This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

52283 

Vol. 75, No. 164 

Wednesday, August 25, 2010 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 3 

[Docket ID: OCC–2010–0016] 

RIN 1557–AD35 

FEDERAL RESERVE SYSTEM 

12 CFR Parts 208 and 225 

[Regulations H and Y; Docket No. R–1391] 

RIN 7100–AD53 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 325 

RIN 3064–AD62 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

12 CFR Part 567 

[Docket ID: OTS–2010–0027] 

RIN 1550–AC43 

Advance Notice of Proposed 

Rulemaking Regarding Alternatives to 

the Use of Credit Ratings in the RiskBased Capital Guidelines of the 

Federal Banking Agencies 

AGENCIES: Office of the Comptroller of 

the Currency (OCC); Board of Governors 

of the Federal Reserve System (Board); 

Federal Deposit Insurance Corporation 

(FDIC); Office of Thrift Supervision 

(OTS). 

ACTION: Joint Advance Notice of 

Proposed Rulemaking. 

SUMMARY: The regulations of the Office 

of the Comptroller of the Currency 

(OCC), Board of Governors of the 

Federal Reserve System (FRB), Federal 

Deposit Insurance Corporation (FDIC), 

and Office of Thrift Supervision (OTS) 

(collectively, the agencies) include 

various references to and requirements 

based on the use of credit ratings issued 

by nationally recognized statistical 

rating organizations (NRSROs). Section 

939A of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the Act), enacted on July 21, 2010, 

requires the agencies to review their 

regulations that require the use of an 

assessment of creditworthiness of a 

security or money market instrument 

and make reference to, or have 

requirements regarding, credit ratings. 

The agencies must then modify their 

regulations to remove any reference to, 

or requirements of reliance on, credit 

ratings in such regulations and 

substitute in their place other standards 

of creditworthiness that the agencies 

determine to be appropriate for such 

regulations. 

This advanced notice of proposed 

rulemaking (ANPR) describes the areas 

in the agencies’ risk-based capital 

standards and Basel changes that could 

affect those standards that make 

reference to credit ratings and requests 

comment on potential alternatives to the 

use of credit ratings. 

DATES: Comments on this ANPR must be 

received by October 25, 2010. 

ADDRESSES: Comments should be 

directed to: 

OCC: Because paper mail in the 

Washington, DC area and at the 

Agencies is subject to delay, 

commenters are encouraged to submit 

comments by the Federal eRulemaking 

Portal or e-mail, if possible. Please use 

the title ‘‘Advance Notice of Proposed 

Rulemaking Regarding Alternatives to 

the Use of Credit Ratings in the RiskBased Capital Guidelines of the Federal 

Banking Agencies’’ to facilitate the 

organization and distribution of the 

comments. You may submit comments 

by any of the following methods: 

• Federal eRulemaking Portal— 

‘‘regulations.gov’’: Go to http:// 

www.regulations.gov. Select ‘‘Document 

Type’’ of ‘‘Proposed Rules,’’ and in 

‘‘Enter Keyword or ID Box,’’ enter Docket 

ID ‘‘OCC–2010–0016,’’ and click 

‘‘Search.’’ On ‘‘View By Relevance’’ tab at 

bottom of screen, in the ‘‘Agency’’ 

column, locate the [insert type of 

rulemaking action] for OCC, in the 

‘‘Action’’ column, click on ‘‘Submit a 

Comment’’ or ‘‘Open Docket Folder’’ to 

submit or view public comments and to 

view supporting and related materials 

for this rulemaking action. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting or 

viewing public comments, viewing 

other supporting and related materials, 

and viewing the docket after the close 

of the comment period. 

• E-mail: 

regs.comments@occ.treas.gov. 

• Mail: Office of the Comptroller of 

the Currency, 250 E Street, SW., Mail 

Stop 2–3, Washington, DC 20219. 

• Fax: (202) 874–5274. 

• Hand Delivery/Courier: 250 E 

Street, SW., Mail Stop 2–3, Washington, 

DC 20219. 

Instructions: You must include ‘‘OCC’’ 

as the agency name and ‘‘Docket ID 

OCC–2010–0016’’ in your comment. In 

general, OCC will enter all comments 

received into the docket and publish 

them on the Regulations.gov Web site 

without change, including any business 

or personal information that you 

provide such as name and address 

information, e-mail addresses, or phone 

numbers. Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 

advance notice of proposed rulemaking 

by any of the following methods: 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov. Select 

‘‘Document Type’’ of ‘‘Public 

Submissions,’’ and in ‘‘Enter Keyword or 

ID Box,’’ enter Docket ID ‘‘OCC–2010– 

0016,’’ and click ‘‘Search.’’ Comments 

will be listed under ‘‘View By 

Relevance’’ tab at bottom of screen. If 

comments from more than one agency 

are listed, the ‘‘Agency’’ column will 

indicate which comments were received 

by the OCC. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC, 250 E Street, 

SW., Washington, DC. For security 

reasons, the OCC requires that visitors 

make an appointment to inspect 

comments. You may do so by calling 

(202) 874–4700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and to submit to security screening in 


srobinson on DSKHWCL6B1PROD with PROPOSALS
52284 Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 

1A nationally recognized statistical rating 

organization (NRSRO) is an entity registered with 

the U.S. Securities and Exchange Commission (SEC) 

as an NRSRO under section 15E of the Securities 

Exchange Act of 1934. See 15 U.S.C. 78o–7, as 

implemented by 17 CFR 240.17g–1. On September 

29, 2006, the President signed the Credit Rating 

Agency Reform Act of 2006 (‘‘Reform Act’’) (Pub. L. 

109–291) into law. The Reform Act requires a credit 

rating agency that wants to represent itself as an 

NRSRO to register with the SEC. 

2Public Law 111–203, 124 Stat. 1376, section 

939A (July 21, 2010). Although the agencies have 

conducted a broad review of their risk-based capital 

regulations to identify all references to credit 

ratings and consider alternatives, the agencies note 

that section 939A of the Dodd-Frank Act limits the 

required review of agency regulations to those 

pertaining to a creditworthiness assessment of a 

security or money market instrument. 

3 Id. 

order to inspect and photocopy 

comments. 

• Docket: You may also view or 

request available background 

documents and project summaries using 

the methods described above. 

