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Federal R eserve Bank
OF DALLAS
ROBERT

D. M C T E E R , J R .

PRESIDEN T
AND CHIEF EX ECUTIVE O F F IC E R

September 5, 1996

D ALLAS, TE XAS

75265-5906

Notice 96-84
TO:

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District

SUBJECT
Interagency Request for Public
Comment on a Proposal to Amend the
Risk-based Capital Guidelines
DETAILS
The Board of Governors of the Federal Reserve System, the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift
Supervision (collectively, the Agencies) have requested public comment on a proposal to
amend the risk-based capital guidelines for banks and bank holding companies regarding
the treatment of collateralized transactions.
The proposal would make uniform the Agencies’ currently differing treat­
ments for transactions supported by qualifying collateral and would implement part of
Section 303 of the Riegle Community Development and Regulatory Improvement Act of
1994. The proposal would also permit institutions to apply a zero-percent risk weight to
portions of transactions that are collateralized in accordance with the provisions of the
proposal.
The Board must receive comments by October 15, 1996. Please address com­
ments to William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. All
comments should refer to Docket No. R-0930.
ATTACHMENT
A copy of the Board’ notice as it appears on pages 42565-70, Vol. 61,
s
No. 160, of the Federal Register dated August 16, 1996, is attached.

For additional copies, bankers and others are encouraged to use one of the following toll-free num bers 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 A ntonio 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)

MORE INFORMATION
For more information, please contact Dorsey Davis at (214) 922-6051. For
additional copies of this Bank’ notice, please contact the Public Affairs Departm ent at
s
(214) 922-5254.
Sincerely yours,

42565

Proposed Rules

Federal Register
Vol. 61, No. 160
Friday, August 16, 1996

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket No. 96-16]
RIN 1557-AB14

FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R-0930]

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064-AB78

DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 567
[Docket No. 96-68]
RIN 1550-AA98

Risk-Based Capital Standards;
Collateralized Transactions

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.
AGENCIES:

The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), the Federal Deposit
Insurance Corporation (FDIC), and the
Office of Thrift Supervision (OTS)
(Agencies) are proposing to amend their
respective risk-based capital standards
to make uniform the Agencies’
treatments for transactions supported by
qualifying collateral. The proposal
w ould implem ent part of section 303 of
the Riegle Community Development and
Regulatory Improvement Act of 1994,
w hich requires the Agencies to work
jointly to make uniform their
regulations and guidelines
implementing common statutory or
supervisory policies. The effect of the
proposal would be to allow banks, bank
SUMMARY:

42566

Federal Register / Vol. 61, No. 160 / Friday, August 16, 1996 / Proposed Rules

holding companies, and savings
associations (institutions) to hold less
capital for certain transactions
collateralized by cash or qualifying
securities.
DATES: Comments m ust be received on
or before October 15,1996.
ADDRESSES: Comments should be
directed to:
OCC: Comments may be subm itted to
Docket No. 96-16, Communications
Division, Third Floor, Office of the
Comptroller of the Currency, 250 E
Street, S.W., W ashington, D.C., 20219.
Comments w ill be available for
inspection and photocopying at that
address. In addition, comments may be
sent by facsimile transm ission to FAX
number (202) 874-5274, or by electronic
mail to
REG.COMMENTS@OCC.TREAS.GOV.
Board: Comments directed to the
Board should refer to Docket No. R 0930 and may be m ailed to W illiam W.
Wiles, Secretary, Board of Govemors of
the Federal Reserve System, 20th Street
and Constitution Avenue, N.W.,
Washington D.C., 20551. Comments
may also be delivered to Room B-2222
of the Eccles Building between 8:45 £.m.
and 5:15 p.m. weekdays, or the guard
station in the Eccles Building courtyard
on 20th Street, N.W. (between
Constitution Avenue and C Street) at
any time. Comments may be inspected
in Room MP-500 of the M artin Building
between 9 a.m. and 5 p.m. weekdays,
except as provided in 12 CFR 261.8 of
the Board’s rules regarding availability
of information.
FDIC: W ritten comments should be
sent to Jerry L. Langley, Executive
Secretary, Attention: Room F-402,
Federal Deposit Insurance Corporation,
550 17th Street N.W., W ashington, D.C.,
20429. Comments may be hand
delivered to Room F-402, 1776 F Street
N.W., W ashington, D.C., 20429 on
business days between 8:30 a.m. and 5
p.m. (Fax num ber (202) 898-3838;
Internet address: comments@fdic.gov).
Comments w ill be available for
inspection and photocopying in Room
7118, 550 17th Street, N.W.,
Washington, D.C., 20429, between 9
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. 96— These
58.
submissions may be hand-delivered to
1700 G Street, N.W., from 9:00 a.m. to
5:00 p.m. on business days; they may be
sent by facsimile transmission to FAX
num ber (202) 906-7755. Comments will
be available for inspection at 1700 G

