OCC 98-41
Subject: Risk-Based Capital -- Unrealized Gains on Equity
Securities
Description: Final Rule
Date: September 9, 1998


TO:  Chief Executive Officers of National Banks, Department and
Division Heads, and all  Examining Personnel

On September 1, 1998, the Office of the Comptroller of the
Currency, the Federal Reserve Board, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision
(agencies) published the attached joint final rule.  The final
rule amends the agencies' risk-based capital regulations to
permit banks to include up to 45 percent of pretax net unrealized
holding gains on available-for-sale equity securities in Tier 2
capital.  The previous risk-based capital guidelines did not
permit any portion of unrealized gains on equity securities to be
included as bank capital.  The final rule applies only to equity
securities held as available-for-sale under Statement of
Financial Accounting Standard 115, "Accounting for Certain
Investments in Debt and Equity Securities."  The equity
securities must be prudently valued in accordance with generally
accepted accounting principles (GAAP) and have readily
determinable values.  Net unrealized gains on these securities
will continue to be excluded from common stockholders' equity in
the calculation of Tier 1 capital.

Under the final rule, the agencies' treatment of unrealized gains
on available-for-sale equity securities for regulatory capital
purposes is consistent with the international standards of the
Basle Accord.  The rule takes effect on October 1, 1998; however,
the agencies will not object if an institution wishes to apply
the provisions of this final ruling beginning September 1, 1998,
the date it was published in the Federal Register.

For further information, contact Roger Tufts (202-874-5070),
senior economic advisor, or Amrit Sekhon (202-874-5211), risk
specialist, in the Capital Policy Division, or Ronald Shimabukuro
(202-874-5090), senior attorney, in the Legislative and
Regulatory Activities Division.


_____________________________________
Emory Wayne Rushton
Senior Deputy Comptroller for Bank Supervision Policy


Attachment -- 63 FR 46518