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Subject: Regulatory Capital: Asset-Backed Commercial Paper
Date: August 11, 2004
To: Chief Executive Officers of National Banks, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Final Rule
This bulletin transmits a final rule on asset-backed commercial paper programs published in the Federal Register on July 28, 2004.
The final rule amends the risk-based capital standards for the treatment of assets in asset-backed commercial paper (ABCP) programs consolidated under the Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46).
Under the final 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. In addition, the final rule requires 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 previously were not assessed a capital requirement, expose banking organizations to credit risk.
The risk-based capital treatment set forth in the final rule does not alter the accounting rules for balance-sheet consolidation as set forth under generally accepted accounting principles. In addition, banking organizations must continue to include consolidated ABCP program assets in their tier 1 leverage ratio calculations.
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.