Street, N.W., from 9:00 a.m. until 4:00
p.m. on business days.
FOR FURTHER INFORMATION CONTACT:

OCC: Roger Tufts, Senior Economic
Advisor (202/874-5070), Christina
Benson, Capital Markets Specialist (202/
874-5070), Office of the Chief National
Bank Examiner, or Ronald
Shimabukuro, Senior Attorney (202/
874-5090), Legislative and Regulatory
Activities Division, Office of the
Comptroller of the Currency, 250 E
Street, S.W., Washington, D.C., 20219.
Board: Roger Cole, Deputy Associate
Director (202/452-2618), Norah Barger,
Manager (202/452-2402), Barbara
Bouchard, Supervisory Financial
Analyst (202/452-3072), Division of
Banking Supervision and Regulation.
For the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Dorothea Thompson (202/4523544), Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, N.W., W ashington
D.C., 20551.
FDIC: For supervisory issues, Stephen
G. Pfeifer, Examination Specialist,
Accounting Section, Division of
Supervision (202/898-8904); for legal
issues, Gerald J. Gervino, Senior
Attorney, Legal Division (202/8983723), Federal Deposit Insurance
Corporation, 550 17th Street N.W.,
Washington, D.C., 20429.
OTS: John F. Connolly, Senior
Program Manager for Capital Policy,
(202) 906-6465, Supervision Policy; or
Deborah Dakin, Assistant Chief Counsel,
(202) 906-6445, Regulations and
Legislative Division, Office of the Chief
Counsel, Office of Thrift Supervision,
1700 G Street, N.W., Washington, D.C.,
20552.
SUPPLEMENTARY INFORMATION: Section
303(a)(2) of the Riegle Community
Development and Regulatory
Improvement Act of 1994, Pub. L. 103—
325,108 Stat. 2160, 2215 (September 23,
1994), codified at 12 U.S.C. 4803,
provides that the Agencies shall,
consistent w ith the principles of safety
and soundness, statutory law and
policy, and the public interest, work
jointly to make uniform all regulations
and guidelines implem enting common
statutory or supervisory policies. In this
regard, the Agencies have been
reviewing, on an interagency basis, their
capital standards to identify areas where
they have substantively different capital
treatments for particular transactions.
Since December 1994, the four
Agencies have had three different rules
for the capital treatment of transactions
that are supported by qualifying
collateral. These rules constitute one of
the more substantive differences among

the Agencies’ capital standards. The
FDIC’s and OTS’s risk-based capital
standards provide that the portion of a
transaction collateralized by cash on
deposit in the lending institution or by
the market value of central government
securities of the OECD-based group of
countries 1 (OECD securities) may be
assigned to the 20 percent risk
category.2 The Board’s general rule is
similar to the FDIC’s and OTS’s, but
there is a lim ited exception. Under the
Board’s risk-based capital guidelines,
transactions fully collateralized w ith
cash or OECD securities w ith a positive
margin (that is, the market value of the'
collateral is greater than the amount of
the claim) may be eligible for a zero
percent risk weight. An institution must
m aintain a positive margin on a daily
basis, fully taking into account any
change in the institution’s exposure to
the obligor or counterparty under a
claim in relation to the market value of
the collateral. The OCC’s rule permits
the portion of a transaction that is
collateralized w ith a positive margin by
cash or OECD securities, w hich m ust be
marked-to-market daily, to receive a
zero percent risk weight.
The Agencies are proposing to amend
their respective risk-based capital
standards to achieve uniformity in the
treatment of collateralized transactions.
This joint proposal would permit
portions of claims (including repurchase
agreements) collateralized by cash on
deposit with the lending institution or
by securities issued or guaranteed by the
U.S. Treasury, U.S. government
agencies, or the central governments in
other OECD countries to be eligible for
a zero percent risk weight. To qualify for
the zero percent risk category, the
collateralized arrangement would have
to specify the portion of the claim that
w ill be continuously collateralized
either in terms of an identified dollar
amount or a percentage of the claim. In
the case of off-balance-sheet derivative
contracts, the collateralized portion
could be specified in terms of an
identified dollar amount or a percentage
of the current or potential future
exposure.
Under this joint proposal, the
arrangement m ust also require
m aintenance on a daily basis of a
1T h e O ECD-based group o f co u n trie s c o m p r ise s
a ll fu ll m em b ers o f th e O rganization for E co n o m ic
C ooperation a n d D e v e lo p m e n t (OECD), a s w e ll as
co u n trie s th at h a v e* co n clu d ed s p e c ia l le n d in g
arrangem en ts w ith th e International M onetary F u n d
a sso c ia ted w ith th e F u n d ’s G eneral A rran gem en ts to
B orrow.
2 P ortion s o f c la im s co lla ter a liz ed b y U .S.
g o v er n m e n t-sp o n so re d a g en cy s e cu rities are a lso
elig ib le for a 20 p erc en t risk w eig h t. T h e A g e n c ie s
are n o t p ro p osin g to ch an ge th e risk w e ig h tin g for
t h e s e c o lla ter a liz ed tran saction s.

