OCC 99-19
Subject: Risk Based Capital, Specific Risk
Description: Final Rule
Date:  April 19, 1999

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


The attached final rule on specific risk was published in the Federal Register 
on April 19, 1999, and applies to banks with significant trading activity 
subject to the market risk-based capital regulation (appendix B of 12 CFR 3.) 
The rule was issued jointly by the OCC, the Board of Governors of the Federal 
Reserve System, and the Federal Deposit Insurance Corporation; it adopts 
without change the interim rule that became effective on December 31, 1997. 

Since January 1, 1998, national banks with significant trading activities 
have been required to use an internal value-at-risk (VAR) model to calculate 
risk-based capital for these activities.  A bank is subject to the rule if 
either: (1) the sum of the bank's trading assets and liabilities is at least 
10 percent of total assets, or (2) the sum of the bank's trading assets and 
liabilities is greater than $1 billion.  However, the OCC may exempt a national 
bank that meets one of these criteria if the institution does not have 
significant market risk.

The final rule permits a bank to use its internal VAR model to calculate the 
specific risk component of its market risk-based capital charge. This component 
covers the risk that the market value of on- or off-balance-sheet items will 
change because of the unique circumstances of a particular issuer. Prior to 
the interim rule, the specific risk component amounted to at least 50 percent 
of a standard, formulaic specific risk charge. (Since January 1, 1998, banks 
have been able to use their VAR models to calculate the component for general 
market risk, which covers risk due to broad movements in interest rates, equity 
prices, foreign exchange rates, or commodity prices.) 

For further information about this bulletin, contact Margot Schwadron in the 
Capital Policy Division at (202) 874-5070.



Kevin J. Bailey
Deputy Comptroller of Core Policy 

Attachment