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Preamble

Table of Contents
          - Introduction 
          - Scope 
          - Qualification 
          - Calculation of Tier 1 Capital and Total Qualifying Capital 
          - Calculation of Risk-Weighted Assets 
          - Operational Risk 
          - Disclosure 

List of Acronyms

Regulatory Flexibility Act Analysis

Paperwork Reduction Act

Plain Language

OCC Executive Order 12866

OTS Executive Order 12866 Determination

OCC Unfunded Mandates Reform Act of 1995 Determination

OTS Unfunded Mandates Reform Act of 1995 Determination

Proposed Regulatory Text

Table of Contents
        - Part I
        - General Provisions
        - Part II
        - Qualifying Capital
        - Part III
        - Qualification
        - Part IV
        - Risk-Weighted Assets for General Credit Risk
        - Part V 
        - Risk-Weighted Assets for Securitization Exposures
        - Part VI
        - Risk-Weighted Assets for Equity Exposures
        - Part VII
        - Risk-Weighted Assets for Operational Risk
        - Part VIII
        - Disclosure

List of Subjects

Authority and Issuance

OCC

Federal Reserve

FDIC

OTS

OCC

Federal Reserve

FDIC

OTS

Billing Codes

(a) Qualification to use operational risk mitigants. A [bank] may       adjust its estimate of operational risk exposure to reflect qualifying       operational risk mitigants if:

(1) The [bank]�s operational risk quantification system is able to generate       an estimate of the [bank]�s operational risk exposure (which does not incorporate       qualifying operational risk mitigants) and an estimate of the [bank]�s operational       risk exposure adjusted to incorporate qualifying operational risk mitigants;       and

(2) The [bank]�s methodology for incorporating the effects of insurance,       if the [bank] uses insurance as an operational risk mitigant, captures through       appropriate discounts to the amount of risk mitigation:

(i) The residual term of the policy, where less than one year;

(ii) The cancellation terms of the policy, where less than one year;

(iii) The policy�s timeliness of payment;

(iv) The uncertainty of payment by the provider of the policy; and

(v) Mismatches in coverage between the policy and the hedged operational       loss event.

(b) Qualifying operational risk mitigants. Qualifying operational       risk mitigants are:

(1) Insurance that:

(i) Is provided by an unaffiliated company that has a claims payment ability       that is rated in one of the three highest rating categories by a NRSRO;

(ii) Has an initial term of at least one year and a residual term of more       than 90 days;

(iii) Has a minimum notice period for cancellation by the provider of 90 days;

(iv) Has no exclusions or limitations based upon regulatory action or for       the receiver or liquidator of a failed depository institution; and

(v) Is explicitly mapped to a potential operational loss event; and

(2) Operational risk mitigants other than insurance for which the [AGENCY]       has given prior written approval. In evaluating an operational risk mitigant       other than insurance, [AGENCY] will consider whether the operational risk       mitigant covers potential operational losses in a manner equivalent to       holding regulatory capital.

(a) If a [bank] does not qualify to use or does not have qualifying operational       risk mitigants, the [bank]�s dollar risk-based capital requirement for operational       risk is its operational risk exposure minus eligible operational risk offsets       (if any).

(b) If a [bank] qualifies to use operational risk mitigants and has qualifying       operational risk mitigants, the [bank]�s dollar risk-based capital requirement       for operational risk is the greater of:

(1) The [bank]�s operational risk exposure adjusted for qualifying operational       risk mitigants minus eligible operational risk offsets (if any); or

(2) 0.8 multiplied by the difference between:

(i) The [bank]�s operational risk exposure; and

(ii) Eligible operational risk offsets (if any).

(c) The [bank]�s risk-weighted asset amount for operational risk equals the       [bank]�s dollar risk-based capital requirement for operational risk determined       under paragraph (a) or (b) of this section multiplied by 12.5.

 

Basel II Capital AccordNotice of Proposed Rulemaking (NPR)

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