Federal Register / Vol. 60, No. 31 / Wednesday, February 15, 1995 / Proposed Rules 8581

This proposed rule also would

increase the amount of assessment on

all of the imported pork and pork

products subject to assessment as

published in the Federal Register as a

final rule September 8, 1994, and

effective on October 11, 1994 (59 FR

46323). This adjustment would reflect

the increase in the assessment rate to

0.45 percent and would be consistent

with the decrease in the annual average

price of domestic barrows and gilts for

calendar year 1994 as reported by

USDA, AMS, Livestock and Grain

Market News (LGMN) Branch. This

adjustment in assessments would make

the equivalent market value of the live

porcine animal from which the

imported pork and pork products were

derived reflect the recent decrease in the

market value of domestic porcine

animals, thereby promoting

comparability between the importer and

domestic assessments.

The methodology for determining the

per-pound amounts for imported pork

and pork products was described in the

supplementary information

accompanying the Order and published

in the September 5, 1986, Federal

Register at 51 FR 31901. The weight of

imported pork and pork products is

converted to a carcass weight equivalent

by utilizing conversion factors which

are published in the USDA Statistical

Bulletin No. 616 ‘‘Conversion Factors

and Weights and Measures.’’ These

conversion factors take into account the

removal of bone, weight lost in cooking

or other processing, and the nonpork

components of pork products. Secondly,

the carcass weight equivalent is

converted to a live animal equivalent

weight by dividing the carcass weight

equivalent by 70 percent, which is the

average dressing percentage of porcine

animals in the United States. Thirdly,

the equivalent value of the live porcine

animal is determined by multiplying the

live animal equivalent weight by an

annual average market price for barrows

and gilts as reported by the USDA,

AMS, LGMN Branch. The annual

average price, which was based on price

data from six major markets, is now

based on only five markets as one of the

six markets—St. Louis—closed in 1994.

This average price is published on a

yearly basis during the month of January

in the LGMN Branch’s publication

‘‘Livestock, Meat, and Wool Weekly

Summary and Statistics.’’ Finally, the

equivalent value is multiplied by the

applicable assessment rate of 0.45

percent due on imported pork and pork

products. The end result is expressed in

an amount per pound for each type of

pork or pork product. To determine the

amount per kilogram for pork and pork

products subject to assessment under

the Act and Order, the cent-per-pound

assessments are multiplied by a metric

conversion factor 2.2046 and carried to

the sixth decimal.

The formula in the preamble for the

Order at 51 FR 31901 contemplated that

it would be necessary to recalculate the

equivalent live animal value of

imported pork and pork products to

reflect increases in the rate of

assessments or changes in the annual

average price of domestic barrows and

gilts to maintain equity of assessments

between domestic and porcine animals

and imported pork and pork products.

Substituting the proposed assessment

rate of 0.45 in the formula and using the

1994 average annual five market price

for domestic barrows and gilts of $39.57

per hundredweight would result in an

increase in assessments for all the

Harmonized Tariff Systems (HTS)

numbers in the table in § 1230.110, 59

FR 46323; September 8, 1994, of an

amount equal to two- to fourhundredths of a cent per pound, or as

expressed in cents per kilogram, four- to

nine-hundredths of a cent per kilogram.

Based on Department of Commerce,

Bureau of Census, data on the volume

of imported pork and pork products

available for the period January 1, 1994,

through September 30, 1994, the

proposed increases in the assessment

amounts would result in an estimated

$175,000 increase in importer

assessments over a 12-month period.

List of Subjects in 7 CFR Part 1230

Administrative practice and

procedure, Advertising, Agriculture

research, Marketing agreement, Meat

and meat products, Pork and pork

products.

For the reasons set forth in the

preamble, it is proposed that 7 CFR part

1230 be amended as set forth below:

PART 1230—PORK PROMOTION,

RESEARCH, AND CONSUMER

INFORMATION

1. The authority citation for 7 CFR

Part 1230 continues to read as follows:

Authority: 7 U.S.C. 4801–4819.

