[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Proposed Rules]
[Pages 76180-76184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30615]



[[Page 76180]]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket No. 00-27]
RIN 1557-AB14

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Regulations H and Y; Docket No. R-1085]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 325

RIN 3064-AC17

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 567

[Docket No. 2000-96]
RIN 1550-AB11


Risk-Based Capital Standards: Claims on Securities Firms

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision, 
Treasury (OTS).

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: The Board, OCC, FDIC and OTS (collectively, the Agencies) are 
proposing to amend their respective risk-based capital standards for 
banks, bank holding companies, and savings associations (collectively, 
institutions) with regard to the risk weighting of claims on, and 
claims guaranteed by, qualifying securities firms. This proposed rule 
would reduce the risk weight applied to claims on, and claims 
guaranteed by, qualifying securities firms incorporated in 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.

DATES: Your comments must be received by January 22, 2001.

ADDRESSES: Comments should be directed as follows:
    OCC: You may send comments electronically to 
<a href="/cdn-cgi/l/email-protection#b8cadddfcb96dbd7d5d5ddd6cccbf8d7dbdb96cccaddd9cb96dfd7ce"><span class="__cf_email__" data-cfemail="f486919387da979b9999919a8087b49b9797da8086919587da939b82">[email protected]</span></a> or by mail to Docket No. 00-27, Office of 
the Comptroller of the Currency, Public Information Room, 250 E Street, 
SW., Mail Stop 1-5, Washington, DC 20219. In addition, you may send 
comments by facsimile transmission to (202) 874-5274. You can inspect 
and photocopy comments at that address. You can make an appointment to 
inspect the comments by calling (202) 874-5043.
    Board: Comments should refer to docket number R-1085, and should be 
sent to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551 or mailed electronically to 
<a href="/cdn-cgi/l/email-protection#a1d3c4c6d28fc2ceccccc4cfd5d2e1c7c4c5c4d3c0cdd3c4d2c4d3d7c48fc6ced7"><span class="__cf_email__" data-cfemail="8bf9eeecf8a5e8e4e6e6eee5fff8cbedeeefeef9eae7f9eef8eef9fdeea5ece4fd">[email protected]</span></a>. Comments addressed to Ms. Johnson 
also may be delivered to the Board's mailroom between the hours of 8:45 
a.m. and 5:15 p.m. and, outside those hours, to the Board's security 
control room. Both the mailroom and the security control room are 
accessible from the Eccles Building courtyard entrance, located on 20th 
Street between Constitution Avenue and C Street, NW. Members of the 
public may inspect comments in room MP-500 of the Martin Building 
between 9 a.m. and 5 p.m. on weekdays.
    FDIC: Written comments should be addressed to Robert E. Feldman, 
Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429. Comments may 
be hand-delivered to the guard station at the rear of the 17th Street 
Building (located on F Street), on business days between 7 a.m. and 5 
p.m. (FAX number (202) 898-3838; Internet address; <a href="/cdn-cgi/l/email-protection#83e0eceeeee6edf7f0c3e5e7eae0ade4ecf5"><span class="__cf_email__" data-cfemail="e88b8785858d869c9ba88e8c818bc68f879e">[email protected]</span></a>). 
Comments may be inspected and photocopied in the FDIC Public 
Information Center, Room 100, 801 17th Street, NW., Washington, DC 
20429, between 9 a.m. and 4:30 p.m. on business days.
    OTS: Send comments to Manager, Dissemination Branch, Records 
Management and Information Policy, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552, Attention Docket No. 2000-96. Hand 
deliver comments to the Guard's Desk, East Lobby Entrance, 1700 G 
Street, NW., from 9 a.m. to 4 p.m. on business days, Attention Docket 
No. 2000-96. Send facsimile transmissions to FAX Number (202) 906-7755, 
Attention Docket No. 2000-96; or (202) 906-6956 (if comments are over 
25 pages). Send e-mails to <a href="/cdn-cgi/l/email-protection#8bb7eaabe3f9eeedb6" http: public.info">public.info</a>@ots.treas.gov">public.info@ots.treas.gov</a>, Attention Docket 
No. 2000-96, and include your name and telephone number. Interested 
persons may inspect comments at the Public Reference Room, 1700 G St. 
NW., from 10 a.m. until 4 p.m. on Tuesdays and Thursdays or obtain 
comments and/or an index of comments by facsimile by telephoning the 
Public Reference Room at (202) 906-5900 from 9 a.m. until 5 p.m. on 
business days. Comments and the related index will also be posted on 
the OTS Internet Site at www.ots.treas.gov.

