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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

SR 13-18

October 29, 2013

TO THE OFFICER IN CHARGE OF SUPERVISION

AT EACH FEDERAL RESERVE BANK AND TO FINANCIAL INSTITUTIONS

SUPERVISED BY THE FEDERAL RESERVE

SUBJECT: Uniform Agreement on the Classification and Appraisal of Securities Held by 

Depository Institutions

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation, and the Office of the Comptroller of the Currency (OCC) have issued the attached 

Uniform Agreement on the Classification and Appraisal of Securities Held by Depository 

Institutions (2013 Securities Classification Guidance). This guidance outlines principles related

to the proper classification of securities without relying on ratings issued by nationally 

recognized statistical rating organizations (external credit ratings) and applies to state member 

banks and in principle to all institutions supervised by the Federal Reserve.

The 2013 Securities Classification Guidance supersedes SR letter 04-9, “Revised 

Uniform Agreement on the Classification of Assets and Appraisal of Securities Held by Banks 

and Thrifts.” Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

of 2010 requires each federal agency to remove references to, and requirements of reliance on, 

external credit ratings in any regulation issued by the agency that requires the assessment of the 

creditworthiness of a security or money market instrument. Therefore, in 2012, the OCC revised

its investment security regulations (12 CFR part 1) to remove reliance on external credit ratings.1

Investment in securities and stock by state member banks are required under the Federal Reserve 

Act (12 USC 335) and Regulation H (12 CFR 208.21) to comply with the OCC investment 

security regulations. 

The OCC investment security regulations require an institution to monitor investment 

credit quality through an analytical review of the obligor rather than solely through external 

 1 See the OCC’s final rules at 77 Fed. Reg. 35253 (June 13, 2012).

Applicability to Community Banking Organizations: This guidance applies to all 

institutions supervised by the Federal Reserve, including those with $10 billion or less in 

consolidated asset. 
 

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credit ratings. Credit quality monitoring provides an opportunity for management to determine 

whether a security continues to be investment grade or if it has deteriorated and thus requires

classification. The 2013 Securities Classification Guidance clarifies the classification standards 

for securities held by an institution and provides examples that demonstrate when a security is 

investment grade and when it is not investment grade. 

Reserve Banks are asked to distribute this letter and attachment to institutions supervised 

by the Federal Reserve in their Districts, as well as to appropriate supervisory and examination 

staff. Questions regarding the attached guidance should be addressed to David Emmel, Manager, 

Credit, Market and Liquidity Risk Policy, at (202) 912-4612. In addition, questions may be sent 

via the Board’s public website.2 

Michael S. Gibson

Director

Attachment:

• Uniform Agreement on the Classification and Appraisal of Securities Held by Depository 

Institutions

Supersedes:

• SR letter 04-9, “Revised Uniform Agreement on the Classification of Assets and 

Appraisal of Securities Held by Banks and Thrifts”

Cross References:

• SR letter 12-15, “Investing in Securities without Reliance on Nationally Recognized 

Statistical Rating Organization Ratings.”

 2 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.