Board of Governors of the Federal Reserve System |
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
AGENCIES PROPOSE REVISION OF RISK-BASED CAPITAL RULES' TREATMENT OF RECOURSE AND DIRECT-CREDIT SUBSTITUTES
The four federal banking agencies today released proposed revisions to their risk-based capital requirements for certain obligations related to securitized transactions.
The proposal by the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and Office of Thrift Supervision is intended to produce more consistent capital treatment for credit risks associated with exposures arising from securitization transactions. It would amend the risk-based capital requirements for asset-backed securities as well as recourse obligations and direct credit substitutes.
Public comment is requested by May 26, 2000.
In securitizations, assets such as residential and commercial mortgages, credit-card receivables and automobile loans are pooled and reconstituted into securities. Securitizations typically carve up the credit risks from underlying assets and redistribute them to different parties. Sellers of assets into a securitization may retain part of the risk of credit loss through recourse arrangements. Sellers also may arrange for a third party, such as a banking organization, to accept some of the credit risk through guarantees, referred to as direct credit substitutes.
The interagency proposal published today incorporates many of the industry comments received in response to an earlier version published in November 1997. A consultative paper issued in June 1999 by the Basel Committee on Banking Supervision considers a similar approach to that contained in this proposal.
The preamble of the agencies' notice of proposed rulemaking is attached. The full notice will be published in the Federal Register.
2000 Banking and consumer regulatory policy