Federal Register / Vol. 61, No. 160 / Friday, August 16, 1996 / Proposed Rules
positive margin of collateral on the
burden by allowing banks to hold less
specified collateralized portion, taking
capital for certain transactions
collateralized.by cash or qualifying
into account daily changes in the value
securities. This proposed rule clarifies
of the institution’s credit exposure and
and makes uniform existing regulatory
the market value of the collateral. The
requirements for national banks. The
Agencies note that for certain
economic impact of this proposed rule
transactions where the m arket value of
the collateral (e.g., the redem ption value on banks, regardless of size, is expected
to be minimal.
of cash on deposit) is fixed and the
value of the exposure seldom fluctuates, Board Regulatory F lexibility A ct
ensuring m aintenance of a positive
Analysis
collateral margin on a daily basis may
Pursuant to section 605(b) of the
not actually entail daily mark-to-market
Regulatory Flexibility Act, the Board
calculations, such as in the case of a
does not believe this proposal would
loan collateralized by a certificate of
have a significant impact on a
deposit. Where only a portion of a
substantial num ber of small business
collateralized claim qualifies for the
entities in accord with the spirit and
zero percent risk category, the
remaining portion should be assigned to purposes of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.). Accordingly,
the risk category appropriate to the
a regulatory flexibility analysis is not
obligor, or if relevant, the guarantor or
required. In addition, because the riskother collateral.
based capital guidelines generally do
In all cases, the collateralized
not apply to bank holding companies
arrangement should ensure that
with consolidated assets of less than
institutions maintain control over the
$150 m illion, this proposal would not
collateral. The proposal has an
affect such companies. The amendment
accommodation for instances where an
concerns capital requirements for
institution is acting as a custom er’s
collateralized transactions w hich may
agent involving the lending or sale of
be entered into by depository
the custom er’s securities that is
institutions of any size. W hile larger
collateralized by cash delivered to the
institutions may enter into more
institution. In this situation, the
sophisticated transactions, the
transaction woulclbe deemed to be
amendment w ould equally favor smaller
collateralized by cash on deposit with
the lending institution provided that (a) institutions, even if their collateralized
transactions are less complex. The effect
any indem nification provided by the
of the proposal would be to reduce
institution to the customer is lim ited to
regulatory burden on depository ,
no more than the difference between the
institutions by allowing the institutions
market value of the securities lent or
to hold less capital for certain
sold and the cash collateral received
and (b) any reinvestm ent risk associated transactions collateralized by cash or
qualifying securities.
with that cash collateral is borne by the
customer.
FDIC Regulatory Flexibility A ct Analysis
While the proposal w ould permit
Pursuant to section 605(b) of the
certain partially collateralized claims to
Regulatory Flexibility Act (Pub. L. 96qualify for the zero percent risk
354, 5 U.S.C. 601 et seq.), it is certified
category, the Agencies reiterate their
that the proposal would not have a
longstanding supervisory guidance and
significant impact on a substantial
rem ind institutions that engaging in
num ber of small entities. The
transactions such as securities lending
or repurchase agreements on a less than am endment concerns capital
requirements for collateralized
fully collateralized basis may be
transactions w hich may be entered into
considered an unsafe and unsound
by depository institutions of any size.
practice.
While larger institutions may enter into
Regulatory Flexibility Act Analysis
more sophisticated transactions, the
OCC Regulatory Flexibility A c t Analysis amendment would equally favor smaller
institutions, even if their collateralized
Pursuant to section 605(b) of the
transactions are less complex. The effect
Regulatory Flexibility Act, the
of the proposal would be to reduce
Comptroller of the Currency certifies
regulatory burden on depository
that this proposed rule w ould not have
institutions by allowing the institutions
a significant economic im pact on a
to hold less capital for certain
substantial number of. small entities in
transactions collateralized by cash or
accord w ith the spirit and purposes of
qualifying securities.
the Regulatory Flexibility Act (5 U.S.C.
OTS Regulatory Flexibility A ct Analysis
601 et seq.). Accordingly, a regulatory
flexibility analysis is not required. The
Pursuant to section 605(b) of the
proposed rule would reduce regulatory
Regulatory Flexibility Act, the OTS

