Regulatory Capital Rules: Advanced Approaches Risk-Based Capital Rule, Revisions to the Definition of Eligible Guarantee
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SUMMARY:
DATES: This rule is effective on
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SUPPLEMENTARY INFORMATION: On
FOOTNOTE 1 79 FR 24618 (
FOOTNOTE 2 78 FR 55340 (
Among other changes, the 2013 capital rule amended the methodologies for calculating risk-weighted assets under the advanced approaches, as well as the standardized approach for regulatory capital in subpart D (standardized approach) of the 2013 capital rule, which is generally consistent with the methodologies for calculating risk-weighted assets established by the
FOOTNOTE 3 See BCBS, "Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework" (
The definition of eligible guarantee provided that an eligible guarantee could be provided only by an eligible guarantor. The definition of eligible guarantor includes a sovereign, the
<p>Following the release of the 2013 capital rule, the agencies received comments raising concerns about the definition of eligible guarantee. Commenters noted that the revisions made to the definition of eligible guarantee changed the recognition of these guarantees for certain exposures under the advanced approaches wholesale framework. For example, several advanced approaches banking organizations /4/ observed that middle market and commercial real estate loans often involve guarantors that do not meet the definition of eligible guarantor. The guarantors for such transactions are often related parties such as owners or sponsors that have not issued investment grade debt securities. These commenters argued that such guarantees provide valuable credit risk mitigation that should be recognized under the advanced approaches capital requirements.
FOOTNOTE 4 Advanced approaches banking organizations generally refers to banking organizations with total consolidated assets of
As explained in the proposal, the agencies did not intend for the revisions to the definition of eligible guarantee in the 2013 capital rule to prevent advanced approaches banking organizations from recognizing the risk-mitigation benefits of the aforementioned types of guarantees. The agencies believe that these guarantees should continue to qualify as credit risk mitigants for purposes of the advanced approaches because they provide banking organizations with credit enhancement with respect to their exposures.
On
FOOTNOTE 5 72 FR 69288 (
FOOTNOTE 6 79 FR 24618 (
II. Comments
--This is a summary of a
Final rule.
CFR Part: "12 CFR Part 3"
RIN Number: "RIN 1557-AD83"
Citation: "79 FR 44120"
Document Number: "RIN 3064-AE13"
Federal Register Page Number: "44120"
"Rules and Regulations"
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