Board: You may submit comments, 

identified by Docket No. R–1391, by any 

of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include docket number in the subject 

line of the message. 

• FAX: (202) 452–3819 or (202) 452– 

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Street, NW.) between 9 a.m. and 5 p.m. 

on weekdays. 

FDIC: You may submit comments on 

the ANPR, by any of the following 

methods: 

• Agency Web site: http:// 

www.FDIC.gov/regulations/laws/ 

federal/notices.html. Follow 

instructions for submitting comments 

on the Agency Web site. 

• E-mail: Comments@FDIC.gov. 

Include RIN # on the subject line of the 

message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street) on business days 

between 7 a.m. and 5 p.m. 

Instructions: All comments received 

will be posted generally without change 

to http://www.fdic.gov/regulations/laws/ 

federal/propose.html, including any 

personal information provided. 

OTS: You may submit comments, 

identified by OTS–2010–0027, by any of 

the following methods: 

• Federal eRulemaking Portal: 

‘‘Regulations.gov’’: Go to http:// 

www.regulations.gov and follow the 

instructions for submitting comments. 

• Mail: Regulation Comments, Chief 

Counsel’s Office, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552, Attention: OTS– 

2010–0027. 

• Facsimile: (202) 906–6518. 

• Hand Delivery/Courier: Guard’s 

Desk, East Lobby Entrance, 1700 G 

Street, NW., from 9 a.m. to 4 p.m. on 

business days, Attention: Regulation 

Comments, Chief Counsel’s Office, 

Attention: OTS–2010–0027. 

• Instructions: All submissions 

received must include the agency name 

and docket number for this rulemaking. 

All comments received will be posted 

without change, including any personal 

information provided. Comments, 

including attachments and other 

supporting materials received are part of 

the public record and subject to public 

disclosure. Do not enclose any 

information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov and 

follow the instructions for reading 

comments. 

• Viewing Comments On-Site: You 

may inspect comments at the Public 

Reading Room, 1700 G Street, NW., by 

appointment. To make an appointment 

for access, call (202) 906–5922, send an 

e-mail to public.info@ots.treas.gov, or 

send a facsimile transmission to (202) 

906–6518. (Prior notice identifying the 

materials you will be requesting will 

assist us in serving you.) We schedule 

appointments on business days between 

10 a.m. and 4 p.m. In most cases, 

appointments will be available the next 

business day following the date we 

receive a request. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Mark Ginsberg, Risk Expert, 

Capital Policy Division, (202) 874–5070; 

or Carl Kaminski, Senior Attorney, 

Legislative and Regulatory Activities 

Division, (202) 874–5090, Office of the 

Comptroller of the Currency, 250 E. 

Street, SW., Washington, DC 20219. 

Board: Thomas Boemio, Senior 

Project Manager, (202) 452–2982; 

William Treacy, Advisor, (202) 452– 

3859, Christopher Powell, Financial 

Analyst, (202) 912–4353, Division of 

Banking Supervision and Regulation; or 

Benjamin McDonough, Counsel, (202) 

452–2036, or April Snyder, Counsel, 

(202) 452–3099; Board of Governors of 

the Federal Reserve System, 20th and C 

Streets, NW., Washington, DC 20551. 

FDIC: Bobby Bean, Chief, (202) 898– 

6705; Ryan Billingsley, Senior Policy 

Analyst, (202) 898–3797, Policy Section, 

Division of Supervision and Consumer 

Protection; or Mark Handzlik, Counsel, 

(202) 898–3990, or Michael B. Phillips, 

Counsel, (202) 898–3581, Supervision 

and Legislation Branch, Legal Division, 

Federal Deposit Insurance Corporation, 

550 17th Street, NW., Washington, DC 

20429. 

OTS: Sonja White, Director, Capital 

Policy, (202) 906–7857, Teresa A. Scott, 

Senior Policy Analyst, Capital Policy, 

(202) 906–6478, or Marvin Shaw, Senior 

Attorney, Regulations and Legislation 

Division, (202) 906–6639, Office of 

Thrift Supervision, 1700 G Street, NW., 

Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The agencies’ regulations and capital 

standards include various references to 

and regulatory requirements based on 

the use of credit ratings issued by 

NRSROs.1 Section 939A of the Act 

requires each Federal agency to review 

‘‘(1) any regulation issued by such 

agency that requires the use of an 

assessment of the creditworthiness of a 

security or money market instrument; 

and (2) any references to or 

requirements in such regulations 

regarding credit ratings.’’ 2 Each Federal 

agency must then ‘‘modify any such 

regulations identified by the review 

* * * to remove any reference to or 

requirement of reliance on credit ratings 

and to substitute in such regulations 

such standard of creditworthiness as 

each respective agency shall determine 

as appropriate for such regulations.’’ In 

developing substitute standards of 

creditworthiness, an agency ‘‘shall seek 

to establish, to the extent feasible, 

uniform standards of creditworthiness’’ 

for use by the agency, taking into 

account the entities it regulates that 

would be subject to such standards.3


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 52285 

4See 12 CFR part 3, appendix A (OCC); 12 CFR 

parts 208 and 225, appendix A (Board); 12 CFR part 

325, appendix A (FDIC); 12 CFR part 567, subpart 

B (OTS). 

5See 12 CFR part 3, appendix B (OCC); 12 CFR 

parts 208 and 225, appendix E (Board); 12 CFR part 

325, appendix C (FDIC); OTS does not have a 

market risk rule. 

6See 12 CFR part 3, appendix C (OCC); 12 CFR 

part 208, appendix F and 12 CFR part 225, 

appendix G (Board); 12 CFR part 325, Appendix D 

(FDIC); 12 CFR part 567, Appendix C (OTS). 

7See ‘‘International Convergence of Capital 

Measurement and Capital Standards, a Revised 

Framework, Comprehensive Version,’’ the Basel 

Committee on Banking Supervision, June 2006. The 

full text is available on the Bank for International 

Settlement’s Web site, 

http://www.bis.org/publ/bcbs128.htm. 

8The OCC is planning to issue a similar advance 

notice of proposed rulemaking addressing 

alternatives to the use of external credit ratings in 

the regulations of the OCC. 

9See, ‘‘Stocktaking on the use of credit ratings’’, 

The Joint Forum. The full text is available on the 

Bank for International Settlement’s Web site, http:// 

www.bis.org/publ/joint22.htm. 

