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Federal Agencies Finalize Technical Correction of Risk-Based Capital Rules

Colodny Fass P.A. - Fort Lauderdale Office

July 19, 2014

Previously published on July 17, 2014

The U.S. Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency announced the finalization of a technical correction to the definition of "eligible guarantee" in the agencies' risk-based capital Rules released yesterday, July 16, 2014.

This past April, the agencies proposed a Rule to correct the definition of "eligible guarantee" by clarifying the types of guarantees that can be recognized for purposes of calculating a banking organization's regulatory capital. Banking organizations utilize eligible guarantees to reduce their credit risk to certain exposures. The correction impacts banking organizations that determine their regulatory capital ratios under the advanced approaches framework, which applies to large internationally active banking organizations--generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposures.

Effective October 1, 2014, the final Rule is substantially similar to the initial proposed Rule and adopts the definition of "eligible guarantee" without change. To ensure consistent public disclosure of capital ratios, the agencies will allow advanced approaches banking organizations to adopt the final Rule before the effective date.


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