Subpart—[Amended]

2. Subpart B—Rules and Regulations

is amended by revising § 1220.110 to

read as follows:

§ 1230.110 Assessments on Imported Pork

and Pork Products.

(a) The following HTS categories of

imported live porcine animals are

subject to assessment at the rate

specified.

Live porcine

animals Assessment

0103.10.0000 0.45 percent Customs Entered Value.

0103.91.0000 0.45 percent Customs Entered Value.

0103.92.0000 0.45 percent Customs Entered Value.

(b) The following HTS categories of

imported pork and pork products are

subject to assessment at the rates

specified. Assessment

Pork and pork

products

Assessment

Cents/lb Cents/kg

0203.11.0000 .... .25 .551150

0203.12.1010 .... .25 .551150

0203.12.1020 .... .25 .551150

0203.12.9010 .... .25 .551150

0203.12.9020 .... .25 .551150

0203.19.2010 .... .30 .661380

0203.19.2090 .... .30 .661380

0203.19.4010 .... .25 .551150

0203.19.4090 .... .25 .551150

0203.21.0000 .... .25 .551150

0203.22.1000 .... .25 .551150

0203.22.9000 .... .25 .551150

0203.29.2000 .... .30 .661380

0203.29.4000 .... .25 .551150

0206.30.0000 .... .25 .551150

0206.41.0000 .... .25 .551150

0206.49.0000 .... .25 .551150

0210.11.0010 .... .25 .551150

0210.11.0020 .... .25 .551150

0210.12.0020 .... .25 .551150

0210.12.0040 .... .25 .551150

0210.19.0010 .... .30 .661380

0210.19.0090 .... .30 .661380

1601.00.2010 .... .35 .771610

1601.00.2090 .... .35 .771610

1602.41.2020 .... .38 .837748

1602.41.2040 .... .38 .837748

1602.41.9000 .... .25 .551150

1602.42.2020 .... .38 .837748

1602.42.2040 .... .38 .837748

1602.42.4000 .... .25 .551150

1602.49.2000 .... .35 .771610

1602.49.4000 .... .30 .661380

3. Subpart B—Rules and Regulations

is amended by revising § 1230.1120 to

read as follows:

§ 1230.112 Rate of assessment.

In accordance with § 1230.71(d) the

rate of assessment shall be 0.45 percent

of market value.

Dated: February 9, 1995.

Lon Hatamiya,

Administrator.

[FR Doc. 95–3783 Filed 2–14–95; 8:45 am]

BILLING CODE 3410–02–P
8582 Federal Register / Vol. 60, No. 31 / Wednesday, February 15, 1995 / Proposed Rules

1The Basle Accord was issued in 1988 by the

Basle Committee, which is comprised of

representatives of the central banks and supervisory

authorities from the G–10 countries (Belgium,

Canada, France, Germany, Italy, Japan, the

Netherlands, Sweden, Switzerland, the United

Kingdom, and the United States) and Luxembourg.

In 1989 the FDIC adopted a Statement of Policy on

Risk-Based Capital (Appendix A to Part 325) to

implement the Basle Accord. This risk-based capital

policy statement applies to the state nonmember

banks for which the FDIC is the appropriate federal

banking agency.

2 Transfer risk generally refers to the possibility

that an asset cannot be serviced in the currency of

payment because of a lack of, or restraints on, the

availability of needed foreign exchange in the

country of the obligor.

3The OECD is an international organization of

countries which 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. Full members of the OECD at the time the

Basle Accord was endorsed included Australia,

Austria, Belgium, Canada, Denmark, Finland,

France, Germany, Greece, Iceland, Ireland, Italy,

Japan, Luxembourg, the Netherlands, New Zealand,

Norway, Portugal, Spain, Sweden, Switzerland,

Turkey, the United Kingdom, and the United States.

