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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10581
October 5, 1992
"I
RISK-BASED CAPITAL GUIDELINES
Adoption of Interim Amendments to Regulations H and Y
Comments Invited by October 23
To All State Member Banks and Bank Holding Companies
in the Second Federal Reserve District, and Others Concerned:
The Board of Governors of the Federal Reserve System has proposed a
modification of its risk-based capital guidelines for State member banks and bank
holding companies to include the European Bank for Reconstruction and
Development, the International Finance Corporation, and the Nordic Investment
Bank in the list of named multilateral lending institutions that are eligible for a 20
percent risk weight. The proposed change would conform the Board’s risk-based
capital guidelines more closely to interpretive guidance adopted by the other G-10
countries that are signatories to the Basle Accord.
The Board implemented the proposed change as an interim rule, effective
September 23, 1992, but has invited comments thereon by October 23. Enclosed
is a copy of the interim rule, which has been reprinted from the Federal Register,
comments may be sent to the Board of Governors, as indicated in the notice, or
to our Bank Analysis Department.
E. G e r a l d C o r r ig a n ,
President.
Board of Governors of the Federal Reserve System
CAPITAL ADEQUACY GUIDELINES
Amendments to Regulations H and Y
(Effective September 23, 1992)
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R-0776]
Capital; Capital Adequacy Guidelines
AGENCY: Board of Governors of the
Federal Reserve System.
a c t io n : Interim rule.
___________
SUMMARY: The Board is proposing to
modify its risk based capital guidelines
for state member banks and bank
holding companies to include the
European Bank for Reconstruction and
Development, the International Finance
Corporation, and the Nordic Investment
Bank in the list of named multilateral
lending institutions that are eligible for a
20 percent risk weight. This proposed
modification would conform the Board's
risk-based capital guidelines more
closely to interpretive guidance adopted
by the other G-10 countries that are
signatories to the Basle Accord.
DATES: The interim rule is effective as of
September 23,1992. Comments must be
received by October 23,1992.
ADDRESSES: Comments, which should
refer to Docket No. R -0776, may be
mailed to the Board of Governors of the
Federal Reserve System, 20th Street and
C o n s t it u t io n A y e n u e , N W ., W a s h in g t o n ,
DC 20551, to the attention of Mr.
William W. Wiles, Secretary. Comments
addressed to Mr. Wiles may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 pun., and to
the security control room outside of
those hours. Both the mail room and the
security control room are accessible
from the courtyard entrance on 20th
Street between Constitution Avenue and
C Street, NW. Comments may be
inspected in Room B-1122 between 9:00
a.m. and 5:00 p.m. weekdays, except as
provided in § 261.8 of the Board’s Rules
Regarding Availability of Information,
12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT:
Rhoger H Pugh, Assistant Director (202/
728-5883), Kelly S. Shaw, Supervisory
Financial Analyst (202/452-3054), Norah
Barger, Supervisory Financial Analyst
(202/452-2402), Division of Banking
Supervision and Regulation; and Brian
E. J. Lam, Attorney (202/452-2067), Legal
Division, Board of Governors of the
Federal Reserve System. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), Dorothea
Thompson (202/452-3544), Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC.
SUPPLEMENTARY INFORMATION: Under
the risk-based capital framework
established by the Basle Accord, claims
on, and claims guaranteed by,
multilateral lending institutions and
regional development banks in which G10 countries are shareholding members
may be accorded, at national discretion,
a 20 percent risk weight. Like the Basle
Accord, the Board’s risk-based capital
guidelines specify five multilateral
lending institutions and regional
development banks1 that are eligible for
the 20 percent risk weight. The
guidelines further state that other
multilateral lending institutions and
regional development banks may be
accorded a 20 percent risk weight if the
U.S. government is a shareholder or
contributing member.
The Board has received a number of
requests concerning the risk weight of
claims on, and investments in securities
issued by, the European Bank for
Reconstruction and Development
(EBRD), the International Finance
Corporation (IFC), and the Nordic
Investment Bank (NIB). In response to
1 International Bank for Reconstruction and
Development (World Bank), Latin American
Development Bank. Asian Development Bank,
African Development Bank, and the European
Investment Bank.
these requests, the Board is proposing to
clarify that bank holding companies and
state member banks may assign a 20
percent risk weight to claims on, or
guaranteed by, the EBRD or the IFC. The
U.S. is a contributing shareholder of the
EBRD, but it was established after the
original publication of the capital
adequacy guidelines. Since the IFC is a
subsidiary of the World Bank, an
organization that the guidelines
specifically name as an institution
eligible for the 20 percent risk weight, it
already implicitly is included in the 20
percent risk category. However, since
numerous inquiries have been received
with regard to the appropriate risk
category for the IFC, the Board is
proposing to include it in the list of
multilateral lending institutions and
regional development banks specifically
named in the guidelines as eligible for
the 20 percent risk weight.
