Zero Percent Risk-Weighted Items
The following exposures would receive a zero percent risk weight under the proposal:
Cash;
Gold bullion;
Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency;
Exposures unconditionally guaranteed by the U.S. government, its central bank, or a U.S. government agency;
Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral
development banking organizations
Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed
below).
For more information, please refer to sections 32(a) and 37(b)(3)(iii) of the proposal. For exposures to foreign
governments and their central banks, see section L below.
B. 20 Percent Risk-Weighted Items
The following exposures would receive a twenty percent risk weight under the proposal:
Financial Institution Letters
FIL-27-2012
June 18, 2012Inactive
weighted Assets; Market Discipline and Disclosure Requirements
Overview
The agencies are issuing a notice of proposed rulemaking (NPR, proposal, or proposed rule) to harmonize and address
shortcomings in the measurement of risk-weighted assets that became apparent during the recent financial crisis, in part
by implementing in the United States changes made by the Basel Committee on Banking Supervision (BCBS) to
international regulatory capital standards and by implementing aspects of the Dodd-Frank Act. Among other things, the
proposed rule would:
revise risk weights for residential mortgages based on loan-to-value ratios and certain product and underwriting
features;
increase capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-
term loan commitments;
expand the recognition of collateral and guarantors in determining risk-weighted assets;
remove references to credit ratings; and
establish due diligence requirements for securitization exposures.
This addendum presents a summary of the proposal in this NPR that is most relevant for smaller, less complex banking
organizations banking organization that are not subject to the market risk capital rule or the advanced approaches capital
rule, and that have under $50 billion in total assets. The agencies intend for this addendum to act as a guide for these
banking organizations, helping them to navigate the proposed rule and identify the changes most relevant to them. The
addendum does not, however, by itself provide a complete understanding of the proposed rules and the agencies expect
and encourage all institutions to review the proposed rule in its entirety.
A. Zero Percent Risk-Weighted Items
The following exposures would receive a zero percent risk weight under the proposal:
Cash;
Gold bullion;
Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency;
Exposures unconditionally guaranteed by the U.S. government, its central bank, or a U.S. government agency;
Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral
development banking organizations
Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed
below).
For more information, please refer to sections 32(a) and 37(b)(3)(iii) of the proposal. For exposures to foreign
governments and their central banks, see section L below.
B. 20 Percent Risk-Weighted Items
The following exposures would receive a twenty percent risk weight under the proposal:
Financial Institution Letters
FIL-27-2012
June 18, 2012Inactive