10See 12 CFR part 3, Appendices A and C (OCC); 

12 CFR part 208, Appendices A and F and 12 CFR 

part 225, Appendices A and G (Board); 12 CFR part 

325, Appendix A and 12 CFR part 325 Appendix 

D (FDIC); 12 CFR part 567, subpart B and Appendix 

C (OTS). 

11See 12 CFR part 3, Appendix A, section 

3(a)(2)(xiii) (OCC); 12 CFR parts 208 and 225, 

Appendix A, section III.C.2 (Board); 12 CFR part 

325, Appendix A, section II.C. (FDIC); 12 CFR 567.6 

(OTS). 

12See 12 CFR part 3, Appendix B, section 5 

(OCC); 12 CFR parts 208 and 225, Appendix E, 

section 5 (Board); 12 CFR part 325, Appendix C, 

section 5 (FDIC); OTS does not have a market risk 

rule. 

13See the definition of ‘‘eligible double default 

guarantor,’’ ‘‘eligible securitization guarantor,’’ and 

‘‘financial collateral’’ in the agencies advanced 

approaches rules. 12 CFR part 3, Appendix C, 

section 2 (OCC); 12 CFR part 208, Appendix F 

section 2 and 12 CFR part 225, Appendix G section 

2 (Board); 12 CFR part 325, Appendix D section 2 

(FDIC); 12 CFR part 567, Appendix C, section 2 

(OTS). 

14 73 FR 43982. 

15See ‘‘Revisions to the Basel II Market Risk 

Framework’’ (July 2009, Basel Committee); 

‘‘Guidelines for Computing Capital for Incremental 

Risk in the Trading Book’’ (July 2005, joint 

publication of the Basel Committee and 

International Organization for Securities 

Commissioners); ‘‘Enhancements to the Basel II 

Framework’’ (July 2009, Basel Committee); and 

‘‘Strengthening the Resilience of the Banking 

Sector’’ (December 2009, Basel Committee). 

16For simplicity, and unless otherwise indicated, 

this ANPR uses the term ‘‘banking organization’’ to 

include banks, savings associations, and bank 

holding companies. 

17These operational criteria would require a bank 

to have a comprehensive understanding of the risk 

characteristics of its individual securitization 

exposures; be able to access performance 

information on the underlying pools on an on-going 

basis in a timely manner; and have a thorough 

understanding of all structural features of a 

securitization transaction. Enhancements 

Document, paragraphs 565(i)–(iv). 

Through this advanced notice of 

proposed rulemaking (ANPR), the 

agencies are seeking to gather 

information as they begin to work 

toward revising their regulations and 

capital standards to comply with the 

Act. This ANPR describes the areas in 

the agencies’ general risk-based capital 

rules,4 market risk rules,5 and advanced 

approaches rules 6 (collectively, the riskbased capital standards) where the 

agencies rely on credit ratings, as well 

as the Basel Committee on Banking 

Supervision’s (Basel Committee) recent 

amendments to the Basel Accord.7 The 

ANPR requests comment on potential 

alternatives to the use of credit ratings.8

II. Risk-Based Capital Standards 

In June 2009, the agencies, as part of 

the international Joint Forum Working 

Group on Risk Assessment and Capital, 

participated in a stocktaking exercise to 

identify the use of credit ratings in 

relevant statutes, regulations, policies 

and guidance.9 The agencies have 

identified multiple regulations that 

must be brought into compliance with 

Section 939A of the Act. Included 

among these regulations are the 

agencies’ risk-based capital standards. 

The agencies’ risk-based capital 

standards reference credit ratings issued 

by NRSROs (credit ratings) in four 

general areas: (1) The assignment of risk 

weights to securitization exposures 

under the general risk-based capital 

rules and advanced approaches rules; 10

(2) the assignment of risk weights to 

claims on, or guaranteed by, qualifying 

securities firms under the general riskbased capital rules; 11 (3) the assignment 

of certain standardized specific risk 

add-ons under the agencies’ market risk 

rule; 12 and (4) the determination of 

eligibility of certain guarantors and 

collateral for purposes of the credit risk 

mitigation framework under the 

advanced approaches rules.13 In 2008, 

the agencies issued a notice of proposed 

rulemaking 14 that sought comment on 

implementation in the United States of 

certain aspects of the standardized 

approach in the Basel Accord. The Basel 

standardized approach for credit risk 

(Basel standardized approach) relies 

extensively on credit ratings to assign 

risk weights to various exposures. 

(Throughout the rest of this ANPR, 

references to the Basel standardized 

approach are references to the Basel 

Accord rather than the 2008 proposal.) 

In 2009, the Basel Committee 

published the following documents that 

were designed to strengthen the riskbased capital framework in the Basel 

Accord: Revisions to the Basel II Market 

Risk Framework (Revisions Document); 

Enhancements to the Basel II 

Framework (Enhancements Document); 

and Strengthening the Resilience of the 

Banking Sector.15 In the Enhancements 

Document, the Basel Committee 

introduced operational criteria to 

require banking organizations 16 to 

undertake independent analyses of the 

creditworthiness of their securitization 

exposures.17 Implementation in the 

United States of the changes to the Basel 

Accord contained in the Revisions 

Document would be significantly 

affected by the need for the agencies to 

comply with section 939A of the Act. 

The table below provides an overview 

of where credit ratings are referenced 

and used as the basis for a capital 

requirement along two dimensions of 

exposure category and capital 

framework. 

Exposure category 

General riskbased capital 

rules 

Advanced 

approaches 

rules 

Market risk 

rules 

Basel 

standardized 

approach 

Basel market 

risk framework 

(revisions 

document) 

Sovereign ............................................................................. ........................ ........................ X X X 

Public Sector Entity .............................................................. ........................ ........................ X X X 

Bank ..................................................................................... ........................ ........................ ........................ X X 

Corporate ............................................................................. X ........................ X X X 

Securitization ........................................................................ X X X X X 

Credit Risk Mitigation ........................................................... X X ........................ X ........................


srobinson on DSKHWCL6B1PROD with PROPOSALS
52286 Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 

18A PSE exposure is an exposure to a state, local 

authority, or other government subdivision below 

the sovereign entity level. 

19See http://www.naic.org/rmbs/ 

index.htm#background. 

