OCC 2005-26
OCC Bulletin  

Subject:        Regulatory Capital: Asset-Backed Commercial Paper 
                    Liquidity Facilities
Description:  Interagency Guidance

Date:           August 4, 2005

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

The Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision (the
agencies) have jointly issued the attached interagency guidance.
This guidance clarifies the application of the asset quality test
set forth in the agencies' final risk-based capital rule on the
consolidation of asset-backed commercial paper (ABCP) programs.
The ABCP rule, which was published in the Federal Register on
July 28, 2004, instituted a new capital charge for ABCP liquidity
facilities.

The ABCP rule requires a 10 percent credit conversion factor
(CCF) for ABCP liquidity facilities with an original maturity of
one year or less, and a 50 percent CCF for facilities with a
maturity of longer than one year.  However, as of September 30,
2005, only "eligible" ABCP liquidity facilities qualify for this
treatment.  To qualify as an "eligible" liquidity facility, the
liquidity provider must have no obligation to fund against assets
that are 90 days or more past due, in default or below investment
grade.  If the ABCP liquidity facility fails this asset quality
test, it is deemed "ineligible" and is treated as a recourse
exposure or direct credit substitute for purposes of determining
the risk-based capital charge.

The agencies, through the attached guidance, are further
clarifying that they will consider an ABCP liquidity facility
"eligible" if the liquidity provider has access to certain types
of seller-specific credit enhancements and the amount of these
credit enhancements exceeds the amount of assets that are 90 days
or more past due, in default, or below investment grade.

For further information, contact Nancy Hunt, risk expert, Capital
Policy Division at (202) 874-4923; or Laura Goldman, counsel,
Legislative and Regulatory Activities Division at (202) 874-5090.



_____________________________
Tommy Snow
Director for Capital Policy

Attachment: Interagency guidance
[http://www.occ.treas.gov/ftp/bulletin/2005-26.pdf]