The federal bank and thrift regulatory agencies today requested public comment
on an interim final rule and a notice of proposed rulemaking (NPR) to amend
their risk-based capital standards for the treatment of assets in asset-backed
commercial paper (ABCP) programs consolidated under the recently issued
Financial Accounting Standards Board Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46).
The NPR would also modify the risk-based capital treatment of certain
securitizations with early amortization provisions.
An ABCP
program is usually carried out through a bankruptcy-remote special purpose
entity generally sponsored and administered by a banking organization (banks,
bank holding companies, and thrifts) to provide funding to its corporate
customers by purchasing asset pools from, or extending loans to, those
customers. The ABCP provides funding
for these assets through the issuance of commercial paper into the market.
These issuances may be credit enhanced by various means, usually by a
sponsoring bank.
Under the interim rule, sponsoring banking organizations may remove
consolidated ABCP program assets from their risk-weighted asset base for
purposes of calculating their risk-based capital ratios. However, sponsoring banking organizations
must continue to include any other exposures they have to these programs, such
as credit enhancements, in risk-weighted assets. The interim rule also
amends the risk-based capital standards to exclude from tier 1 and total
capital any minority interests in ABCP programs consolidated by sponsoring
banking organizations under FIN 46. The interim rule will be in effect
only for the regulatory reporting periods ending September 30 and December 31,
2003, and March 31, 2004.
The risk-based capital treatment
set forth in the interim rule does not alter the accounting rules for balance
sheet consolidation as set forth under generally accepted accounting
principles. Consequently, banking organizations
will be required to report consolidated ABCP program assets in their tier 1
leverage ratio calculation.
The NPR solicits comments on a
permanent, risk sensitive risk-based capital treatment for the risks arising from
ABCP programs. In particular, it proposes to permanently permit banking
organizations to exclude from their risk-weighted asset base those assets in
ABCP programs consolidated onto sponsoring banking organizations balance
sheets as a result of FIN 46. In addition, the NPR also would require
banking organizations to hold risk-based capital against liquidity facilities
provided to ABCP programs with an original maturity of one year or less.
This treatment recognizes that such facilities, which currently are not
assessed a capital requirement, expose banking organizations to credit risk.
The agencies are also proposing a risk-based capital charge for certain types
of securitizations of revolving retail credit facilities (for example, credit
card receivables) that incorporate early amortization provisions. The
goal of these capital proposals is to more closely align the risk-based capital
requirements with the associated risk of the exposures.
The interim final rule and NPR are being issued by the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance Corporation, the
Office of the Comptroller of the Currency and the Office of Thrift Supervision.
Comments on the interim final rule and NPR are due 45 days after their
publication in the Federal Register.
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Attachments
Media Contacts:
Federal Reserve Susan
Stawick (202) 452-2955
FDIC David
Barr (202) 898-6992
OCC Robert
Garsson (202) 874-5770
OTS Chris
Smith (202) 906-6677