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F edera l R e se r ve B ank O F DALLAS R O B E R T H. B O Y K I N PRESIDENT January 15, 1991 DALLAS, TEXA S 7 5 2 2 2 Notice 91-01 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT Federal Financial I n s t i t u t i o n s Examination Council Study o f Regulatory Treatment o f Recourse Arrangements DETAILS The Federal Financial Institutions Examination Council (FFIEC) has announced the currently projected timetable for its study of the regulatory treatment of recourse arrangements and has defined the stu dy ’s immediate scope. The FFIEC’s request for public comment on recourse arrangements was presented in this Ba n k ’s Circular 90-51, dated July 27, 1990. ATTACHMENT A copy of the FFIEC’s recent press release is attached. MORE INFORMATION For further information, please contact Jane Anne Schmoker at (214) 651-6228. For additional copies of this notice or Circular 90-51, please contact the Public Affairs Department at (214) 651-6289. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Federal Financial Institutions Examination Council & 1776 G Street, N W , Suite 850B • W ash in gton , D C 200 0 6 • (202) 3 5 7 -0177 • FAX (202) 357-0191 Press Release For immediate release December 10, 1990 The Examination Council at its December 7, 1990 meeting reviewed the status of its study of the regulatory treatment of recourse arrangements. public of the This announcement is to advise the currently projected timetable for the study and to define its immediate scope. On June 25, 1990, the Council issued a Request for Public Comment on Recourse Arrangements which was published 60-day comment period in the Federal Register. was solicited appropriate arrangements. treatment of on the reporting definition and Comment was capital of also solicited recourse arrangements for and the recourse on the appropriate under thelending applicable to banks and savings associations. a Public comment "recourse" treatments for limits The five agencies represented on the Council originally targeted year-end 1990 as the effective date for any regulatory changes arising from the study. Board of G o v ern o rs o f the Federal R eserve S ystem , Federal D ep o sit Insurance C o rp o ra tio n , N a tio n a l Credit U n io n A dm inistrate-:' O ffice of the C om p troller of the Currency, O ffice o f Thrift S upervision The Council has received approximately 145 comment letters from a wide range of depository institutions and the public in response to the publication. Many commenters expressed concern that the December target date might not allow sufficient time for the development of optimal solutions to the numerous issues presented. In view of the project's significance and complexity, the Council has narrowed the scope of the immediate study, as explained below, and is now targeting year-end 1991 as the earliest Council or effective the date agencies for any regulatory will publish changes. notices of The proposed rulemaking in the Federal Register for public comment prior to adopting any final rules or guidelines. The primary and immediate focus of the Council’s study is on the capital and reporting treatments of recourse arrangements that expose Among other financial issues, institutions the Council to is credit-related actively risks. considering appropriate treatments for limited recourse arrangements and for recourse that supports a third party’s assets. also considering options for addressing The Council is implicit recourse, including the possibility that this matter should be addressed on a case-by-case basis. The Council continues to believe that all quantifiable risks to financial institutions should be supported by capital. At this stage, however, the Council does not propose to address the risk-based capital treatment of recourse arrangements that expose financial institutions to interest rate risk or other - distinctly non-credit risks. 3 - The overall risk-based capital treatment of interest rate and certain other non-credit risks is under consideration Committee on by the Banking individual Supervision, international framework for agencies decided await areas have before treatment for to jointly recourse agencies which bank capital further considering the Basle established the standards. The developments the arrangements and appropriate that institutions to non-credit-related risks. in these expose capital financial In the meantime, the agencies will continue to apply their current capital standards, which include minimum capital requirements and additional capital requirements for individual institutions when warranted. # # # #