III. Request for Comment 

This ANPR seeks comment on 

standards of creditworthiness other than 

credit ratings that may be used for 

purposes of the risk-based capital 

standards. The various alternative 

approaches in this ANPR may present 

challenges of feasibility in varying 

degrees. The agencies would appreciate 

commenters’ views on the feasibility of 

implementing the suggestions for 

alternative approaches in this ANPR 

and any methodologies that commenters 

may provide. 

a. Creditworthiness Standards 

Section 939A of the Act requires the 

agencies to establish, to the extent 

feasible, uniform standards of 

creditworthiness to replace references 

to, or requirements of reliance on, credit 

ratings for purposes of the agencies’ 

regulations. The agencies are therefore 

considering alternative creditworthiness 

standards, including those currently in 

use in the agencies’ regulations, 

supervisory guidance, and market 

practices. The agencies recognize that 

any measure of creditworthiness will 

involve a tradeoff among the principles 

listed below. For example, a more 

refined differentiation of risk might be 

achievable only at the expense of greater 

implementation burden. In evaluating 

any standard of creditworthiness for 

purposes of determining risk-based 

capital requirements, the agencies will, 

to the extent practicable and consistent 

with the other objectives, consider 

whether the standard would: 

• Appropriately distinguish the credit 

risk associated with a particular 

exposure within an asset class; 

• Be sufficiently transparent, 

unbiased, replicable, and defined to 

allow banking organizations of varying 

size and complexity to arrive at the 

same assessment of creditworthiness for 

similar exposures and to allow for 

appropriate supervisory review; 

• Provide for the timely and accurate 

measurement of negative and positive 

changes in creditworthiness; 

• Minimize opportunities for 

regulatory capital arbitrage; 

• Be reasonably simple to implement 

and not add undue burden on banking 

organizations; and 

• Foster prudent risk management. 

Question 1: The agencies seek 

comment on the principles that should 

guide the formulation of 

creditworthiness standards. Do the 

principles provided above capture the 

appropriate elements of sound 

creditworthiness standards? How could 

the principles be strengthened? 

b. Possible Alternatives to Credit Ratings 

in the Risk-Based Capital Standards 

The agencies’ existing risk-based 

capital standards include a range of 

approaches to differentiating credit risk. 

At one end of the spectrum, the 

agencies’ general risk-based capital rules 

provide a relatively simple approach to 

measuring and differentiating risk based 

on the use of broad risk buckets. This 

approach requires all corporate 

exposures, for example, to receive the 

same risk weight, regardless of the 

variation in risks that exist across 

corporate exposures. This simple 

approach has limited risk sensitivity. At 

the other end of the spectrum, the 

agencies’ advanced approaches rules 

require a banking organization to make 

its own assessment of the credit risk of 

a corporate exposure, subject to a 

number of agency-prescribed standards. 

This assessment is then used as an input 

into a supervisory formula to calculate 

minimum risk-based capital 

requirements. Relatively consistent 

assessments of risk across exposure 

categories and across banking 

organizations could be more difficult to 

achieve with this approach. The 

agencies’ rules also incorporate other 

methods for assessing risk-based capital 

requirements, including the use of 

NRSRO ratings. 

The agencies are considering a wide 

range of approaches of varying 

complexity and risk-sensitivity for 

developing creditworthiness standards 

for the risk-based capital standards. 

These include developing risk weights 

for exposure categories based on 

objective criteria established by 

regulators, similar to the current riskbucketing approach of the general riskbased capital rules. The approaches also 

include developing broad qualitative 

and quantitative creditworthiness 

standards that banking organizations 

could use, subject to supervisory 

oversight, to measure the credit risk 

associated with exposures within a 

particular exposure category. These 

general approaches present certain 

advantages and disadvantages. In 

considering these approaches, the 

agencies will evaluate the extent to 

which the alternatives meet the 

principles described above. 

Risk Weights Based on Exposure 

Category: One way to eliminate 

references to credit ratings in the riskbased capital standards would be for the 

agencies to delete all of the sections in 

their risk-based capital regulations that 

refer to credit ratings and retain the 

remainder of the general risk-based 

capital rules. Under this approach, all 

non-securitization exposures generally 

would receive a 100 percent risk-weight 

unless otherwise specified. For 

example, certain sovereign and bank 

exposures would be assigned a zero 

percent or a 20 percent risk weight, 

respectively. Alternatively, the agencies 

could revise the risk-weight categories 

for exposures by considering the type of 

obligor, for example, sovereign, bank, 

public sector entity (PSE),18 as well as 

considering other criteria, such as the 

characteristics of the exposure, which 

could increase the risk sensitivity of the 

risk-based capital requirements by 

providing a wider range of risk-weight 

categories. 

Exposure-Specific Risk Weights: 

Under this approach, banking 

organizations could assign risk weights 

to individual exposures using specific 

qualitative and quantitative credit risk 

measurement standards established by 

the agencies for various exposure 

categories. Such standards would be 

based on broad creditworthiness 

metrics. For instance, exposures could 

be assigned a risk weight based on 

certain market-based measures, such as 

credit spreads; or obligor-specific 

financial data, such as debt-to-equity 

ratios or other sound underwriting 

criteria. Alternatively, banking 

organizations could assign exposures to 

one of a limited number of risk weight 

categories based on an assessment of the 

exposure’s probability of default or 

expected loss. 

As part of an exposure-specific 

approach, the agencies are considering 

whether banking organizations should 

be permitted to contract with third-party 

service providers to obtain quantitative 

data, such as probabilities of default, as 

part of their process for making 

creditworthiness determinations and 

assigning risk weights. While this 

method could increase risk sensitivity, 

consistent application across exposure 

categories and across banking 

organizations could be more difficult to 

achieve. 

Alternatively, the agencies could 

consider an approach for debt securities 

similar to that adopted by the National 

Association of Insurance 

Commissioners, under which a third 

party financial assessor would inform 

the agencies’ understanding of risks and 

their ultimate determination of the riskbased capital requirement for individual 

securities.19 One potential drawback of 

this approach is excessive reliance on a 

single third-party assessment of risk. 


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Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 52287 

20See 12 CFR part 3, Appendix A, section 3(a) 

(OCC); 12 CFR parts 208 and 225, Appendix A, 

section III.C (Board); 12 CFR part 325, Appendix A, 

section II.C. (FDIC); 12 CFR 567.6 (OTS). The 

OECD-based group of countries comprises all full 

members of the 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. 

