Circular Letters

Circular Letter 5562

April 22, 2002

To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officer

Subject: Risk-Based Capital Standards: Claims on Securities Firms

Summary:

On April 9, 2002, the federal banking agencies issued a final rule amending their risk-based capital standards for banks, bank holding companies, and savings associations with regard to the risk weighting of claims on, and claims guaranteed by, qualifying securities firms.

This rule reduces the risk weight applied to certain claims on, and claims guaranteed by, qualifying securities firms incorporated in the United States and in other countries that are members of the Organization for Economic Cooperation and Development (OECD) from 100 percent to 20 percent under the Agencies’ risk-based capital rules. In addition, consistent with the existing rules of the FRB and the OCC, the FDIC and OTS are amending their risk-based capital standards to permit a zero percent risk weight for certain claims on qualifying securities firms that are collateralized by cash on deposit in the lending institution or by securities issued or guaranteed by the United States or other OECD central governments.

Effective Date: This final rule is effective July 1, 2002.

Additional Information: A copy of the final rule is attached PDF Icon (65 KB, 32 pages). For additional information, contact Norah Barger, Deputy Associate Director (202/452-2402), Barbara Bouchard, Assistant Director (202/452-3072), or John F. Connolly, Supervisory Financial Analyst (202/452-3621), Division of Banking Supervision and Regulation, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551.