Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429 Division of Supervision
On-Balance Sheet Netting Proposal
FIL-37-98
April 9, 1998
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: Basle Committee Proposal for On-Balance Sheet Netting
The Basle Committee on Banking Supervision has issued the attached proposal that
establishes principles for the capital treatment of on-balance sheet netting transactions. The
proposal differs from current U.S. Generally Accepted Accounting Principles (GAAP). However,
institutions should continue to follow the GAAP standards for regulatory reporting until notified
otherwise.
The proposal allows on-balance sheet netting if these four conditions are met:
The reporting bank has a well-founded legal basis for determining that the netting or
offsetting and agreement are enforceable in each relevant jurisdiction.
The maturity of the deposit is at least as long as the corresponding loan.
The positions are denominated in the same currency.
The reporting bank monitors and controls the exposures on a net basis.
The Basle Committee is seeking comments on the proposal, particularly as it relates to the
overall scope of netting transactions and netting across currencies. Comments are due by June
30, 1998, and may be submitted directly to the Basle Committee at facsimile number 011 41 61
280 9100.
Nicholas J. Ketcha Jr.
Director
Attachment:
Basle Committee on Banking Supervision - Consultative paper on on-balance-sheet netting
Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's
Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 (800-
276-6003 or (703) 562-2200).Inactive
550 17th Street NW, Washington, DC 20429 Division of Supervision
On-Balance Sheet Netting Proposal
FIL-37-98
April 9, 1998
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: Basle Committee Proposal for On-Balance Sheet Netting
The Basle Committee on Banking Supervision has issued the attached proposal that
establishes principles for the capital treatment of on-balance sheet netting transactions. The
proposal differs from current U.S. Generally Accepted Accounting Principles (GAAP). However,
institutions should continue to follow the GAAP standards for regulatory reporting until notified
otherwise.
The proposal allows on-balance sheet netting if these four conditions are met:
The reporting bank has a well-founded legal basis for determining that the netting or
offsetting and agreement are enforceable in each relevant jurisdiction.
The maturity of the deposit is at least as long as the corresponding loan.
The positions are denominated in the same currency.
The reporting bank monitors and controls the exposures on a net basis.
The Basle Committee is seeking comments on the proposal, particularly as it relates to the
overall scope of netting transactions and netting across currencies. Comments are due by June
30, 1998, and may be submitted directly to the Basle Committee at facsimile number 011 41 61
280 9100.
Nicholas J. Ketcha Jr.
Director
Attachment:
Basle Committee on Banking Supervision - Consultative paper on on-balance-sheet netting
Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's
Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 (800-
276-6003 or (703) 562-2200).Inactive