Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429 Division of Supervision
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information
Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).
CAPITAL STANDARDS FIL-74-2003
October 1, 2003
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: Federal Banking and Thrift Regulatory Agencies Issue Rulemakings Advancing Risk-
Sensitive Capital Requirements for Sponsors of Asset-Backed Commercial Paper
Programs Affected by "Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities," and Issuers of Consumer Securitizations With
Early Amortization Provisions
Summary: The federal banking and thrift regulatory agencies - through an interim final rule - are
temporarily amending their risk-based capital requirements for the assets of sponsors of
asset-backed commercial paper (ABCP) programs that are impacted by "Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities." Through a notice of proposed rulemaking, the agencies are proposing a risk-
based capital requirement on all liquidity facilities extended to ABCP programs, and
putting forth a risk-based capital requirement for certain types of consumer securitizations
that incorporate early amortization provisions.
The federal financial regulatory agencies - the Federal Deposit Insurance Corporation (FDIC),
the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, and the Office of Thrift Supervision - have published the attached interim final rule
and notice of proposed rulemaking requesting public comment on their plans for assessing
regulatory capital requirements for various off-balance sheet securitization exposures,
particularly those asset-backed commercial paper (ABCP) programs affected by the recently
issued "Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities" (FIN 46). The rules are expected to affect financial institutions that issue
ABCP, provide liquidity facilities to ABCP programs or securitize retail credit cards. The interim
final rule is effective immediately.
Under FIN 46, the Financial Accounting Standards Board broadened the criteria for determining
when one entity is deemed to have a controlling financial interest in another entity and,
therefore, when an entity must consolidate another entity in its financial statements. The
effective date of FIN 46 for the majority of the affected institutions was July 1, 2003; the impact
of FIN 46 will be reflected in the institutions' September 30, 2003, financial reports.
The interim final rule allows sponsoring banking organizations to remove the consolidated
ABCP program assets from risk-weighted assets for the purpose of calculating their risk-based
capital ratios. This interim capital treatment will be in effect only for the regulatory reporting
periods ending September 30 and December 31, 2003, and March 31, 2004. This interim capital
treatment does not extend to the tier 1 leverage capital ratio calculation, the denominator of
which will continue to be based primarily on on-balance sheet assets as reported under
generally accepted accounting principles (GAAP). The interim final rule will affect Call Report
Schedule RC-R (Regulatory Capital) and Schedule RC-S (Servicing, Securitization, and Asset
Sale Activities). The rule identifies the specific line items affected.
The notice of proposed rulemaking sets forth a risk-sensitive approach for ABCP exposures by
assessing capital against liquidity facilities provided by ABCP sponsors and third-party banking
organizations, regardless of the structure or tenure of the commitment. As with the interim final
rule, the proposed rule would not amend the tier 1 leverage capital ratio, which continues to be
based primarily on on-balance sheet assets as reported under generally accepted accountingInactive
550 17th Street NW, Washington, DC 20429 Division of Supervision
NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information
Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).
CAPITAL STANDARDS FIL-74-2003
October 1, 2003
TO: CHIEF EXECUTIVE OFFICER
SUBJECT: Federal Banking and Thrift Regulatory Agencies Issue Rulemakings Advancing Risk-
Sensitive Capital Requirements for Sponsors of Asset-Backed Commercial Paper
Programs Affected by "Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities," and Issuers of Consumer Securitizations With
Early Amortization Provisions
Summary: The federal banking and thrift regulatory agencies - through an interim final rule - are
temporarily amending their risk-based capital requirements for the assets of sponsors of
asset-backed commercial paper (ABCP) programs that are impacted by "Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities." Through a notice of proposed rulemaking, the agencies are proposing a risk-
based capital requirement on all liquidity facilities extended to ABCP programs, and
putting forth a risk-based capital requirement for certain types of consumer securitizations
that incorporate early amortization provisions.
The federal financial regulatory agencies - the Federal Deposit Insurance Corporation (FDIC),
the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, and the Office of Thrift Supervision - have published the attached interim final rule
and notice of proposed rulemaking requesting public comment on their plans for assessing
regulatory capital requirements for various off-balance sheet securitization exposures,
particularly those asset-backed commercial paper (ABCP) programs affected by the recently
issued "Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities" (FIN 46). The rules are expected to affect financial institutions that issue
ABCP, provide liquidity facilities to ABCP programs or securitize retail credit cards. The interim
final rule is effective immediately.