FOR FURTHER INFORMATION CONTACT:
    OCC: Margot Schwadron, Risk Expert (202/874-5070), Capital Policy 
Division; or Ron Shimabukuro, Senior Attorney (202/874-5090), 
Legislative and Regulatory Activities Division, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Norah Barger, Assistant Director (202/452-2402), Barbara 
Bouchard, Manager (202-452-3072), or John F. Connolly, Supervisory 
Financial Analyst (202/452-3621), Division of Banking Supervision and 
Regulation; or Mark E. Van Der Weide, Counsel (202/452-2263), Legal 
Division. For the hearing impaired only, Telecommunication Device for 
the Deaf (TDD), Janice Simms (202/872-4984), Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551.
    FDIC: For supervisory issues, Stephen G. Pfeifer, Examination 
Specialist (202/898-8904), Accounting Section, Division of Supervision; 
for legal issues, Leslie Sallberg, Counsel, (202/898-8876), Legal 
Division, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: David W. Riley, Project Manager, (202/906-6669), Supervision 
Policy; Teresa A. Scott, Counsel, Banking and Finance (202/906-6478), 
Regulations and Legislation Division, Office of the Chief Counsel, 
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION: The Agencies' risk-based capital standards 
are based upon principles contained in the July 1988 agreement entitled 
``International Convergence of Capital Measurement and Capital 
Standards'' (Basel Accord or Accord). The Basel Accord was developed by 
the Basel Committee on Banking Supervision (Basel Committee) and 
endorsed by the central bank governors of the Group of Ten (G-10) 
countries.\1\ The Basel Accord provides a framework for assessing the 
capital adequacy of a depository institution by risk weighting

[[Page 76181]]