42567

certifies that this proposed rule will not
have a significant economic impact on
a substantial number of small entities.
The amendment concerns capital
requirements for collateralized
transactions which may be entered into
by depository institutions of any size.
While larger institutions may enter into
more sophisticated transactions, the
amendment would equally favor smaller
institutions, even if their collateralized
transactions are less complex. The effect
of the proposal would be to reduce
regulatory burden on depository
institutions by allowing the institutions
to hold less capital for certain
transactions collateralized by cash or
qualifying securities.
Paperwork Reduction Act
The Agencies have determined that
this proposal would not increase the
regulatory paperwork burden of banking
organizations pursuant to the provisions
of the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.).
OCC and OTS Executive Order 12866
Determination
The Comptroller of the Currency and
the Director of the OTS have determined
that this proposed rule does not
constitute a “significant regulatory
action” for the purposes of Executive
Order 12866.
OCC and OTS Unfunded Mandates
Reform Act of 1995 Determinations
Section 202 of the Unfunded
Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act)
requires that an agency prepare a
budgetary impact statement before
promulgating a rule that includes a
Federal mandate that may result in
expenditure by State, local, and tribal
governments, in the aggregate, or'by the
private sector, of $100 m illion or more
in any one year. If a budgetary impact
statement is required, Section 205 of the
Unfunded Mandates Act also requires
an agency to identify and consider a
reasonable number of regulatory
alternatives before promulgating a rule.
As discussed in the preamble, this
proposed rule is limited to changing the
risk weighting of transactions
collateralized by cash or securities
issued or unconditionally guaranteed by
the U.S. Government or its agencies, or
the central government of an OECD
country, from the 20 percent to the zero
percent risk weight category under the
Agencies’ risk-based capital rules. In
addition, w ith respect to the OCC, this
proposal clarifies and makes uniform
existing regulatory requirements for
national banks. The OCC and OTS have
therefore determined that the proposed

42568

Federal Register / Vol. 61, No. 160 / Friday, August 16, 1996 / Proposed Rules

rule will not result in expenditures by
State, local, or tribal governments or by
the private sector of $100 m illion or
more. Accordingly, the OCC and OTS
have not prepared a budgetary im pact
statement or specifically addressed the
regulatory alternatives considered.
List o f Subjects

12 CFR Part 3
Administrative practice and
procedure, Capital, National banks,
Reporting and recordkeeping
requirements, Risk.
12 CFR Part 208
Accounting, Agriculture, Banks,
banking, Confidential business
information, Crime, Currency, Federal
Reserve System, Mortgages, Reporting
and recordkeeping requirements,
Securities.
12 CFR Part 225
Administrative practice and
procedure, Banks, banking, Federal
Reserve System, Holding companies,
Reporting and recordkeeping
requirements, Securities.
12 CFR Part 325
Administrative practice and
procedure, Banks, banking, Capital
adequacy, Reporting and recordkeeping
requirements, Savings associations,
State non-member banks.
12 CFR Part 567
Capital, Reporting and recordkeeping
requirements, Savings associations.
Authority and issuance
Office of the Com ptroller o f the Currency
12 CFR CHAPTER I

For the reasons set out in the
preamble, part 3 of chapter I of title 12
of the Code of Federal Regulations is
proposed to be am ended as follows:
PART 3—MINIMUM CAPITAL RATIOS;
ISSUANCE OF DIRECTIVES

1. The authority citation for part 3
continues to read as follows:
Authority: 12 U.S.C. 93a, 1 61,1818,
1828(n), 1828 note, 1831n note, 3907, and
3909.

2. In appendix A to part 3, paragraph
(a)(l)(viii) and footnote 15 in paragraph
(b)(l)(v) of section 3 are revised to read
as follows:
Appendix A to Part 3— Risk-Based
Capital Guidelines

*

*

*

*

*

Sectio n 3. R isk C ategories/W eights fo r OnB alance S h e et A sse ts a n d O ff-B alance S h eet
Item s

*

*

*

*

*

(a) * * '*
( 1) *

*

*

(viii) T hat p o rtion o f claim s specified as
collateralized by cash on d ep osit w ith the
bank or by securities issu ed or
un co n d itio n ally guaran teed by the U nited
States G overnm ent or its agencies, or th e
central governm ents of a n OECD country,
p rov ided th a t:9a
(A) T he bank specifies in th e collateral
agreem ent the collateralized p o rtion o f the
claim eith er in term s of a n id entified dollar
am o unt or a percentage of th e claim (or in the
case of an off-balance-sheet derivative
contract, in term s of an identified d ollar
am o unt or a percentage o f th e current or
p o ten tial future ex p o su re);9b and
(B) T he bank specifies in th e collateral
agreem ent th at the custo m er is obligated to
m ain tain on a d aily basis a p o sitiv e m argin
of collateral on th e specified p o rtion o f the
claim th at fully takes into account daily
changes in th e valu e of the b an k’s credit
exposure a n d in the m arket value of the
collateral.

