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To: Chief Executive Officers of National Banks, Department and Division Heads, and all Examining Personnel

Description: Final Rule

On August 10, 1998, the OCC, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (agencies) published the attached joint final rule. The final rule amends the agencies' risk-based capital treatment of servicing assets, and was effective upon publication. Specifically, the regulation increases the amount of servicing assets (and purchased credit card relationships) that may be included in regulatory capital from 50 to 100 percent of Tier 1 capital. Servicing assets subject to the 100 percent Tier 1 capital limitation include mortgage and non-mortgage assets. Non-mortgage servicing assets and purchased credit card relationships are subject to a sublimit of 25 percent of Tier 1 capital. The final rule continues to subject the fair value of mortgage servicing assets and purchased credit card relationships to a 10 percent discount and applies the same discount to non-mortgage servicing assets.

The final rule makes the agencies' treatment of servicing and related assets for regulatory capital purposes consistent with the accounting standards prescribed by the Financial Accounting Standards Board ("Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" [FAS 125]) for the reporting of servicing assets.

For further information, contact Roger Tufts, senior economic advisor, Capital Policy Division at (202) 874-5070, or Gene Green, deputy chief accountant, Office of the Chief Accountant at (202) 874-4933.

Emory Wayne Rushton
Senior Deputy Comptroller
for Bank Supervision Policy

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