its assets and off-balance-sheet exposures primarily based on credit 
risk.
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    \1\ The G-10 countries are Belgium, Canada, France, Germany, 
Italy, Japan, Netherlands, Sweden, Switzerland, the United Kingdom, 
and the United States. The Basel Committee is comprised of 
representatives of the central banks and supervisory authorities 
from the G-10 countries and Luxembourg.
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    The original Basel Accord imposed a 20 percent risk weight for 
claims on banks incorporated in OECD countries \2\ and a 100 percent 
risk weight for claims on securities firms and most other nonbanking 
firms. In April 1998, the Basel Committee amended the Basel Accord to 
lower the risk weight from 100 percent to 20 percent for claims on, and 
claims guaranteed by, securities firms incorporated in OECD countries 
if such firms are subject to supervisory and regulatory arrangements 
that are comparable to those imposed on OECD banks. Such arrangements 
must include risk-based capital requirements that are comparable to 
those applied to depository institutions under the Accord and its 
amendment to incorporate market risks. The term ``comparable'' is also 
intended to require that qualifying securities firms (but not 
necessarily their parent organizations) be subject to consolidated 
regulation and supervision with respect to any of their subsidiaries.
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    \2\ The OECD is an international organization of countries that 
are committed to market-oriented economic policies, including the 
promotion of private enterprise and free market prices, liberal 
trade policies, and the absence of exchange controls. For purposes 
of the Basel Accord, OECD countries are those countries that are 
full members of the OECD or that have concluded special lending 
arrangements associated with the International Monetary Fund's 
General Arrangements to Borrow. A listing of OECD member countries 
is available at www.oecdwash.org. Any OECD country that has 
rescheduled its external sovereign debt, however, may not receive 
the preferential capital treatment generally granted to OECD 
countries under the Accord for five years after such rescheduling.
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    One of the primary reasons that the Basel Committee amended the 
Accord was to make it consistent with the treatment of claims on 
securities firms permitted under the European Union's (EU) Capital 
Adequacy Directive (CAD). A number of European countries have followed 
the CAD for some time. The CAD, which subjects EU depository 
institutions and securities firms to the same capital requirements, 
applies a 20 percent risk weight to claims on both depository 
institutions and securities firms.
    This proposed rule would reduce the risk weight applied to claims 
on, and claims guaranteed by, qualifying securities firms from 100 
percent to 20 percent under the Agencies' risk-based capital rules. 
Under this proposal, qualifying securities firms must be incorporated 
in an OECD country, be subject to supervisory and regulatory 
arrangements that are comparable to those imposed on OECD banks, and 
have a credit rating that is in one of the three highest investment 
grade rating categories used by a nationally recognized statistical 
rating organization (rating agency).
    Qualifying U.S. securities firms must be broker-dealers registered 
with the Securities and Exchange Commission (SEC). Qualifying U.S. 
securities firms also must be subject to and comply with the SEC's net 
capital rule,\3\ and margin and other regulatory requirements 
applicable to registered broker-dealers.\4\
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    \3\ The SEC's net capital rule, as set forth at 17 CFR 240.15c3-
1, requires broker-dealers to maintain continually sufficient liquid 
assets to protect the interests of customers and other market 
participants if a broker-dealer becomes insolvent. Under the SEC's 
rules, a broker-dealer must maintain a minimum ratio of net capital 
to either liabilities or customer-related receivables.
    \4\ U.S. securities firms that have registered with the SEC as 
over-the-counter derivatives dealers would not be qualifying 
securities firms because they are subject to a less rigorous net 
capital rule and are exempt from a variety of regulatory 
requirements applicable to fully regulated broker-dealers, including 
certain margin requirements. See 63 FR 59362 (Nov. 3, 1998).
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    Qualifying securities firms incorporated in any other OECD country 
must be subject to consolidated supervision and regulation (covering 
their subsidiaries, but not necessarily their parent organizations) 
comparable to that imposed on depository institutions in OECD 
countries, including risk-based capital requirements comparable to 
those applied to depository institutions under the Accord.\5\
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    \5\ For example, this generally would include firms engaged in 
securities activities in the EU that are subject to the CAD. 
Securities firms in other OECD countries would need to demonstrate 
to lending institutions and regulatory authorities that their 
supervision and regulation qualify as comparable under this rule and 
the Accord.
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    The Agencies are of the view that supervision and regulation alone 
are not necessarily sufficient indicators of creditworthiness to 
warrant a 20 percent risk weight. Consequently, a qualifying securities 
firm, or the parent consolidated group of a qualifying securities firm, 
must have a long-term issuer credit rating,\6\ or a rating on at least 
one issue of long-term (i.e., one year or longer) unsecured debt, from 
a nationally recognized statistical rating organization (rating agency) 
that is in one of the three highest investment grade rating categories 
used by the rating agency.\7\
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    \6\ A long issuer credit rating is one that assesses a firm's 
overall capacity and willingness to pay on a timely basis its 
unsecured financial obligations. Issuer credit ratings that are 
assigned to non-broker-dealer subsidiary or affiliate of the 
securities firm, or debt ratings on long-term unsecured debt issues 
of such a subsidiary or affiliate of the securities firm, would not 
satisfy the rating criteria to be a qualifying securities firm.
    \7\ The Agencies recognize that two recent proposals used the 
two highest investment grade rating categories to identify assets 
that would qualify for a 20 percent risk weight. The Basel 
Committee's June 1999 consultative paper entitled ``A New Capital 
Adequacy Framework'' proposed that a bank, commercial firm or 
securitization position rated in one of the two highest investment 
grade rating categories would qualify for a 20 percent risk weight. 
In addition, the Agencies' recent proposed rule on recourse and 
direct credit substitutes proposed that a securitization position 
rated in one of the two highest investment grade rating categories 
would qualify for a 20 percent risk weight. 65 FR 12319 (March 8, 
2000).
    The Agencies considered proposing a rating requirement for 
securities firms consistent with these other proposals, but decided 
for several reasons that it would be appropriate to propose 
requiring qualifying securities firms to be rated in one of the top 
three rating categories of a rating agency. In addition to meeting 
the rating standard, qualifying securities firms are subject to 
supervision and regulation comparable to depository institutions in 
OECD countries. This supervision distinguishes qualifying securities 
firms from other types of entities, such as commercial firms. 
Further, under the current Basel Accord, claims on OECD depository 
institutions and securities firms receive a 20 percent risk weight 
without satisfying a similar credit rating requirement. Thus, while 
the Agencies considered both a higher rating requirement, on the one 
hand, and whether any rating requirement should be imposed on 
securities firms, on the other, the Agencies believe the proposed 
rating requirement strikes an appropriate balance.
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    Claims on, and claims guaranteed by, holding companies and other 
affiliates of a qualifying securities firm, would retain their current 
100 percent risk weighting under the Agencies' risk-based capital 
rules. This treatment is consistent with the existing treatment for 
depository institution holding companies and other affiliates of 
depository institutions in consolidated holding companies. Claims on, 
and claims guaranteed by, a subsidiary of a qualifying securities firm 
also would retain their current 100 percent risk weight, unless such 
subsidiary's obligations were guaranteed by a qualifying securities 
firm (e.g., its parent qualifying securities firm).
    The Agencies are proposing to revise their rules to apply a 20 
percent risk weight to qualifying securities firms for several reasons. 
First, claims on qualifying securities firms generally involve 
relatively low credit risk because such firms are subject to 
supervision and regulation, including capital requirements, comparable 
to banks in OECD countries and have ratings in one of the three highest 
investment grade rating categories. Second, the 100 percent risk weight 
applied to claims on securities firms under the Agencies' current 
capital rules is more stringent than the 20 percent capital charge 
applied to claims on securities firms under the Basel Accord and the 
CAD. This results in a competitive inequity for U.S. depository 
institutions, which would be mitigated by this proposed rule.