The Board is also proposing to permit
bank holding companies and state
member banks to assign a 20 percent
risk weight to claims on, or guaranteed
by, NIB. Under the current guidelines,
NIB would not qualify for a 20 percent
risk weight as the U.S. is neither a
shareholder nor a contributing member.
However, the Basle Committee on
Banking Supervision has interpreted the
criteria in the Basle Accord for assigning
a multilateral lending institution to the
20 percent risk category to mean that
any country may include NIB in this
preferential risk category since Sweden,
a G-10 country, is a shareholder in NIB.
Thus, adding NIB to the list of named
multilateral lending institutions eligible
for a 20 percent risk weight would serve
to conform the Board’s risk-based
capital guidelines more closely to the
interpretative guidance adopted by the
other G-10 countries that are signatories
to the Basle Accord.
The proposed modifications to the
risk-based capital guidelines would
PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 57, NO. 185, pp. 43889-90
inc. Cir. No. 10581]
(OVER)
have the effect of allowing claims
collateralized by securities issued by the
EBRD, IFC, and NIB to be included in
the 20 percent risk category.
The Board is seeking comment on the
proposed change to its risk-based
capital guidelines. Because the Board
wishes to implement in an appropriate
and expeditious manner guidance
adopted by the G-10 countries in
connection with the Basle Accord, and
because the proposed revision would
reduce rather than expand the
regulatory burden on state member
banks and bank holding companies, the
Board is implementing the proposed
change immediately as an interim rule.
Regulatory Flexibility Act Analysis
PART 208— MEMBERSHIP OF S T A T E
BANKING IN STITUTIO N S IN TH E
FEDERAL RESERVE SYSTEM
PART 225— BANK HOLDING
COMPANIES AND CHANGE IN BANK
C O N TR O L
1. Hie authority citation for part 225 is
1. Hie authority citation for part 208 is
revised to read as follows:
revised to read as follows:
Authority: S ectio n s 9 , 11(a), 11(c), 19, 21, 25,
and 25(a) of the F ed eral R eserve A c t a s
am en d ed (12 U.S.C. 321-338, 248(a), 248(c),
461. 481-486, 601 an d 811, resp ectively):
se c tio n s 4 , 13(j), an d 18(o) o f the F ederal
D ep osit Insurance A ct, a s am en d ed (12 U.S.C.
1 8 1 4 ,1623{j), an d l828(o), resp ectively);
se ctio n 7(a) o f th e International Banking A ct
o f 1978 (12 U.S.C. 3105): se c tio n s 907-910 o f
the International Lending S u p ervision A ct o f
1983 (12 U.S.C. 3906-3909); se c tio n s 2 . 12(b),
12(g), 12(i), 15B(c) (5), 1 7 ,17A, an d 23 o f the
S ecu rities E xchan ge A ct o f 1934 (15 U.S.C.
78b, 781(b), 761(g), 78i(i), 78o-4(c) (5), 78q, 78q1, and 78w , resp ectively); se c tio n 5155 o f the
R ev ised S tatu tes (12 U.S.C. 36) a s am en ded
b y the M cF ad d en A ct o f 1927; an d se c tio n s
1101-1122 o f the F in an cial In stitu tion s
Reform, R ecovery, and E nforcem ent A ct of
1989 (12 U.S.C. 3310 an d 3331-3351).
The Federal Reserve Board does not
believe adoption of this proposal would
have a significant economic impact on a
substantial number of small business
entities (in this case, small banking
2. Appendix A to part 208 is amended
organizations), in accord with the spirit by revising the second sentence of the
and purposes of the Regulatory
second paragraph in HI.C.2 to read as
Flexibility Act (5 U.S.C. 601 et seq.). In
follows:
this regard, the proposed revision would
reduce certain regulatory burdens on
Appenix A to Part 206—Capital Adequacy
Guidelines for State Member Banks: Riskbank holding companies as it would
Based Measure
reduce the capital charge on certain
*
*
*
*
*
transactions. In addition, because the
in. ** *
risk-based capital guidelines generally
c. * * *
do not apply to bank holding companies
2. ***In ad d ition , this category a lso
with consolidated assets of less than
clu d es cla im s on, an d the p ortions o f claim s
$150 million, this proposal will not affect in
that are gu aran teed by, U .S. governm entsuch companies.
