Highlights:
The proposed rule:

• Applies to banks with aggregate trading assets and liabilities equal to 10 percent or more of quarter-end total assets as reported on the most recent quarterly Call Report or Thrift Financial Report, or equal to $1 billion or more.
• Establishes more explicit eligibility criteria for positions that receive market risk capital treatment; sets requirements for prudent valuation and robust stress testing, and for the control, oversight and validation mechanisms for models; and expects banks to have an internal capital assessment for market risk.
• Introduces a new minimum regulatory capital charge, the incremental default risk requirement, which captures default risk over a time horizon of one year, taking into account the impact of liquidity, concentrations, hedging and optionality.
• Updates standard specific risk capital requirements for sub-investment grade government debt positions and non-qualifying debt positions to conform to Basel II credit risk weights.
• Replaces the current joint final rule on "Risk-Based Capital Standards: Market Risk," published in the Federal Register on September 6, 1996 (see FIL-84-96, dated October 10, 1996).In reply to: Suggested Routing: Chief Executive Officer Chief Financial Officer Chief Risk Officer

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer

Related Topics:
Risk-Based Capital Rules 12 CFR Part 325 Basel II Market Risk

Attachments:

• "Key Aspects of the Proposed Rule on Risk- Based Capital Standards Market Risk"
• Joint Notice of Proposed Rulemaking, Risk- Based Capital Standards Market Risk - PDF 3560k (PDF Help)

Contact:
Jason C. Cave, Associate Director, Capital Markets Branch, at jcave@fdic.gov or (202) 898-3548
Gloria Ikosi, Senior Quantitative Risk Analyst, at gikosi@fdic.gov or (202) 898-3997

Printable Format:
FIL-87-2006 - PDF 51k (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2006/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562- 2200).