[[Page 76182]]

    The Agencies are seeking comment on all aspects of this rule. 
Particularly, the Agencies request comment on their proposed criteria 
for qualifying securities firms.
    (1) Does the rating of a broker-dealer's parent consolidated 
organization serve as a reliable indicator of the credit quality of 
claims on, or guaranteed by, the broker-dealer?
    (2) Is there a rating or other indicator of a broker-dealer's 
credit quality that is more reliable and more consistent with market 
practices than the proposed standard?
    (3) Should claims on, and claims guaranteed by, certain 
subsidiaries of qualifying securities firms be accorded a 20 percent 
risk weight? If so, what should the qualifying criteria be for such 
subsidiaries?

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
Agencies certify that this proposed rule would not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
because it would not have a significant impact on the amount of capital 
required to be held by small institutions. The proposed rule: (1) Only 
covers a narrow category of assets that might be held by an 
institution, (2) decreases the amount of capital that an institution 
must hold for those assets, (3) does not significantly change the 
amount of total capital an institution must hold, and (4) will have a 
positive impact on an affected institution's capital requirements. 
Accordingly, a regulatory flexibility analysis is not required.

Paperwork Reduction Act

    The Agencies have determined that this proposal does not involve a 
collection of information pursuant to the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501, et seq.).

Executive Order 12866

    The Comptroller of the Currency and the Director of the OTS have 
determined that this proposed rule is not a significant regulatory 
action for purposes of Executive Order 12866. This proposed rule would 
reduce the current risk weighting applied to claims on qualifying 
securities firms and would not impose additional cost or burden on 
institutions.

OCC and OTS--Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in the expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. As discussed in the preamble, 
this proposal would reduce the current risk-based capital charge for 
claims on, and claims guaranteed by, qualifying securities firms. 
Accordingly, the OCC and OTS have determined that this proposed rule 
would not result in the expenditure by state, local, and tribal 
governments, or by the private sector, of more than $100 million or 
more in any one year. In fact, this proposed rule would impose no new 
cost or burden on state, local, or tribal governments, or the private 
sector. Therefore, the OCC and OTS have not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered.

Plain Language Requirement

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
federal banking agencies to use ``plain language'' in all proposed and 
final rules published after January 1, 2000. We invite your comments on 
how to make this proposal easier to understand. For example:
    (1) Have we organized the material to suit your needs?
    (2) Are the requirements in the rule clearly stated?
    (3) Does the rule contain technical language or jargon that isn't 
clear? Would a different format (grouping and order of sections, use of 
headings, paragraphing) make the rule easier to understand?
    (5) Would more (but shorter) sections be better?
    (6) What else could we do to make the rule easier to understand?

FDIC Assessment of Impact of Federal Regulation On Families

    The FDIC has determined that this proposed rule would not affect 
family well being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act of 1999 (Pub. L. 105-277).

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Capital, National banks, 
Reporting and recordkeeping requirements, Risk.