In May 1994, Mexico was accepted as a full member

of the OECD. In addition, Saudi Arabia has

concluded special lending arrangements associated

with the International Monetary Fund’s General

Arrangements to Borrow.

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 325

RIN 3064–AB54

Capital Maintenance

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Proposed Rule.

SUMMARY: The FDIC is proposing to

amend its risk-based capital guidelines

to modify the definition of the OECDbased group of countries. Claims on the

governments and banks of this group

generally receive lower risk weights

than corresponding claims on the

governments and banks of non-OECDbased countries. The FDIC is proposing

this amendment on the basis of an

announcement, made on July 15, 1994,

by the Basle Committee on Banking

Supervision (Basle Committee) that,

subject to national consultation, the

Basle Committee plans to introduce a

change to the Basle Accord in 1995. The

effect of the proposed modification

would be to exclude from the OECDbased group of countries which are

eligible for the lower risk weights any

country that has rescheduled its

external sovereign debt within the

previous five years.

DATES: Comments on the proposal must

be received by March 17, 1995.

ADDRESSES: All comments should be

submitted to Robert E. Feldman, Acting

Executive Secretary, Attention: Room F–

402, Federal Deposit Insurance

Corporation, 550 17 Street NW.,

Washington, D.C. 20429. Comments

may be hand delivered to Room F–402,

1776 F Street NW., Washington, DC, on

business days between 8:30 a.m. and

5:00 p.m. [Fax number: (202)898–3838.]

Comments will be available for

inspection at the FDIC’s Reading Room,

Room 7118, 550 17th Street NW.,

Washington, D.C. between 9:00 a.m. and

4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: For

supervisory purposes, Stephen G.

Pfeifer, Examination Specialist,

Accounting Section, Division of

Supervision (202/898–8904); for legal

purposes, Dirck A. Hargraves, Attorney,

Legal Division (202/898–7049).

SUPPLEMENTARY INFORMATION:

I. Background

In 1988 the central bank governors of

the G–10 countries endorsed

international capital standards (the

Basle Accord) 1 establishing a risk-based

framework for measuring the capital

adequacy of internationally-active

banks. Under the framework, riskweighted assets are calculated by

assigning assets and off-balance-sheet

items to broad categories based

primarily on their credit risk; that is, the

risk that a banking organization will

incur a loss due to an obligor or

counterparty default on a transaction.

Risk weights range from zero percent,

for assets with minimal credit risk (such

as U.S. Treasury securities), to 100

percent, which is the risk weight that

applies to most private sector claims,

including commercial loans.

While the Basle Accord primarily

focuses on credit risk, it also

incorporates country transfer risk

considerations.2 In addressing transfer

risk, the Basle Committee members

examined several methods for assigning

obligations of foreign countries to the

various risk categories. Ultimately, the

Basle Committee decided to use a

defined group of countries considered to

be of high credit standing as the basis

for differentiating claims on foreign

governments and banks. For this

purpose, the Basle Committee

determined this group as the full

members of the Organization for

Economic Cooperation and

Development (OECD), as well as

countries that have concluded special

lending arrangements with the

International Monetary Fund (IMF)

associated with the IMF’s General

Arrangements to Borrow.3 These

countries are referred to as the OECDbased group of countries and encompass

most of the major industrial countries,

including all members of the G–10 and

the European Union.

Under both the Basle Accord and the

FDIC’s risk-based capital guidelines,

claims on the governments and banks of

the OECD-based group of countries

generally receive lower risk weights

than corresponding claims on the

governments and banks of non-OECD

countries. Specifically, the FDIC’s riskbased capital policy statement provides

for the following treatment:

• Direct claims on, and the portions

of claims that are directly and

unconditionally guaranteed by, OECDbased central governments (including

central banks) are assigned to the zero

percent risk weight category. Claims on

central governments outside the OECDbased group are assigned to the zero

percent risk weight category only if such

claims are denominated in the national

currency (i.e., local currency claims)

and funded by liabilities in the same

currency.