*

*

*

*

*

*

*

(b) * * *
(v j *

*

*

*

* 15

*

Dated: July 26, 1996.
Eugene A. Ludwig,
C om ptroller o f th e Currency.
Federal Reserve System
12 CFR CHAPTER II

For the reasons set forth in the
preamble, parts 208 and 225 of chapter
II of title 12 of the Code of Federal
Regulations are proposed to be amended
as follows:

A uthority: 12 U.S.C. 36, 248(a), 248(c),
321—
338a, 371d, 461, 481-486, 601, 611,
1 8 1 4 ,1823(j), 1828(o), 1831o, 1 8 3 1 p -l, 3105,
3310, 3331-3351, a n d 3906-3909; 15 U.S.C.
78b, 781(b), 781(g), 78l(i), 78o-4(c)(5), 78q,
78q— a n d 78w; 31 U.S.C. 5318; 42 U.S.C.
1,
4012a, 4104a, 4104b, 4106, a n d 4128.

2. In appendix A to part 208 section
the paragraph immediately
following the heading is designated as
paragraph a. and the second paragraph
is designated as paragraph b. and
revised to read as follows:
in .C .1 .,

Appendix A to Part 208—Capital
Adequacy Guidelines for State Member
Banks: Risk-Based Measure
*

*

h i.

*

*

*

*

*

*

3. In appendix A to part 208, the last
sentence of section III.D.l.i. is revised to
read as follows:
*

1. The authority citation for part 208
continues to read as follows:

*

*

*

*

III. * * *
JJ

*

*

*

^

9a C laim s c o lla ter a liz ed b y secu rities is s u e d or
guaranteed by th e U n ited S tates G overn m en t or its
a g en cies, or the central g o v ern m en t o f an OECD
co u n try in c lu d e se c u r itie s le n d in g tran saction s,
repu rch ase ag reem en ts, co lla ter a liz ed letters o f
cred it, su c h as rein su ran ce letters o f cred it, an d
oth er s im ilar fin a n cia l guarantees. S w a p s, forw ards,
futures, a n d o p tio n s tran saction s are a lso e lig ib le ,
i f th ey m eet th e collatera l requ irem en ts.
9bS e e fo otn ote 22 in s e c tio n 3(b)(5)(iii) o f th is
a p p e n d ix A (collatera l h e ld aga in st d eriv ative
contracts).
15 * * * w h e n th e b ank is a ctin g as a c u sto m er’s
agent in a tran sactio n in v o lv in g th e loan or sa le o f
th e c u sto m er’s secu rities co lla ter a liz ed b y cash
d eliv ere d to th e bank, th e tran saction is d e e m e d to
b e co lla ter a liz ed b y cash o n d ep o sit w ith th e bank
p ro v id ed that a n y o b liga tion b y th e b ank to
in d e m n ify th e cu stom er is lim ite d to n o m ore th an
th e d ifferen ce b e tw e e n th e m arket v a lu e o f th e
secu rities le n t or s o ld a n d th e cash collateral
r e ceiv e d , a n d an y r e in v estm en t risk a sso c ia te d w ith
th e co llateral is b orn e b y th e cu stom er.

*

*

C. * * *
1.
Category 1: zero p ercent, a. * * *
b. T his category also in clu d es th e po rtion s
o f claim s (includ ing repurchase agreem ents)
collateralized by cash on d eposit w ith the
lending bank or by securities issued or
u n co n d itio n ally guaranteed by the U.S.
T reasury, U.S. gbvernm ent agencies, or the
central governm ent in o th er OECD-based
countries, p ro v id ed th at the collateralized
arrangem ent:
l l ) Specifies the collateralized p o rtio n of
the claim e ith er in term s of an identified
do llar am o unt or a percentage of th e claim
(or, in the case o f a n off-balance-sheet
derivative contract, e ith er in term s of an
id entified d o lla r am oun t or a percentage of
the current or p otential future exposure); a n d
(2) Requires th e m ainten ance o n a daily
basis of a positive m argin of collateral on the
specified portio n o f th e claim th at fully takes
into account daily changes in the value o f the
b a n k ’s credit exposure a n d in the m arket
value of the collateral.

*
PART 208—MEMBERSHIP OF STATE
BANKING INSTITUTIONS IN THE
FEDERAL RESERVE SYSTEM
(REGULATION H)

*

*

*

*

*

i. * * * W hen a bank is acting as a
c ustom er’s agent in a transaction involving
th e loan or sale of the cu stom er’s securities
th at is collateralized by cash delivered to the
lend ing bank, th e tran saction is deem ed to be
collateralized by cash on deposit w ith th e
b an k for p urp oses o f determ inin g the
appropriate risk-w eight category, provided
th at any in dem nification is lim ited to no
m ore th an the difference betw een th e m arket
value of the securities len t or sold and the
cash collateral received, and any
reinv estm ent risk associated w ith the cash
collateral is borne by the custom er.
*

*

"

*

*

-

*

4. In appendix A to part 208,
Attachment III, category 1, paragraph 5
is revised to read as follows:
*

*

*

*

*

Federal Register / Vol. 61, No. 160 / Friday, August 16, 1996 / Proposed Rules
Attachment III—Summary of Risk
Weights and Risk Categories for State
Member Banks
Category 1: Z ero P ercent
*

