The proposal would provide banks with the option to adopt an alternative risk-based capital framework based largely upon the Standardized Approach set forth in the Basel II Framework.
The FDIC approved an interagency proposal that would provide banks with the option to adopt an alternative risk-based capital framework based largely upon the Standardized Approach set forth in the Basel II Framework.
The Standardized Approach capital framework would be available to all banks except the largest and most complex banks that are subject to the Advanced Approaches final rule issued on December 7, 2007.
Some of the key aspects of the proposal include:
- adding more risk buckets to the existing rules;
- expanding the use of external ratings to a broader range of exposures;
- expanding the recognition of credit risk mitigants, such as collateral and guarantees;
- establishing a more risk-sensitive approach for residential mortgages based largely on loan-to-value measures;
- increasing the capital requirements on certain off-balance sheet exposures, including liquidity lines to asset-backed commercial paper exposures; and
- requiring a capital charge for operational risk using the Basic Indicator Approach under the Basel II capital framework.
The agencies are seeking comment on various aspects of the proposed framework, including possible enhancements and alternatives to the use of external credit ratings, especially for structured finance exposures.
Comments will be accepted for 90 days from the date of publication in the Federal Register.
Press release
© FDIC - Federal Deposit Insurance Corporation
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