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Federal Reserve Bank OF DALLAS R O B E R T D. M c T E E R , J R . DALLAS, TEXAS P R E S ID E N T AND C H IE F E X E C U T I V E O F F I C E R December 16 1994 7 5 2 6 5 -5 9 0 6 Notice 94-129 TO: The Chief Executive Officer of each state member bank and bank holding company in the Eleventh Federal Reserve District SUBJECT Recommendations Pertaining to Regulatory Capital Issues Arising from Financial Accounting Standards Board Statement No. 115 DETAILS The Task Force on Supervision of the Federal Financial Institutions Examination Council (FFIEC), acting under delegated authority, has announced its recommendations to the agencies pertaining to regulatory capital issues arising from FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." ATTACHMENT A copy of the FFIEC’s press release dated November 10, 1994, is attached. MORE INFCNF/IATION For more information, please contact Dorsey Davis at (214) 922-6051. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, For additional copies, bankers and others are encouraged to use one o f 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 ’f e _________________________________________________________________________ 2100 Pennsylvania Avenue, NW, Suite 200 • Washington, DC 20037 . (202)634-6526 • FAX (202)634-6556 Press Release For (r e v i s e d ) immediate release November 10, 1994 The Task Force on Supervision of the Institutions Examination Council authority, announced today its Federal Financial (FFIEC),1 acting under delegated recommendations to the agencies pertaining to regulatory capital issues arising from FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115). The agencies Task that the Force net on Supervision unrealized is recommending to the holding gains (losses) on available-for-sale debt securities not be included in regulatory capital for purposes capital ratios. of computing Accordingly, the leverage and risk-based when calculating these ratios, the amortized cost rather than the fair value of available-for-sale debt securities generally would be used. With regard to equity securities that have readily determinable fair values, the Task Force on Supervision recommends that they continue to be valued at the lower of cost or fair value for regulatory capital purposes. 1 The FFIEC consists of representatives from the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller o f the Currency (OCC), the Office of Thrift Supervision (OTS) (referred to as the "agencies"), and the National Credit Union Administration. The Task Force on Supervision is comprised of staff members from each o f the agencies. The recommendations in this press release are not directed to credit unions. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision 2 - Furthermore, the Task Force - on Supervision recommends that examiners continue their longstanding practice of considering any unrealized appreciation and securities not recognized depreciation on debt and equity in capital ratios when evaluating the adequacy of an institution's capital. These recommendations would continue the interim capital treatment that the FRB , FDIC, and OCC adopted when however, issued FAS would 115 became represent in August 1993 to effective. a reversal follow These of FAS the 115 recommendations, interim OTS policy computing savings in associations' regulatory capital. The Chairman of the FFIEC, strongly Force. endorsed the She said, FDIC Chairman Ricki Tigert recommendations of the Supervision Task "Cooperation among bank regulatory agencies in assuring consistency in capital standards and regulatory practices is essential to a sound and efficient banking system." With respect to the Task Force's recommendations on FAS 115 she stated, "Incorporating FAS cause unnecessary purposes of 115 into volatility prompt regulatory capital in applying corrective action standards capital without standards any # # for appreciable benefits to the safety and soundness of the banking system." # would
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