• Claims conditionally guaranteed by

OECD-based central governments and

claims collateralized by securities

issued or guaranteed by OECD-based

central governments generally are

assigned to the 20 percent risk weight

category. The same types of claims on

non-OECD countries are assigned to the

100 percent risk category.

• Long-term claims on OECD banks

are assigned to the 20 percent riskweight category. Long-term claims on

non-OECD banks are assigned to the 100

percent risk category. (Short-term claims

on all banks, whether they are members

of the OECD-based group of countries or

not, are assigned a 20 percent risk

weight.)

• General obligation bonds that are

obligations of states or other political

subdivisions of the OECD-based group

of countries are assigned to the 20

percent risk category. Revenue bonds of

such political subdivisions are assigned

to the 50 percent risk category. Both

general obligation and revenue bonds of

political subdivisions of non-OECD

countries are assigned to the 100

percent risk category.

Recently, the OECD has taken steps to

expand its membership. In light of these

steps, the Basle Committee was urged to

clarify an ambiguity in the Basle Accord

as to whether the OECD members

eligible for the lower risk weights

include only those members that were

in the OECD when the Basle Accord was

endorsed in 1988 or all members,

regardless of entry date into the OECD.

The Basle Committee also reviewed the

overall appropriateness of the criteria

the Basle Accord uses to determine

whether claims on a foreign government
Federal Register / Vol. 60, No. 31 / Wednesday, February 15, 1995 / Proposed Rules 8583

12The OECD-based group of countries comprises

all full members of the Organization for Economic

Cooperation and Development (OECD), as well as

countries that have concluded special lending

arrangements with the International Monetary Fund

(IMF) associated with the IMF’s General

Arrangements to Borrow, but excludes any country

that has rescheduled its external sovereign debt

within the previous five years. The OECD includes

the following countries: Australia, Austria,

Belgium, Canada, Denmark, Finland, France,

Germany, Greece, Iceland, Ireland, Italy, Japan,

Luxembourg, Mexico, the Netherlands, New

Zealand, Norway, Portugal, Spain, Sweden,

Switzerland, Turkey, the United Kingdom and the

United States. Saudi Arabia has concluded special

lending arrangements with the IMF associated with

the IMF’s General Arrangements to Borrow.

or bank qualify for placement in a lower

risk category. As part of this review, the

Basle Committee reassessed whether

membership in the OECD (or the

conclusion of special lending

arrangements with the IMF) would, by

itself, be sufficient to ensure that only

countries with relatively low transfer

risk would continue to be eligible for

lower risk weight treatment.

On July 15, 1994, the Basle Committee

made an announcement to clarify that

the reference in the Basle Accord to

OECD members applies to all current

members of the organization. The

announcement also stated that it is the

Basle Committee’s intention, subject to

national consultation, to record a

change to the Basle Accord in 1995 that

would modify the definition of the

OECD-based group of countries for riskbased capital purposes. The change, if

adopted, would exclude from lower risk

weight treatment any country within the

OECD-based group of countries that has

rescheduled its external sovereign debt

within the previous five years. The

Basle Committee announcement was

endorsed by the G–10 Governors.

II. Proposed Rule

In view of the Basle Committee’s

announcement, the FDIC is proposing to

amend its risk-based capital guidelines

to modify the definition of the OECDbased group of countries. Under the

proposal, the OECD-based group of

countries would continue to include

countries that are currently full

members of the OECD, regardless of

entry date, as well as countries that have

concluded special lending arrangements

with the IMF associated with the Fund’s

General Arrangements to Borrow, but

would exclude any country within this

group that has rescheduled its external

sovereign debt within the previous five

years. The effect of the proposed

modification would be to clarify that

membership in the OECD-based group

of countries must coincide with

relatively low transfer risk in order for

a country to be eligible for differentiated

capital treatment.