Under FIN 46, the Financial Accounting Standards Board broadened the criteria for determining
when one entity is deemed to have a controlling financial interest in another entity and,
therefore, when an entity must consolidate another entity in its financial statements. The
effective date of FIN 46 for the majority of the affected institutions was July 1, 2003; the impact
of FIN 46 will be reflected in the institutions' September 30, 2003, financial reports.
The interim final rule allows sponsoring banking organizations to remove the consolidated
ABCP program assets from risk-weighted assets for the purpose of calculating their risk-based
capital ratios. This interim capital treatment will be in effect only for the regulatory reporting
periods ending September 30 and December 31, 2003, and March 31, 2004. This interim capital
treatment does not extend to the tier 1 leverage capital ratio calculation, the denominator of
which will continue to be based primarily on on-balance sheet assets as reported under
generally accepted accounting principles (GAAP). The interim final rule will affect Call Report
Schedule RC-R (Regulatory Capital) and Schedule RC-S (Servicing, Securitization, and Asset
Sale Activities). The rule identifies the specific line items affected.
The notice of proposed rulemaking sets forth a risk-sensitive approach for ABCP exposures by
assessing capital against liquidity facilities provided by ABCP sponsors and third-party banking
organizations, regardless of the structure or tenure of the commitment. As with the interim final
rule, the proposed rule would not amend the tier 1 leverage capital ratio, which continues to be
based primarily on on-balance sheet assets as reported under generally accepted accountingInactive
principles. The proposed rule also sets forth a risk- sensitive capital requirement for
securitizations of revolving consumer credit card receivables with early amortization provisions.
The early amortization capital requirement would be based largely upon excess spread levels, a
key performance measure and early warning indicator of early amortization risk.
For further information, please contact Jason C. Cave, Chief, Policy Section, Capital Markets
Branch, on 202-898-3548 or Michael B. Phillips, Counsel in the Legal Division, on 202-898-
3581.
For your reference, FDIC Financial Institution Letters may be accessed from the FDIC's Web
site at www.fdic.gov/news/news/financial/2003/index.html. To learn how to automatically receive
FDIC Financial Institution Letters through e-mail, please
visit http://www.fdic.gov/news/announcements/index.html.
Michael J. Zamorski
Director
Attachments:
• October 1, 2003, Federal Register, pages 56530-56537
• October 1, 2003, Federal Register, pages 56530-56537 - PDF 67 kb (PDF Help)
• October 1, 2003, Federal Register, pages 56568-56586
• October 1, 2003, Federal Register, pages 56568-56586 - PDF 127 kb (PDF Help)
Distribution: FDIC-Supervised Banks (Commercial and Savings)
Last Updated 11/13/2018 communications@fdic.govInactive
securitizations of revolving consumer credit card receivables with early amortization provisions.
The early amortization capital requirement would be based largely upon excess spread levels, a
key performance measure and early warning indicator of early amortization risk.
For further information, please contact Jason C. Cave, Chief, Policy Section, Capital Markets
Branch, on 202-898-3548 or Michael B. Phillips, Counsel in the Legal Division, on 202-898-
3581.
For your reference, FDIC Financial Institution Letters may be accessed from the FDIC's Web
site at www.fdic.gov/news/news/financial/2003/index.html. To learn how to automatically receive
FDIC Financial Institution Letters through e-mail, please
visit http://www.fdic.gov/news/announcements/index.html.
Michael J. Zamorski
Director
Attachments:
• October 1, 2003, Federal Register, pages 56530-56537
• October 1, 2003, Federal Register, pages 56530-56537 - PDF 67 kb (PDF Help)
• October 1, 2003, Federal Register, pages 56568-56586
• October 1, 2003, Federal Register, pages 56568-56586 - PDF 127 kb (PDF Help)
Distribution: FDIC-Supervised Banks (Commercial and Savings)
Last Updated 11/13/2018 communications@fdic.govInactive