12 CFR Part 208

    Accounting, Agriculture, Banks, banking, Confidential business 
information, Crime, Currency, Federal Reserve System, Mortgages, 
Reporting and recordkeeping requirements, Securities.

12 CFR Part 225

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 325

    Administrative practice and procedure, Banks, banking, Capital 
adequacy, Reporting and recordkeeping requirements, Savings 
associations, State non-member banks.

12 CFR Part 567

    Capital, Reporting and recordkeeping requirements, Savings 
associations.

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set out in the joint preamble, the Office of the 
Comptroller of the Currency proposes to amend part 3 of chapter I of 
title 12 of the Code of Federal Regulations as follows:

PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES

    1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n 
note, 1835, 3907, and 3909.

    2. In appendix A to part 3:
    A. In section 1:
    i. Redesignate paragraphs (c)(17) through (c)(31) as (c)(18) 
through (c)(32); and
    ii. Add new paragraph (c)(17).
    B. In section 3:
    i. Redesignate footnotes 11a and 11b as 11b and 11c;
    ii. Add new paragraph (a)(2)(xiii);
    iii. Add new footnote 11a to read as follows:

[[Page 76183]]

Appendix A to Part 3--Risk-Based Capital Guidelines

Section 1. Purpose, Applicability of Guidelines, and Definitions.

* * * * *
    (c) * * *
    (17) Nationally recognized statistical rating organization 
(NRSRO) means an entity recognized by the Division of Market 
Regulation of the Securities and Exchange Commission (or any 
successor Division) as a nationally recognized statistical rating 
organization for various purposes, including the Securities Exchange 
Commission net capital requirement for brokers and dealers.
* * * * *
    Section 3. Risk Categories/Weights for On-Balance Sheet Assets and 
Off-Balance Sheet Items.
* * * * *
    (a) * * *
    (2) * * *
    (xiii) Claims on, or guaranteed by, a qualifying securities firms 
incorporated in an OECD country, subject to the following conditions:
    (A) If the securities firm is incorporated in the United States, 
then the securities firm must be a broker-dealer that is registered 
with the Securities and Exchange Commission and must be subject to and 
comply with the Securities Exchange Commission net capital regulation 
(17 CFR 240.15c3(1)), margin regulations and other regulatory 
requirements applicable to a registered broker-dealer.
    (B) If the securities firm is incorporated in any other OECD 
country, then the securities firm must be subject to consolidated 
supervision and regulation (covering its subsidiaries, but not 
necessarily its parent organization) comparable to that imposed on 
depository institutions under the Basel Capital Accord.\11a\
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    \11a\ See Accord on International Convergence of Capital 
Measurement and Capital Standards as adopted by the Basle Committee 
on Banking Regulations and Supervisory Practices (renamed as the 
Basel Committee on Banking Supervision), dated July 1988.
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    (C) A securities firm (or its parent consolidated group), whether 
incorporated in the United States or another OECD country, must also 
have a long-term issuer credit rating, or a credit rating on at least 
one issue of long-term unsecured debt, from a nationally recognized 
statistical rating organization. The credit rating must be in one of 
the three highest investment grade categories used by the nationally 
recognized statistical rating organization.
* * * * *

    Dated: November 6, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Federal Reserve System

12 CFR Chapter II

    For the reasons set forth in the joint preamble, parts 208 and 225 
of chapter II of title 12 of the Code of Federal Regulations are 
proposed to be amended as follows:

Part 208--Membership of State Banking Institutions in the Federal 
Reserve System (Regulation H)

    1. The authority citation for part 208 continues to read as 
follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1835(a), 1882, 2901-2907, 
3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 
781(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 5318; 42 U.S.C. 
4012a, 4104a, 4104b, 4106, and 4128.