*

*

*

3. In appendix A to part 225, the last
sentence in section III.D.l.i. is revised to
read as follows:
*

*

*

*

*

III. * * *

*

D. * * *
5.
P ortions of claim s (includ ing repurchase I * * *
agreem ents) collateralized by cash on deposit
i. * * * W hen a banking organization is
w ith the len d in g b ank or by securities issued
acting as a cu sto m er’s agent in a transaction
or un c o n d itio n ally guaranteed by OECD
involving th e loan or sale of the cu sto m er’s
central governm ents or U.S. governm ent
securities th at is collateralized by cash
agencies, p ro v id ed th at th e collateralization
delivered to the lending banking
arrangem ent (a) specifies the collateralized
organization, the transaction is deem ed to be
po rtion o f the claim either in term s o f an
co llateralized by cash on d eposit w ith the
id entified dollar am o unt or a percentage of
banking organization for p u rp o ses of
the claim (or, in the case of an off-balancedeterm ining th e app ropriate risk-w eight
sheet derivative contract, e ith e r in term s of
category, p ro v id ed th at an y in dem nification
an id en tified dollar am o u n t o r a percentage
is lim ited to no m ore th a n th e difference
of the c u rren t or potential future exposure);
betw een the m arket value of the securities
and (b) requires the m ainten an ce of a positive lent or sold a n d th e cash collateral received,
collateral m argin on a daily basis th at fully
and any reinvestm ent risk associated w ith
takes into accou nt daily changes in the value
the cash collateral is borne by th e custom er.
of th e b a n k ’s credit exposure a n d in the
*
*
*
*
*
m arket value of the collateral.

*

*

*

*

*

PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)

1. The authority citation for part 225
continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p— 1843(c)(8), 1844(b),
1,
1972(1), 3106, 3108, 3310, 3331-3351, 3907,
a n d 3909.

4. In appendix A to part 225,
Attachment III, category 1, paragraph 5
is revised to read as follows:
*
*
*
*
*
Attachment III —Summary of Risk
Weights and Risk Categories for Bank
Holding Companies
Category 1: Z ero P ercent

*

*

*

*

*

5. Portions of claim s (in cluding rep urch ase
agreem ents) collateralized b y cash on d epo sit
w ith the len d in g banking organization o r by
2. In appendix A to part 225 section
securities issu ed or u n co n d itio n ally
m .C.l., the paragraph immediately
guaranteed by OECD cen tral governm ents or
following the heading is designated as
U.S. g overnm ent agencies, p ro v id ed that the
paragraph a. and the second paragraph
collateralization arrangem ent (a) specifies the
is designated as paragraph b. and
co llateralized portio n of the claim eith er in
revised to read as follows:
term s of an identified d o lla r am o u n t or a
percentage of the claim (or, in th e case of an
Appendix A to Part 225—Capital
off-balance-sheet derivative contract, either
Adequacy Guidelines for Bank Holding in term s o f an identified d o lla r am o u n t or a
Companies: Risk-Based Measure
percentage of th e current o r p o tential future
*
*
*
*
*
exposure); a n d (b) requires th e m aintenance
of a positive collateral m argin o n a daily
III. * * *
basis that fully takes into acco unt daily
C. * * *
changes in th e value of the banking
1. Category 1: zero p ercen t a. * * *
b.
T his category also in clu d e s the po rtions organization’s credit exposure a n d in th e
m arket value of the collateral.
of claim s (inclu din g repurchase agreem ents)
*
*
*
*
*
collateralized by cash on deposit w ith th e
By ord er o f the Board of G overnors of the
lending banking organization or b y securities
Federal Reserve System , A ugust 8, 1996.
issu ed or u n c o n d itio n ally guaranteed by the
U.S. T reasury, U.S. governm ent agencies, or
W illiam W. W iles,
th e central governm ent in oth er OECD-based
S ecretary o f th e Board.
countries, p rovided that th e co llateralized
arrangem ent:
Federal Deposit Insurance Corporation
(1) Specifies the collateralized portion of
12 CFR CHAPTER III
the claim eith e r in term s o f an iden tified
For the reasons set forth in the
dollar am o unt or a percentage of the claim
preamble, part 325 of chapter III of title
(or, in the case of an off-balance-sheet
derivative contract, either in term s o f an
12 of the Code of Federal Regulations is
identified do llar am o unt or a percentage of
proposed to be amended as follows:
the c u rren t o r potential future exposure); an d
(2) Requires the m ainten ance on a daily
PART 325— CAPITAL MAINTENANCE
basis of a po sitive m argin o f collateral o n the
1. The authority citation for part 325
specified p ortio n o f the claim th a t fully takes
into account daily changes in th e value of the continues to read as follows:
banking organization’s credit exposure a n d in
Authority: 12 U.S.C. 1815(a), 1815(b),
th e m arket value o f the collateral.
1 8 1 6 ,1818(a), 1818(b), 1818(c), 1818(t),
*

*

*

*

*

1819(Tenth), 1828(c), 1828(d), 1828(i),

42569

1828(n), 1828(o), 18310, 1835, 3907, 3909,
4808; Pub. L. 1 0 2 -2 3 3 ,1 0 5 Stat. 1761,1789,
1790 (12 U.S.C. 1831n note); Pub. L. 1 0 2 24 2 ,1 0 5 Stat. 2236, 2355, 2386 (12 U.S.C.
1828 note).

