Comptroller of the Currency, Fed, and FDIC Revises Eligible Guarantee Definition
Targeted News Service |
Regulatory Capital Rules: Advanced Approaches Risk-Based Capital Rule, Revisions to the Definition of Eligible Guarantee
A Rule by the Comptroller of the Currency, the
Publication Date:
Agencies:
Dates: This rule is effective on
Effective Date:
Entry Type: Rule
Action: Final rule.
Document Citation: 79 FR 44120
Page: 44120 -44125 (6 pages)
CFR: 12 CFR 217
12 CFR 324
12 CFR 3
Agency/Docket Numbers: Docket ID OCC-2014-0012
Regulation Q
Docket No. R-1488
RIN: 1557-AD83
3064-AE13
7100-AE17
Document Number: 2014-17858
Shorter URL: https://federalregister.gov/a/2014-17858
Action
Final Rule.
Summary
DATES:
This rule is effective on
FOR FURTHER INFORMATION CONTACT:
OCC:
Board:
SUPPLEMENTARY INFORMATION:
I. Background
On
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
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
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.
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
[*Federal RegisterVJ 2014-07-30]
For more information about
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Wordcount: | 1268 |
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