NR 2001-96
November 29, 2001
FOR IMMEDIATE RELEASE

Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation                                                                      
Office of Thrift Supervision

AGENCIES ADOPT RECOURSE, DIRECT CREDIT SUBSTITUTES AND RESIDUAL INTERESTS FINAL RULE 

The federal bank and thrift regulatory agencies today announced the publication of a
final rule that changes their regulatory capital standards to address the treatment 
of recourse obligations, residual interests and direct credit substitutes that expose 
banks, bank holding companies, and thrifts (collectively, banking organizations) to 
credit risk. 

The final rule, published in today's Federal Register, synthesizes the capital 
treatment outlined in two notices of proposed rulemakings issued in 2000--"Recourse 
and Direct Credit Substitutes" and "Residual Interests in Asset Securitizations or 
Other Transfers of Financial Assets."   The final rule treats recourse obligations 
and direct credit substitutes more consistently than the agencies' current risk-based 
capital standards, and introduces a credit ratings-based approach to assigning risk 
weights within a securitization.  The final rule also imposes a "dollar-for-dollar" 
capital charge on residual interests and a concentration limit on credit-enhancing 
interest-only strips, a subset of residual interests.

The rule is effective on January 1, 2002.  Any transactions settled on or after 
January 1, 2002, are subject to this final rule.  Banking organizations that enter 
into transactions before January 1, 2002, may elect early adoption, as of November 
29, 2001, of any provision of the final rule that results in a reduced capital 
requirement.  Conversely, banking organizations that have entered into transactions
before January 1, 2002, that result in increased capital requirements under the final
rule may delay the application of this rule to those transactions until December 31, 2002. 

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Media Contacts:
Federal Reserve: David Skidmore (202) 452-2955
OCC: Kevin Mukri (202) 874-5770
FDIC:	David Barr  (202) 898-6992
OTS:  Sam Eskenazi (202) 906-6913