2. In appendix A to part 325, section
II.C, the first two paragraphs under
Category 1— Zero Percent Risk Weight
are designated as paragraphs a. and b.,
respectively, and a new paragraph c. is
added to read as follows:
Appendix A to Part 325—Statement of
Policy on Risk-Based Capital
*
*
*
*
*
II. P rocedures fo r C om puting R isk-W eighted
A ssets

*

*

*

*

*

C. * * *
Category 1—Zero P ercent R isk W eight, a.
*

*

*

Jj

*

*

*

c.
T his category also in clu d es the p ortions
of claim s (includ ing repurch ase agreem ents)
collateralized by cash on deposit w ith the
lending bank or by securities issu ed or
u n c on ditio nally guaranteed by the U.S.
Treasury, U.S. governm ent agencies, or the
central governm ent in oth er OECD countries,
provided th at th e co llateralized arrangem ent:
(1) Specifies the collateralized p ortion of
the claim e ith e r in term s of an id entified
.dollar am o unt or a percentage of the claim
(or, in th e case o f an off-balance-sheet
derivative contract, either i n term s of an
identified do llar am o unt or a percentage of
the cu rren t o r po tential future exposure); an d
(2) Requires the m ain tenance on a daily
basis of a po sitive m argin of collateral on the
specified p ortio n of the claim th a t fully takes
into account daily changes in the value of the
b a n k ’s credit exposure and in the m arket
value of the collateral.

*

*
*
*
*
3. In appendix A to part 325, section
II.C., the three paragraphs under
Category 2— 20 Percent Risk Weight are
designated as paragraphs,a. through c.,
respectively, the phrase “portions of
claims collateralized by cash held in a ■
segregated deposit account of the
lending bank;” is removed from the
newly designated paragraph a., and the
first sentence of the newly designated
paragraph b. is revised to read as
follows:
*

*
JJ

*

*
*

*

*

*

*

*

c. * * *
*

*

*

Category 2—20 P ercent R isk W eight, a.
*

*

*

b. T his category also includes claim s on,
a nd portions of claim s guaranteed by, U.S.
G overnm ent-sponsored agencies, p o rtio n s of
claim s collateralized by securities issued or
guaran teed by U.S. G overnm ent-sponsored
agencies, a n d the p ortions of claim s
(including rep urch ase agreem ents)
collateralized by cash on d epo sit in the
lending b a n k or by securities issued or
guaranteed by OECD central governm ents

42570

Federal Register / Vol. 61, No. 160 / Friday, August 16, 1996 / Proposed Rules

that do no t qualify for the zero percen t risk
w eight category. * * *

*

*
*
*
*
4. In appendix A to part 325, section
II.D.l, the eight paragraphs are
designated as paragraphs a. through h.,
respectively, and the newly designated
paragraph h. is amended by adding a
sentence to the end of the paragraph to
read as follows:
*
*
*
*
*
II. * * *
D. * * *
1. Item s w ith a 100 P ercent C onversion
Factor, a. * * *

*

*

*

*

*

h. * * * W hen a bank is acting as a
custo m er’s agent in a transaction involving
the loan or sale o f th e custom er’s securities
th at is collateralized by cash delivered to the
len din g bank, th e transaction is deem ed to be
co llateralized by cash on deposit w ith the
bank for p urpo ses of d eterm ining the
ap pro priate risk-w eight category, pro vid ed
that any ind em n ification is lim ited to no
m ore th an th e difference betw een the m arket
value of the securities lent or sold a n d the
cash collateral received, and any
rein vestm ent risk associated w ith th e cash
collateral is borne by the custom er.

