76180 Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / Proposed Rules

1The 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.

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.

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’ riskbased 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

regs.comments@occ.treas.gov 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

regs.comments@federalreserve.gov.

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; comments@fdic.gov).

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 public.info@ots.treas.gov,

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

Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / Proposed Rules 76181

2The 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.

3The 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.

4U.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 brokerdealers, including certain margin requirements. See

63 FR 59362 (Nov. 3, 1998).

5For 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.

6A 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-brokerdealer 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.

7The 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.

its assets and off-balance-sheet

exposures primarily based on credit

risk.

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.

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

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

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

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’ riskbased 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.

76182 Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / Proposed Rules

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 riskbased 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-LeachBliley 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:

Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / Proposed Rules 76183

11aSee 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.

34With 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 brokerdealers. 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.

37With 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 brokerdealers. 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

Continued

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 OffBalance 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 brokerdealer 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

(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 OECDbased group of countries.34

* * * * *

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 OECDbased group of countries.37

* * * * *

76184 Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / Proposed Rules

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.

23With 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 OECDbased 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.

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

***

* * * * *

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:

§ 567.6 Risk-based capital credit riskweight 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 longterm 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

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

Small Business Size Standards;

Waiver of the Nonmanufacturer Rule

AGENCY: Small Business Administration.

ACTION: Proposed waiver of rule.

SUMMARY: The Small Business

Administration (SBA) is considering

granting a waiver of the

Nonmanufacturer Rule for Surge

Arresters, Current and Voltage

Transformers, Disconnected Switches,

Sultotransformers, Power Transformers

(multiple winding type), Insulator

Assemblies for transmission lines

(porcelain and polymer type), and

Stacking Post Insulators. The basis for a

waiver of the Nonmanufacturer Rule for

these products is that there are no small

business manufacturers or processors