OCC 2000-32
Subject: Risk-Based Capital -- Securities Borrowing
Transactions
Description: Interim Rule and Request for Comment
Date: December 8, 2000



TO:  Chief Executive Officers of National Banks,
Department and Division Heads, Examining Personnel
and Other Interested Parties


PURPOSE

This bulletin transmits an interim rule and a request
for comment on the risk-based capital (RBC) treatment
of securities borrowing transactions in which the
borrower of the security posts cash collateral.
The interim rule was published in the Federal Register
on December 5, 2000.

SUMMARY

The interagency interim rule alters the treatment of
certain securities borrowing transactions for banks
that have implemented the market risk amendment to
the RBC rules (12 CFR Part 3, appendix B).
Specifically, the interim rule permits these banks to
exclude from risk-weighted assets a large portion of
the receivable arising from their posting of cash
collateral when they borrow a security.  This exclusion
is conditional on the following requirements:

1.  The transaction is based on securities
includable in the trading book that are liquid and 
readily marketable.

2.  The transaction is marked to market daily.

3.  The transaction is subject to daily margin
maintenance requirements.
 
4.  The transaction is a securities contract for the
purposes of Section 555 of the Bankruptcy 
Code (11 USC 555), a qualified financial contract for
the purpose of Section 11(e)(8) of the Federal Deposit
Insurance Act (12 USC 1821(e)(8)), or a netting contract
between or among financial institutions for the purposes
of Sections 401-407 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 USC 4401-4407),
or the Federal Reserve Board's Regulation EE (12 CFR
Part 231).

If these conditions are met, then a bank may incorporate
into its risk-weighted assets an amount that is based on
the difference between the amount of cash collateral it
posted and the market value of the borrowed security.
Thus, only the net exposure (i.e., cash collateral less
the value of the borrowed security) rather than the
gross exposure, would be incorporated into the RBC
calculation.  Also, though the rule is effective on
January 5, 2001, national banks may apply the provisions
of the interim rule beginning December 5, 2000.

Comments on the Proposal

The OCC encourages all interested parties to review and
comment on the attached interim rule and request for
comment.  Comments on the proposed rule are due January
19, 2001.  Please forward all comments to Communications
Division, Office of the Comptroller of the Currency,
250 E Street SW, Washington, DC 20219, Attention Docket
No. 00-28.

FOR FURTHER INFORMATION, CONTACT:

Roger Tufts, senior economic advisor, Capital Policy
Division, (202) 874-5070; or Ron Shimabukuro, senior
attorney, Legislative and Regulatory Activities
Division, (202) 874-5090.



________________________
Jonathan L. Fiechter 
Senior Deputy Comptroller for International and Economic
Affairs


 Attachment--65 FR 75856