*

*
*
*
*
5. In appendix A to part 325 under Table II—Summary of Risk Weights and
Risk Categories, a period is added at the
end of paragraph (6) and a new
paragraph (7) is added under Category
1—Zero Percent Risk Weight to read as
follows:
*
*
*
*
*
Table II—Summary of Risk Weights
and Risk Categories
Category 1—Zero Percent Risk W eight

*

*

*

*

*

(7) Portions of claim s (including
repurchase agreem ents) collateralized by
cash on deposit w ith the len din g b a n k o r by
securities issu ed or u n co n d itio n ally
guaranteed b y th e U.S. Treasury, U.S.
G overnm ent agencies, or th e central
governm ent in o th er OECD countries,
pro vid ed th a t th e collateralization
arrangem ent (a) specifies the collateralized
po rtion o f the claim either in term s o f an
identified d ollar a m ou nt or a percentage of
the claim (or, in the case of an off-balancesheet derivative contract, e ith er in term s of
an identified d ollar am ount or a percentage
of th e c u rren t o r potential future exposure);
and (b) requires the m aintenance o f a positive
collateral m argin on a daily basis th a t fully
takes into acco unt daily changes in the value
of the b a n k ’s credit exposure a n d in the
m arket value of th e collateral.
*

*

*

*

*

*

*

(6) P ortions of claim s (including
repurchase agreem ents) collateralized 3 by
securities issu ed or guaranteed by the-U.S.
T reasury, U.S. G overnm ent agencies, or the
central governm ent in other OECD co untries
th at do n o t qualify for the zero percent risk
w eight category, or th at are collateralized by
securities issu ed o r guaranteed by U.S.
G overnm ent-sponsored agencies.
(7) P ortions o f loans a n d other claim s
collateralized by cash on deposit in the
lending b a n k th at do n ot qualify for the zero
percent risk w eight category.

provided that the collateralized
arrangement:
(J) Specifies the collateralized portion
of the claim either in terms of an
identified dollar amount or a percentage
of the claim (or, in the case of an offbalance-sheet derivative contract, either
in terms of an identified dollar amount
or a percentage of the current or
potential future exposure);9 and
(2) Requires the maintenance on a
daily basis of a positive margin of
collateral on the specified portion of the
claim that fully takes into account daily
changes in the value of the savings
association’s credit exposure and in the
market value of the collateral.

*

*

*

*

*

*

*

Category 2— 20 Percent R isk W eight
*

*

*

*

*

*

*

*

*

By order of th e Board of Directors.
D ated at W ashington, D.C., th is 17th day of
June, 1996.
Federal D eposit Insurance C orporation
Valerie J. Best,
A ssista n t E xecu tive Secretary.
Office of Thrift Supervision
12 CFR CHAPTER V

For the reasons set forth in the
preamble, part 567 of chapter V of title
12 of the Code of Federal Regulations is
proposed to be amended as set forth
below:
PART 567—CAPITAL

1. The authority citation for part 567
continues to read as follows:
Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 1828 (note).

2. Section 567.6 is amended by:
a. Redesignating footnotes 8, 9,10,
and 11 as footnotes 10,11,12, and 13,
respectively.
b. Adding paragraph (a)(l)(i)(H); and
c. Adding a sentence at the end of
paragraph (a)(2)(i)(E).
The additions read as follows:
§ 567.6 Risk-based capital credit riskweight categories.

(a) * * *
( 1) * * *

(i) * * *
(H) That portion of claims
collateralized by cash on deposit with
the lending savings association or by
securities issued or unconditionally
guaranteed by the United States
Treasury, the United States Government
or its agencies, or the central
government in other OECD countries,8

*

6. In appendix A to part 325 under
Table II—Summary of Risk Weights and
Risk Categories, paragraphs (6) and (7)
under Category 2—20 Percent Risk
Weight are revised to read as follows:
*

Table n —Sum m ary o f Risk W eights and
Risk Categories

*

3 D egree o f colla ter a liz a tio n is d eter m in ed by
current m arket va lu e.
8 C laim s co lla ter a liz ed b y secu rities is s u e d or
gu aran teed b y th e U n ite d S tates Treasury, th e
U n ited S tates G ov ern m en t or its a g en cies, o r th e
central g o v ern m en t o f an OECD cou n try in c lu d e
secu rities le n d in g tra n saction s, rep u rchase
a greem en ts, c o lla ter a liz ed letters o f cred it, s u c h as

*

*

*

^

*

(2 ) * * *

(i) * * *
(E) * * * W hen the savings association
is acting as a customer’s agent in a
transaction involving the loan or sale of
the custom er’s securities that is
collateralized by cash delivered to the
lending savings association, the
transaction is deemed to be
collateralized by cash on deposit w ith
the savings association for purposes of
determining the appropriate risk weight
category, provided that any obligation of
the savings association to indemnify the
customer is lim ited to no more than the
difference between the market value of
the securities lent or sold and the cash
collateral received, and any
reinvestment risk associated with the
collateral is borne by the customer.
*
*
*
*
*
Dated: July 23,1996.
Office o f T hrift Supervision
Jonathan L. Fiechter,
A ctin g D irector.
[FR Doc. 9 6-2 063 9 F iled 8 -1 5 -9 6 ; 8:45 am]
BILLING 'CODE 4810 -33 -P , 6210 -01 -P , 6714-01-P ,
6720-01 - P


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102