The list of OECD countries is available on the OECD 

Web site at http://www.oecd.org. 

21Basel Accord, Paragraphs 53–56. 

22See 12 CFR part 3, Appendix A, section 3(a) 

(OCC); 12 CFR parts 208 and 225, Appendix A, 

section III.C (Board); 12 CFR part 325, Appendix A, 

section II.C (FDIC); 12 CFR 567.6 (OTS). 

23Basel Accord, paragraphs 57–58. 

Regardless of the approach used, the 

agencies would establish strict 

quantitative and qualitative criteria to 

ensure that the methodology employed 

is consistent with safe and sound 

banking practices. 

Question 2: What are the advantages 

and disadvantages for each of these 

general approaches? What, if any, 

combination of the approaches would 

appropriately reflect exposure 

categories and the sophistication of 

individual banking organizations? What 

other approaches do commenters 

believe would meet the agencies’ 

suggested criteria for a creditworthiness 

standard? If increasing reliance is 

placed on banking organizations to 

assign risk weights for credit exposures 

using the types of approaches described 

above, how would the agencies ensure 

consistency of capital treatment for 

similar exposures? How could the use of 

third-party providers be implemented to 

ensure quality, transparency, and 

consistency? 

c. Exposure-Specific Options for 

Measuring Creditworthiness 

The broad approaches discussed 

above could be applied in various ways 

across the agencies risk-based capital 

rules as well as existing exposure 

categories. While the range of 

approaches is potentially applicable to 

all exposure categories, the sections 

below provide a more detailed 

discussion of how the approaches might 

be implemented by exposure categories. 

i. Sovereign Exposures 

The agencies’ general risk-based 

capital rules risk weight exposures to 

sovereign entities based on membership 

in the Organization for Economic 

Cooperation and Development 

(OECD).20 However, under the Basel 

standardized approach, a banking 

organization would assign a risk weight 

to a sovereign exposure based on the 

external credit rating of the sovereign by 

a credit rating agency.21 The current 

market risk rule and the Basel modified 

market risk framework also make use of 

ratings for sovereign exposures. 

There are several alternative 

methodologies that could be used to risk 

weight sovereign exposures that have 

different implications for risk 

sensitivity. One option would be to 

assign risk weights for sovereign 

exposures based on whether the 

sovereign is a member of an 

organization other than the OECD, such 

as the G–20 or the Basel Committee on 

Banking Supervision, or whether it 

participates in the International 

Monetary Fund (IMF) New 

Arrangements to Borrow. This type of 

approach would be operationally 

simple, but would not recognize 

differences in creditworthiness among 

the individual member nations within 

an organization. An additional degree of 

risk sensitivity could be incorporated 

into this approach by adding additional 

criteria beyond membership in a given 

organization. For instance, a higher risk 

weight could be assigned to an exposure 

to a sovereign entity if it had 

restructured its debt within a specified 

period of time or if its creditworthiness 

deteriorated based on some market 

indicator (for example, credit spreads). 

The agencies could also consider 

incorporating into standards of 

creditworthiness country risk 

classifications generated by the OECD, 

the World Bank, or a similar 

organization. This approach could 

assign risk weights according to the 

relative credit risk of each risk 

classification or designation. Under 

such an approach, exposures to 

sovereigns classified as having lower 

credit risk would receive lower risk 

weights, and exposures classified as 

higher risk would receive higher risk 

weights. 

A third option would be to 

differentiate the credit risk of sovereign 

exposures based on certain key financial 

and economic indicators. For example, 

risk weights could be assigned based on 

one or more ratios such as gross debt per 

capita, real gross domestic product 

growth rate, or government debt and 

foreign reserves. Such a treatment 

would require the agencies to select 

specific ratios and acceptable data 

sources, for example, from the IMF or 

the OECD. 

Question 3: What are the advantages 

and disadvantages of these alternative 

methods? How can the agencies ensure 

consistent and transparent 

implementation? Should the agencies 

consider other international 

organizations? Which financial and 

economic indicators should the agencies 

consider? What are the implications or 

potential unintended consequences? 

Are there other methods for assessing 

risk-based capital requirements for 

sovereign exposures that would meet the 

principles described in section III? 

Commenters are asked to provide 

quantitative as well as qualitative 

support and/or analysis for proposed 

alternative methods. 

ii. Public Sector Entity (PSE) exposures 

The agencies’ general risk-based 

capital rules assign risk weights to PSE 

exposures based on the repayment 

source for the exposure (for example, 

whether the exposure is a general 

obligation, revenue, or industrial 

revenue bond) and membership of the 

PSE’s sovereign government in the 

OECD.22 Under the Basel standardized 

approach, PSE exposures would be risk 

weighted based on the credit rating of 

the exposure or the risk weight of the 

sovereign.23 The current market risk 

rule and the Basel modified market risk 

framework also make use of credit 

ratings for PSE exposures. 

One approach would be to continue to 

use the general risk-based capital rules’ 

treatment of differentiating the risk of 

PSEs based on the type of exposure, the 

sovereign of incorporation, and by how 

revenues are collected for the PSE 

exposure. 

Alternatively, the agencies could 

provide some incremental risk 

sensitivity by differentiating revenue 

bond issuers by type of service or 

business. As with sovereign exposures, 

risk weighting could be based on several 

financial and economic measures. For 

example, the agencies could assign risk 

weights based on one or more ratios, 

such as a relevant debt service 

obligation to cash flow ratio (for 

example, debt to revenue), and/or debt 

to market value of certain assets (for 

example, real estate). The agencies also 

could incorporate credit spreads to help 

differentiate credit risk among PSE 

exposures. Other options include 

permitting banking organizations to 

assign risk weights to PSE exposures 

based on the applicable risk weight of 

the sovereign of incorporation, or using 

data obtained from qualified third 

parties to inform creditworthiness 

assessments based upon a set of 

objective criteria established by the 

agencies. 

Question 4: What are the advantages 

and disadvantages of these alternative 

methods for calculating risk-based 

capital requirements for PSE exposures? 

How can the agencies ensure consistent 

and transparent implementation? 