    2. In appendix A to part 208, the following amendments are made:
    a. In sections III. and IV., redesignate footnotes 34 through 52 as 
footnotes 35 through 53;
    b. In section III.C.2., the three existing paragraphs are 
designated as III.C.2.a. through III.C.2.c., and a new section 
III.C.2.d. is added with a new footnote 34; and
    c. In Attachment III, under Category 2, a new paragraph 12. is 
added. The revision and additions read as follows:

Appendix A to Part 208--Capital Adequacy Guidelines for State 
Member Banks: Risk-Based Measure

* * * * *
    III. * * *
    C. * * *
    2. * * *
    d. This category also includes claims on, and claims guaranteed 
by, qualifying securities firms incorporated in the OECD-based group 
of countries.\34\
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    \34\ With regard to securities firms incorporated in the United 
States, qualifying securities firms are those securities that are 
broker-dealers registered with the Securities and Exchange 
Commission (SEC). They must be subject to and in compliance with the 
SEC's net capital rule, 17 CFR 240.15c3-1, and subject to the margin 
and other regulatory requirements applicable to registered broker-
dealers. With regard to securities firms incorporated in any other 
country in the OECD-based group of countries, qualifying securities 
firms are those securities firms that are subject to consolidated 
supervision and regulation (covering their direct and indirect 
subsidiaries, but not necessarily their parent organizations) 
comparable to that imposed on banks in OECD countries. Such 
regulation must include risk-based capital requirements comparable 
to those applied to banks under the Accord on International 
Convergence of Capital Measurement and Capital Standards (1988, as 
amended in 1998) (Basel Accord). Furthermore, any qualifying 
securities firm, or its parent consolidated group, must have a long-
term issuer credit rating, or a rating on at least one issue of 
long-term unsecured debt, from a nationally recognized statistical 
rating organization that is in one of the three highest investment 
grade rating categories used by the rating agency.
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* * * * *

Attachment III--Summary of Risk Weights and Risk Categories for State 
Member Banks

* * * * *
    Category 2: 20 Percent * * *
    12. Claims on, and claims guaranteed by, qualifying securities 
firms incorporated in the OECD-based group of countries.
* * * * *

Part 225--Bank Holding Companies and Change in Bank Control 
(Regulation Y)

    1. The authority citation for part 225 continues to read as 
follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3907, and 
3909.

    2. In appendix A to part 225, the following amendments are made:
    a. In sections III. and IV., redesignate footnotes 37 through 57 as 
footnotes 38 through 58;
    b. In section III.C.2., the three existing paragraphs are 
designated as III.C.2.a. through III.C.2.c., and a new section 
III.C.2.d. is added with a new footnote 37; and
    c. In Attachment III, under Category 2, a new paragraph 12 is 
added. The revision and additions read as follows:

Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Risk-Based Measure

* * * * *
    III. * * *
    C. * * *
    2. * * *
    d. This category also includes claims on, and claims guaranteed 
by, qualifying securities firms incorporated in the OECD-based group 
of countries.\37\
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    \37\ With regard to securities firms incorporated in the United 
States, qualifying securities firms are those securities that are 
broker-dealers registered with the Securities and Exchange 
Commission (SEC). They must be subject to and in compliance with the 
SEC's net capital rule, 17 CFR 240.15c3-1, and subject to the margin 
and other regulatory requirements applicable to registered broker-
dealers. With regard to securities firms incorporated in other 
countries in the OECD-based group of countries, qualifying 
securities firms are those securities firms that are subject to 
consolidated supervision and regulation (covering their direct and 
indirect subsidiaries, but not necessarily their parent 
organizations) comparable to that imposed on banks in OECD 
countries. Such regulation must include risk-based capital 
requirements comparable to those applied to banks under the Accord 
on International Convergence of Capital Measurement and Capital 
Standards (1988, as amended in 1998) (Basel Accord). Furthermore, 
any qualifying securities firm, or its parent consolidated group, 
must have a long-term issuer credit rating, or a rating on at least 
one issue of long-term unsecured debt, from a nationally recognized 
statistical rating organization that is in one of the three highest 
investment grade rating categories used by the rating agency.
---------------------------------------------------------------------------

* * * * *

[[Page 76184]]

Attachment III--Summary of Risk Weights and Risk Categories for Bank 
Holding Companies

* * * * *
    Category 2: 20 Percent * * *
    12. Claims on, and claims guaranteed by, qualifying securities 
firms incorporated in the OECD-based group of countries.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, November 27, 2000.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

    For the reasons set forth in the joint preamble, part 325 of 
chapter III of title 12 of the Code of Federal Regulations is proposed 
to be amended as follows:

PART 325--CAPITAL MAINTENANCE

    1. The authority citation for part 325 continues to read as 
follows:

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 
1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 
2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 
U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended 
by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note).