sp o n so red 32 a g en cies an d cla im s on, an d the
portions o f claim s g u aran teed by, the
List of Subjects
Authority: 12 U.S.C. 1817(j) (13), 1818(b),
1828(o), 1831i, 1843(c) (8), 1844(b), 1972(1),
3106, 3108, 3907, 3909, 3310, 3331-3351, and
se c. 306 o f the F ed eral D ep o sit Insurance
C orporation Im provem ent A ct o f 1991 (Pub. L
102-242,105 S t a t 2236 (1991)).
2. Appendix A to part 225 is amended
by revising the second sentence of the
second paragraph in UI.C.2 to read as
follows:
Appendix A to Part 22S—Capital Adequacy
Guidelines for Bank Holding Companies:
Risk-Based Measure
*
*
*
*
*
III. * * *
C. * * *
2. ***ln addition, this category also
includes claims on, and the portions of claims
that are guaranteed by, U.S. governmentsponsored38 agencies and claims on, and the
portions of claims guaranteed by, the
International Bank for Reconstruction and
Development (World Bank), the International
Finance Corporation, the Interamerican
Development Bank, the Asian Development
Bank, the African Development Bank, the
European Investment Bank, the European
Bank for Reconstruction and Development
the Nordic Investment Bank, and other
multilateral lending institutions or regional
development banks in which the U.S.
government is a shareholder or contributing
member.***
*
*
*
*
*
8
*
International Bank for R econ stru ction and
D ev elo p m en t (W orld Bank), the International
12 CFR Part 208
F in an ce Corporation, the Interam erican
Accounting, Agriculture, Banks,
D ev elo p m en t Bank, the A sia n D evelop m en t
Bank, th e A frican D evelop m en t Bank, the
banking, Confidential business
information, Currency, Federal Reserve European In vestm en t Bank, the European
Bank for R econ stru ction and D evelop m en t,
System, Reporting and recordkeeping
the N ordic In vestm en t Bank, and other
requirements, Securities.
m ultilateral lending in stitu tion s or regional
12 CFR Part 225
d ev elo p m en t ban k s in w h ich the U.S.
govern m en t is a sh arehold er or contributing
Administrative practice and
m em ber.***
procedure, Banks, banking, Federal
* * * * *
Reserve System, Holding companies,
Reporting and recordkeeping
requirements, Securities.
** For this purpose, U.S. government-sponsored
For the reasons set forth in the
agencies are defined as agencies originally
established or chartered by the federal government
preamble, and pursuant to the Board’s
serve public purposes specified by the U.S.
authority under section 5(b) of the Bank to
Congress but whose obligations are not explicitly
Holding Company Act of 1956 (12 U.S.C. guaranteed by the full faith and credit of the U.S.
government. These agencies include the Federal
1844 (b)), and section 910 of the
International Lending Supervision Act of Home Loan Mortgage Corporation (FHLMC), the
Federal National Mortgage Association (FNMA), the
1983 (12 U.S.C. 3909), the Board is
Farm Credit System, the Federal Home Loan Bank
amending 12 CFR parts 208 and 225 as
System, and the Student Loan Marketing
Association (SLMA). Claims on U.S. goverrunentfollows:
sponsored agencies include capital stock in a
Federal Home Loan Bank that is held as a condition
of membership in that Bank.
8S For this purpose, U.S. government-sponsored
agencies are defined as agencies originally
established or chartered by the federal government
to serve public purposes specified by the U.S.
Congress but whose obligations are not explicitly
guaranteed by the full faith and credit of the U.S.
government. These agencies include the Federal
Home Loan Mortgage Corporation (FHLMC), die
Federal National Mortgage Association (FNMA), the
Farm Credit System, the Federal Home Loan Bank
System, and the Student Loan Marketing
Association (SIMA). Claims on U.S. governmentsponsored agencies include capital stock in a
Federal Home Loan Bank that is held as a condition
of membership in that Bank.
Board o f G overnors o f the Federal R eserve
System . Septem ber 1 6 ,1 9 9 2 .
W illiam W . W iles,
Secretary of the Board.
[FR Doc. 9 2 - 2 3 0 2 5 Filed 9-22-92; 8:45 am]
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