Which services and businesses, or 

financial and economic measures, 

should the agencies consider? What are 

the implications or potential for 


srobinson on DSKHWCL6B1PROD with PROPOSALS
52288 Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 

24See 12 CFR part 3, Appendix A, section 

3(a)(2);12 CFR parts 208 and 225, Appendix A, 

section III.C (Board); 12 CFR part 325, Appendix A, 

section II.C (FDIC); 12 CFR 567.6 (OTS). 25Basel Accord, paragraphs 60–64. 

26Certain claims on, or claims guaranteed by, 

qualifying securities firms may receive a 20 percent 

risk weight. 

27See 12 CFR part 3, Appendix A, section 3(a) 

(OCC); 12 CFR parts 208 and 225, Appendix A, 

section III.C (Board); 12 CFR part 325, Appendix A, 

section II.C (FDIC); 12 CFR 567.6(a)(1)(iv) (OTS). 

28Basel Accord, paragraphs 66–68. 

29See 12 CFR part 3, Appendix A, section 4 

(OCC) ; 12 CFR parts 208 and 225, Appendix A, 

section III.B.3 (Board); 12 CFR part 325, Appendix 

A, section II.B.5 (FDIC); 12 CFR parts 567, subpart 

B (OTS). 

30Basel Accord, Paragraph 567 (Basel 

standardized approach) and 12 CFR part 3, 

Appendix C, section 43(b) (OCC); 12 CFR part 208, 

Appendix F section 43(b) and 12 CFR part 225, 

Appendix G section 43(b) (Board); 12 CFR part 325, 

Appendix D, section 43(b) (advanced approaches 

rule) (FDIC); 12 CFR part 567, Appendix C, section 

43(b) (OTS). 

31 66 FR 59617 (November 29, 2001). 

unintended consequences? Are there 

other methods for assessing risk-based 

capital for PSE exposures in a relatively 

risk sensitive manner that would meet 

the principles described in section III? 

Commenters are asked to provide 

quantitative as well as qualitative 

support and/or analysis for proposed 

alternative methods. 

iii. Bank Exposures 

The agencies’ general risk-based 

capital rules generally assign a 20 

percent risk weight to exposures to U.S. 

depository institutions and foreign 

banks.24 Long-term exposures to banks 

not incorporated in OECD countries are 

assigned a 100 percent risk weight. 

Under the Basel standardized approach, 

bank exposures would be risk weighted 

based either on the risk weight of the 

sovereign or the credit rating of the 

exposure.25 The market risk rule and the 

Basel modified market risk framework 

also use ratings for bank exposures. 

One option for risk weighting bank 

exposures is to continue to use the 

general risk-based capital treatment, 

which bases the risk weight for bank 

exposures on whether the sovereign 

where the bank is incorporated is a 

member of the OECD. Another method 

for risk weighting bank exposures could 

be based on several financial measures 

and market indicators. For example, the 

agencies could assign risk weights based 

on one or more ratios such as funding 

(for example, core deposits to total 

liabilities) and/or credit quality (for 

example, non-performing items to total 

assets). This method also could be 

supplemented for banks with publicly 

traded securities with market-based 

information such as a banking 

organization’s unsecured bond spreads 

over comparable Treasury securities. 

Question 5: What are the advantages 

and disadvantages of these alternative 

methods for calculating risk-based 

capital requirements for bank 

exposures? How can the agencies ensure 

consistent and transparent 

implementation? Which financial and 

market indicators should the agencies 

consider? What are the implications or 

potential for unintended consequences? 

Are there other methods for assessing 

risk-based capital for bank exposures in 

a relatively risk sensitive manner that 

would meet the principles described in 

section III? Commenters are asked to 

provide quantitative as well as 

qualitative support and/or analysis for 

proposed alternative methods. 

iv. Corporate Exposures 

Under the agencies’ general risk-based 

capital rules, corporate exposures 

generally 26 receive a risk weight of 100 

percent,27 whereas under the Basel 

standardized approach, banking 

organizations would be allowed to use 

credit ratings to assign risk weights to 

corporate exposures.28 The current 

market risk rule and the Basel modified 

market risk framework also use credit 

ratings for corporate exposures. 

One option for risk weighting 

corporate exposures would be to 

continue to use the treatment provided 

in the general risk-based capital rules 

and require banking organizations to 

risk weight all corporate exposures at 

100 percent. Another method would be 

to differentiate the credit risk of 

corporate exposures based on financial 

and economic measures appropriate to 

the borrower. For example, the agencies 

could allow banking organizations to 

assign risk weights based on balance 

sheet or cash flow ratios, such as current 

assets to current liabilities, debt to 

equity, or some form of debt service to 

cash flow ratio (for example, current 

interest and maturities to current cash 

flow from operations). Alternatively, 

some corporate exposures for publicly 

traded firms could be risk weighted on 

the basis of market-based measures, 

such as credit spreads and equity-price 

implied default probability, and 

measures of capital adequacy and 

liquidity. 

Finally, the agencies could allow 

banking organizations to assign risk 

weights based upon a more flexible set 

of objective criteria that the agencies 

would establish by rule. As a part of 

their process for making 

creditworthiness determinations and 

assigning risk weights, banking 

organizations would be allowed to 

consider external data, including credit 

analyses (but not credit ratings) 

provided by third parties, that met 

standards established by the agencies. 

Question 6: What are the advantages 

and disadvantages of these alternative 

methods? What are the implications or 

potential for unintended consequences? 

If all banking organizations are allowed 

to calculate their own capital 

requirements for corporate exposures, 

how can the agencies ensure consistent 

and transparent implementation (for 

example, where there may be material 

differences in how financial statements 

are typically presented or differences in 

chosen financial ratios)? What different 

approaches or other financial or market 

criteria would commenters recommend? 

Are there other methods for assessing 

risk-based capital for corporate 

exposures in a relatively risk sensitive 

manner that would meet the principles 

described in section III? Commenters are 

asked to provide quantitative, as well as 

qualitative, support and/or analysis for 

proposed alternative methods. 

v. Securitization Exposures 

Under the agencies’ general risk-based 

capital rules, a banking organization 

may use credit ratings to assign risk 

weights to certain securitization 

exposures.29 Generally, when a banking 

organization cannot, or chooses not to 

use the ratings-based approach, it must 

either ‘‘gross-up’’ the exposure or hold 

dollar-for-dollar capital against the 

exposure. These latter methods are 

designed to capture the risk of unrated 

or low rated exposures that typically are 

subordinate in the capital structure of a 

securitization. Under the advanced 

approaches rules and the Basel 

standardized approach, a banking 

organization is required to use a ratingsbased approach when available to assign 

risk weights to traditional and synthetic 

securitization exposures.30 Both the 

advanced approaches rules and the 

Basel standardized approach also 

provide alternative approaches for 

determining the capital requirements for 

exposures that do not qualify for the 

ratings-based approach. The market risk 

rule and the Basel modified market risk 

framework also use credit ratings for 

securitization exposures. 