    2. In appendix A to part 325, section II.B.3., the phrase ``U.S. 
depository institutions and foreign banks'' is removed and the phrase 
``U.S. depository institutions, foreign banks, and qualifying OECD-
based securities firms'' is added in its place.
    3. In appendix A to part 325:
    a. In section II.C., under Category 2--20 Percent Risk Weight, add 
a new sentence immediately after the existing first sentence;
    b. Redesignate footnotes 23 through 42 as footnotes 24 through 43;
    c. Add a new footnote 23; and
    d. In Table II, add a new paragraph (13) under Category 2--20 
Percent Risk Weight.

Appendix A to Part 325--Statement of Policy on Risk-Based Capital

* * * * *
    II. * * *
    C. * * *
    Category 2-20 Percent Risk Weight * * * This category also includes 
claims on, and claims guaranteed by, qualifying securities firms 
incorporated in the OECD-based group of countries.\23\ * * *
---------------------------------------------------------------------------

    \23\ With regard to securities firms incorporated in the United 
States, qualifying securities firms are those securities firms that 
are broker-dealers registered with the Securities and Exchange 
Commission (SEC). They must be subject to and in compliance with the 
SEC's net capital rule, 17 CFR 240.15c3-1, and subject to the margin 
and other regulatory requirements applicable to registered broker-
dealers. With regard to securities firms incorporated in any other 
country in the OECD-based group of countries, qualifying securities 
firms are those securities firms that are subject to consolidated 
supervision and regulation (covering their direct and indirect 
subsidiaries, but not necessarily their parent organizations) 
comparable to that imposed on banks in OECD countries. Such 
regulation must include risk-based capital requirements comparable 
to those applied to banks under the Accord on International 
Convergence of Capital Measurement and Capital Standards (1988, as 
amended in 1998) (Basel Accord). Furthermore, any qualifying 
securities firm, or its parent consolidated group, must have a long-
term issuer credit rating, or a rating on at least one issue of 
long-term unsecured debt, from a nationally recognized statistical 
rating organization that is in one of the three highest rating 
categories used by the rating agency.
---------------------------------------------------------------------------

* * * * *

Table II--Summary of Risk Weights and Risk Categories

* * * * *
    Category 2-20 Percent Risk Weight
* * * * *
    (13) Claims on, and claims guaranteed by, qualifying securities 
firms incorporated in the OECD-based group of countries.
* * * * *

    By order of the Board of Directors.

    Dated at Washington, D.C., this 17th day of October, 2000.
    Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervision

    For the reasons set forth in the joint preamble, the Office of 
Thrift Supervision amends part 567 of chapter V of title 12 of the Code 
of Federal Regulations as follows:

PART 567--CAPITAL

    1. The authority citation for part 567 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828 
(note).

    2. Section 567.6 is amended by adding paragraph (a)(1)(ii)(T) to 
read as follows:


Sec. 567.6  Risk-based capital credit risk-weight categories.

    (a) * * *
    (1) * * *
    (ii) * * *
    (T) Claims on, and claims guaranteed by, a qualifying securities 
firms incorporated in an OECD-based country.
    (1)(i) A qualifying securities firm incorporated in the United 
States must be a broker-dealer that is registered with the Securities 
and Exchange Commission (SEC). It must be subject to and comply with 
the SEC's net capital rule (17 CFR 240.15c3(1), margin regulations and 
other regulatory requirements applicable to a registered broker-dealer.
    (ii) A qualifying securities firm incorporated in any other OECD-
based country must be a security firm that is subject to consolidated 
supervision and regulation (covering its subsidiaries, but not 
necessarily its parent organization) comparable to that imposed on 
depository institutions under the Accord on International Convergence 
of Capital Measurement and Capital Standards (1988, as amended in 
1998).
    (2) A qualifying securities firm (or its parent consolidated group) 
must also have a long-term issuer credit rating, or a rating on at 
least one issue of long-term unsecured debt, from a nationally 
recognized statistical rating organization. The rating must be in one 
of the three highest investment grade categories used by the ratings 
agency.
* * * * *

    By the Office of Thrift Supervision.

    Dated: November 3, 2000.
Ellen Seidman,
Director.
[FR Doc. 00-30615 Filed 12-5-00; 8:45 am]
BILLING CODES 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P


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