OCC 2003-42
OCC Bulletin

Subject:      Regulatory Capital–-Asset-Backed Commercial Paper and 
              Early Amortization
Description:  Interim Rule and Notice of Proposed Rulemaking—Request for Comments

Date:         October 10, 2003 

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


PURPOSE

This bulletin transmits both an interagency interim final rule on 
asset-backed commercial paper programs and an interagency notice of 
proposed rulemaking (NPR) on asset-backed commercial paper programs 
and securitizations with early amortization features.  Both were 
published in the Federal Register on October 1.  Comments on these 
rulemakings are requested.

SUMMARY

The interim final rule and the notice of proposed rulemaking amend 
the risk-based capital standards for the treatment of assets in 
asset-backed commercial paper (ABCP) programs consolidated under 
the recently issued Financial Accounting Standards Board 
Interpretation No. 46, Consolidation of Variable Interest Entities 
(FIN 46).  The proposed rule would also modify the risk-based 
capital treatment of certain securitizations with early amortization 
provisions.  
  
Under the interim rule, sponsoring banking organizations may remove 
ABCP program assets consolidated under FIN 46 from their risk-
weighted asset base for purposes of calculating their risk-based 
capital ratios.  However, sponsoring banking organizations must 
continue to include any other exposures they have to these programs, 
such as credit enhancements, in risk-weighted assets.  The interim 
rule will be in effect only for the regulatory reporting periods 
ending September 30 and December 31, 2003, and March 31, 2004.

The risk-based capital treatment set forth in the interim rule does 
not alter the accounting rules for balance sheet consolidation as 
set forth under generally accepted accounting principles.  
Consequently, banking organizations must include consolidated ABCP 
program assets in their tier 1 leverage ratio calculation.

The NPR solicits comments on a permanent, risk-based capital 
treatment for the risks arising from ABCP programs.  In particular, 
it proposes allowing banking organizations to exclude ABCP program 
assets requiring consolidation under FIN 46 from their risk-weighted 
asset base on a permanent basis.  In addition, the NPR would require 
banking organizations to hold risk-based capital against liquidity 
facilities provided to ABCP programs with an original maturity of 
one year or less.  This treatment recognizes that such facilities, 
which currently are not assessed a capital requirement, expose 
banking organizations to credit risk.

The NPR also proposes a risk-based capital charge for certain types 
of securitizations of revolving retail credit facilities (for 
example, credit card receivables) that incorporate early amortization 
provisions.  The goal of this proposal is to more closely align 
risk-based capital requirements with the risks embedded in these 
types of securitization structures.
  
The comment period for these rulemakings closes on November 17.

FOR FURTHER INFORMATION CONTACT:

Amrit Sekhon, risk expert, Capital Policy Division at 
(202) 874-5211 or Ron Shimabukuro, special counsel, Legislative and 
Regulatory Activities Division at (202) 874-5090.



___________________________
Tommy Snow
Director for Capital Policy



Attachments:
·	68 FR 56530
[http://www.occ.treas.gov/fr/fedregister/68fr56530.pdf]
·	68 FR 56568
[http://www.occ.treas.gov/fr/fedregister/68fr56568.pdf