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Subject: Risk-Based Capital -- Securities Borrowing Transactions
Date: December 8, 2000
To: Chief Executive Officers of National Banks, Department and Division Heads, Examining Personnel and Other Interested Parties
Description: Interim Rule and Request for Comment
This bulletin transmits an interim rule and a request for comment on the risk-based capital (RBC) treatment of securities borrowing transactions in which the borrower of the security posts cash collateral. The interim rule was published in the Federal Register on December 5, 2000.
The interagency interim rule alters the treatment of certain securities borrowing transactions for banks that have implemented the market risk amendment to the RBC rules (12 CFR Part 3, appendix B). Specifically, the interim rule permits these banks to exclude from risk-weighted assets a large portion of the receivable arising from their posting of cash collateral when they borrow a security. This exclusion is conditional on the following requirements:
If these conditions are met, then a bank may incorporate into its risk-weighted assets an amount that is based on the difference between the amount of cash collateral it posted and the market value of the borrowed security. Thus, only the net exposure (i.e., cash collateral less the value of the borrowed security) rather than the gross exposure, would be incorporated into the RBC calculation. Also, though the rule is effective on January 5, 2001, national banks may apply the provisions of the interim rule beginning December 5, 2000.
Comments on the Proposal
The OCC encourages all interested parties to review and comment on the attached interim rule and request for comment. Comments on the proposed rule are due January 19, 2001. Please forward all comments to Communications Division, Office of the Comptroller of the Currency, 250 E Street SW, Washington, DC 20219, Attention Docket No. 00-28.
FOR FURTHER INFORMATION, CONTACT:
Roger Tufts, senior economic advisor, Capital Policy Division, (202) 874-5070; or Ron Shimabukuro, senior attorney, Legislative and Regulatory Activities Division, (202) 874-5090.
Jonathan L. Fiechter