For purposes of this proposal, an

event of rescheduling of external

sovereign debt generally would include

renegotiations of terms arising from the

country’s inability or unwillingness to

meet its external debt service

obligations. Renegotiations of debt in

the normal course of business generally

do not indicate transfer risk of the kind

that would preclude an OECD-based

country from qualifying for lower risk

weight treatment. One example of such

a routine renegotiation would be a

renegotiation to allow the borrower to

take advantage of a change in market

conditions, such as a decline in interest

rates.

The FDIC invites comment on all

aspects of this proposal.

III. Regulatory Flexibility Act

The Board of Directors of the FDIC

hereby certifies that adoption of this

proposed amendment to part 325 will

not have a significant economic impact

on a substantial number of small

business entities (in this case, small

banking organizations) within the

meaning of the Regulatory Flexibility

Act requirements (5 U.S.C. 601 et seq.).

This amendment will not necessitate the

development of sophisticated

recordkeeping or reporting systems by

small institutions nor will small

institutions need to seek out the

expertise of specialized accountants,

lawyers, or managers to comply with

this regulation. In light of this

certification, the Regulatory Flexibility

Act requirements (at 5 U.S.C. 603, 604)

to prepare initial and final regulatory

flexibility analyses do not apply.

IV. Paperwork Reduction Act

The FDIC has determined that the

proposed amendment, if adopted,

would not increase the regulatory

paperwork burden of state nonmember

banks pursuant to the provisions of the

Paperwork Reduction Act (44 U.S.C.

3501 et seq.). Consequently, no

information has been submitted to the

Office of Management and Budget for

review.

List of Subjects in 12 CFR Part 325

Bank deposit insurance, Banks,

Banking, Capital adequacy, Reporting

and recordkeeping requirements,

Savings Associations, State nonmember

banks.

For the reasons set forth in the

preamble, the Board of Directors of the

Federal Deposit Insurance Corporation

proposes to amend part 325 of title 12

of the Code of Federal Regulations 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, 3907, 3909; Pub. L.

102–233, 105 Stat. 1761, 1789, 1790 (12

U.S.C. 1831n note); Pub. L. 102–242, 105

Stat. 2236, 2355, 2386 (12 U.S.C. 1828 note).

2. Appendix A to part 325 is amended

by revising footnote 12 in section II.B.2.

to read as follows:

Appendix A to Part 325—Statement of

Policy on Risk-Based Capital

* * * * *

II. * * *

B. * * *

2. * * * 12 * * *

* * * * *

By order of the Board of Directors.

Dated at Washington, D.C. this 31st day of

January, 1995.

Federal Deposit Insurance Cprporation

Robert E. Feldman,

Acting Executive Secretary.

[FR Doc. 95–3692 Filed 2–14–95; 8:45 am]

BILLING CODE 6714–01–P

12 CFR Part 363

RIN 3064—AA83

Annual Independent Audits and

Reporting Requirements

AGENCY: Federal Deposit Insurance

Corporation (FDIC or Corporation).

ACTION: Notice of proposed rulemaking.

SUMMARY: Section 314 of the Riegle

Community Development and

Regulatory Improvement Act of 1994

(RCDRIA) amends sections 36(i) and

36(g)(2) of the Federal Deposit Insurance

Act (FDI Act). Section 36 of the FDI Act

is generally intended to facilitate early

identification of problems in financial

management through annual

independent audits, assessments of the

effectiveness of internal controls and of

compliance with designated laws and

regulations, and more stringent

reporting requirements. Section 314(a)

provides relief from certain duplicative

reporting under section 36 of the FDI

Act for sound, well managed insured

depository institutions with over $9

billion in total assets which are

subsidiaries of multibank holding

companies. Section 314(b) requires the

Corporation to notify a large insured

depository institution in writing if it

decides a review by an independent

public accountant of such institution’s

quarterly financial reports is required.