Prior to the implementation of the 

recourse, direct credit substitutes, 

residual interests and mortgage- and 

asset-backed securities rule in 2001 

(recourse rule),31 the agencies’ general 

risk-based capital rules did not rely on 

credit ratings to determine risk weights 

for securitization exposures. In addition 

to establishing a risk-weighting 

framework based on credit ratings, the 

recourse rule established an alternative 

risk-weighting framework for certain 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 52289 

32See 12 CFR part 3, Appendix C section 45 

(OCC); 12 CFR part 208, Appendix F section 45 and 

12 CFR part 225, Appendix G section 45 (Board); 

12 CFR part 325, Appendix D, section 45 (FDIC); 

12 CFR part 567, Appendix C, section 45 (OTS). 

33See 12 CFR part 3, Appendix A (OCC), 12 CFR 

parts 208 and 225, Appendix A, section III.B 

(Board); 12 CFR part 325, Appendix A, section 

II.B.2 (FDIC); 12 CFR 567.6 (OTS). 

34Basel Accord, paragraph 195. 

35 Id. at paragraph 145. 

36See 12 CFR part 3, Appendix C, sections 33 and 

34 (OCC); 12 CFR part 208, Appendix F sections 34 

and 35 and 12 CFR part 225, Appendix G sections 

34 and 35 (Board); 12 CFR part 325, Appendix D, 

sections 34 & 35 (FDIC); 12 CFR part 567, Appendix 

C, sections 34–35 (OTS). 

37 Id. 

38See the definition of ‘‘eligible double-default 

guarantor’’ in the agencies’ advanced approaches 

rules. 12 CFR part 3, Appendix C, section 2 (OCC); 

12 CFR part 208, Appendix F section 2 and 12 CFR 

part 225, Appendix G section 2 (Board); 12 CFR part 

325, Appendix D, section 2 (FDIC); 12 CFR part 567, 

Appendix C, section 2 (OTS). 

securitization exposures (a gross-up 

treatment reflecting the risk of more 

subordinated tranches of 

securitizations). The agencies could 

apply the risk-based capital rules in 

effect prior to the implementation of the 

recourse rule, which would eliminate 

all references to credit ratings. This 

would result in all securitization 

exposures receiving the same risk 

weight regardless of the amount of 

subordination in the securitization 

structure. Alternatively, the agencies 

could: 

• Require that banks apply the 

aforementioned ‘‘gross-up’’ treatment 

under which a bank must maintain 

capital against its securitization 

exposure, as well as against all more 

senior exposures that the bank’s 

exposure supports in the structure. The 

grossed-up exposure would then be 

assigned to the risk weight appropriate 

to the underlying securitized exposures. 

• Differentiate the credit risk of the 

‘‘grossed-up’’ securitization exposure 

based on financial and structural 

parameters of the underlying or 

reference pool of instruments, as well as 

the exposure itself. For example, risk 

weights could be assigned based on the 

securitization transaction’s 

overcollateralization ratio, interest 

coverage ratio, or priority in the cash 

flow waterfall. 

• Assign the most senior 

securitization exposure in a transaction 

a risk weight based on the underlying 

exposure type and the aggregate amount 

of subordination that provides credit 

enhancement to the exposure. For 

example, the greater the amount of 

subordination, the lower the risk weight 

to which the senior exposure would be 

assigned. However, this approach would 

only apply to the senior-most tranche 

and would not distinguish between 

exposures with significant credit 

support and those where the support 

had been reduced or eliminated by 

losses. 

• Adopt the Basel Committee’s 

approach to calculating capital 

requirements for securitization 

exposures that is based on the level of 

subordination and the type of 

underlying exposures in the Revisions 

Document. The approach would use a 

‘‘concentration ratio’’ to set the 

minimum risk-based capital 

requirements for securitization 

positions. The concentration ratio is 

equal to the sum of the notional 

amounts of all the tranches divided by 

the sum of the notional amounts of the 

tranches junior to or pari passu with the 

tranche in which the position is held 

including that tranche itself. The capital 

requirement is 8 percent of the 

weighted-average risk weight that would 

be applied to the underlying securitized 

exposures multiplied by the 

concentration ratio. If the concentration 

ratio is 12.5 or higher, the position 

would be deducted from capital. Under 

this approach, the capital requirement 

would be no less than that which would 

result from a direct exposure to the 

underlying assets. 

• Design a risk-weighting approach 

based on a supervisory formula. 

Building on the capital requirements of 

the underlying exposures, the agencies 

could recognize multiple sources of risk 

related to securitizations and impose 

provisions that limit some forms of 

arbitrage. Under the advanced 

approaches rules, for example, banking 

organizations are allowed to use the 

supervisory formula approach (SFA) to 

calculate minimum regulatory capital 

requirements for certain securitization 

exposures.32 This approach uses 

exposure-specific inputs, including the 

capital requirement of the underlying 

exposures as if held directly by the 

banking organization. The inputs 

required for calculating the capital 

requirement of the underlying 

exposures are not always available for 

investing banking organizations. 

Nevertheless, the agencies could 

develop a simplified version of the SFA 

that could be applied by all banking 

organizations. Depending upon the 

parameters used in the SFA, this 

approach could increase risk sensitivity, 

as well as potentially increasing 

transparency in the securitization 

market. 

Question 7: What are the advantages 

and disadvantages of these approaches 

for calculating risk-based capital 

requirements for securitization 

exposures? How can the agencies ensure 

consistent and transparent 

implementation? Which parameters or 

measures of subordination and structure 

should the agencies consider? What are 

the implications or potential for 

unintended consequences? How can the 

agencies ensure that an alternative 

approach meets the criteria for a 

creditworthiness standard? What other 

approaches or specific financial and 

structural parameters that would be 

appropriate standards of 

creditworthiness for securitization 

exposures? Commenters are asked to 

provide quantitative as well as 

qualitative support and/or analysis for 

proposed alternative methods. 

vi. Guarantees and Collateral 

The agencies’ general risk-based 

capital rules generally limit the 

recognition of third-party guarantees to 

those provided by central governments, 

U.S. government agencies, banks, state 

and local governments of OECD 

countries, qualifying securities firms, 

and multilateral lending institutions 

and regional development banks. The 

general risk-based capital rules 

recognize collateral in the form of cash, 

securities issued or guaranteed by OECD 

central governments, securities issued 

by U.S. government agencies or U.S. 

government-sponsored agencies, and 

securities issued by multilateral lending 

institutions and regional development 

banks.33

Under the Basel standardized 

approach, guarantor eligibility is based 

on the credit rating of the guarantor’s 

unsecured long-term debt security 

without credit enhancement that has a 

long-term external credit rating.34 In 

addition, financial collateral includes, 

among other things, long-term debt 

securities that have an external credit 

rating of one category below investment 

grade or higher and short-term debt 

securities that have an external credit 

rating of at least investment grade.35

The advanced approaches rules 

recognize the risk reducing effects of 

financial collateral and guarantees.36

Eligible financial collateral includes 

long-term debt securities that have a 

credit rating of one category below 

investment grade or higher and shortterm debt securities that have a credit 

rating of at least investment grade.37

Guarantors eligible for double default 

treatment include those entities that a 

banking organization assigns a 

probability of default equal to or lower 

than the probability of default 

associated with a long-term credit rating 

in the third-highest investment grade 

category.38

One option would be to expand the 

use of the recognition of collateral and 


srobinson on DSKHWCL6B1PROD with PROPOSALS
52290 Federal Register / Vol. 75, No. 164 / Wednesday, August 25, 2010 / Proposed Rules 

guarantees as provided in the general 

risk-based capital rules, that is, by 

substituting the risk weight appropriate 

to the guarantor or collateral for that of 

the exposure. This approach would 

have to be modified to exclude mention 

of external credit ratings for certain 

securities firms. The agencies could also 

incorporate into the recognition of 

collateral and guarantees some of the 

creditworthiness standards discussed 

above for sovereign, PSE, bank, and 

corporate exposures. 

Question 8: What are the advantages 

and disadvantages of the alternative 

approaches? What are the implications 

or potential for unintended 

consequences? Are there other 

approaches that would more 

appropriately capture the riskmitigating effects of collateral and/or 

guarantees without adding undue cost 

or burden? Commenters are asked to 

provide quantitative as well as 

qualitative supporting data and/or 

analysis for proposed alternative 

methods. 

d. Burden 

The agencies recognize that any 

measure of creditworthiness will 

involve a tradeoff among the objectives 

discussed in this ANPR. As previously 

noted, the agencies recognize that a 

more refined differentiation of 

creditworthiness may be achievable 

only at the expense of greater 

implementation burden. The agencies 

seek comment on the costs and burden 

that various alternative standards might 

entail. In particular, the agencies are 

interested in whether the development 

of alternatives to the use of credit 

ratings would involve, in most 

circumstances, cost considerations 

greater than those under the current 

regulations. 

Question 9: What burden might arise 

from the implementation of alternative 

methods of measuring creditworthiness 

at banking organizations of varying size 

and complexity? Commenters are asked 

to provide quantitative as well as 

qualitative support for their burden 

estimates. In addition to the cost 

burden, the agencies seek comment on 

the feasibility of implementing various 

alternatives, particularly for community 

and mid-sized banks. 

Dated: August 9, 2010. 

John C. Dugan, 

Comptroller of the Currency. 

By order of the Board of Governors of the 

Federal Reserve System, this 10th day of 

August 2010. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

Dated at Washington, DC, this 10th day of 

August 2010. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Dated: August 11, 2010. 

By the Office of Thrift Supervision. 

John E. Bowman, 

Acting Director. 

[FR Doc. 2010–21051 Filed 8–24–10; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P; 

6720–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2010–0805; Directorate 

Identifier 2010–NM–042–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier, 

Inc. Model DHC–8–300 Series 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above. This proposed 

AD results from mandatory continuing 

airworthiness information (MCAI) 

originated by an aviation authority of 

another country to identify and correct 

an unsafe condition on an aviation 

product. The MCAI describes the unsafe 

condition as: Several cases of aileron 

terminal quadrant support brackets that 

were manufactured using sheet metal 

have been found cracked on DHC–8 

Series 300 aircraft. Investigation 

revealed that the failure of the support 

bracket was due to fatigue. Failure of the 

aileron terminal quadrant support 

bracket could result in an adverse 

reduction of aircraft roll control. These 

conditions could result in loss of control 

of the airplane. The proposed AD would 

require actions that are intended to 

address the unsafe condition described 

in the MCAI. 

DATES: We must receive comments on 

this proposed AD by October 12, 2010. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue, SE., 

Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–40, 1200 New Jersey Avenue, SE., 

Washington, DC, between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact Bombardier, 

Inc., 400 Coˆte-Vertu Road West, Dorval, 

Que ́bec H4S 1Y9, Canada; telephone 

514–855–5000; fax 514–855–7401; email thd.qseries@aero.bombardier.com; 

Internet http://www.bombardier.com. 

You may review copies of the 

referenced service information at the 

FAA, Transport Airplane Directorate, 

1601 Lind Avenue, SW., Renton, 

Washington. For information on the 

availability of this material at the FAA, 

call 425–227–1221. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Operations 

office (telephone (800) 647–5527) is in 

the ADDRESSES section. Comments will 

be available in the AD docket shortly 

after receipt. 

FOR FURTHER INFORMATION CONTACT: 

Craig Yates, Aerospace Engineer, 

Airframe and Mechanical Systems 

Branch, ANE–171, FAA, New York 

Aircraft Certification Office (ACO), 1600 

Stewart Avenue, Suite 410, Westbury, 

New York 11590; telephone (516) 228– 

7355; fax (516) 794–5531. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposed AD. Send your comments 

to an address listed under the 

ADDRESSES section. Include ‘‘Docket No. 

FAA–2010–0805; Directorate Identifier 

2010–NM–042–AD’’ at the beginning of 

your comments. We specifically invite 

comments on the overall regulatory, 


srobinson on DSKHWCL6B1PROD with PROPOSALS