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Subject: Risk-Based Capital – Money Market Mutual Funds
Date: April 8, 2009
To: Chief Executive Officers of National Banks, Department and Division Heads, Examining Personnel, and Other Interested Parties
Description: Final Rule
This bulletin briefly summarizes a final rule concerning the risk-based capital treatment for certain asset-backed commercial paper (ABCP) purchased by national banks pursuant to a special lending facility established by the Board of Governors of the Federal Reserve System (Federal Reserve). The final rule was published on March 27, 2009, in the Federal Register by the Office of the Comptroller of the Currency (OCC).
The final rule extends the risk-based capital treatment of a previously issued interim final rule for ABCP purchased by national banks pursuant to the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (ABCP Lending Facility) established by the Federal Reserve. The ABCP Lending Facility enables depository institutions to borrow on a nonrecourse basis from the Federal Reserve Bank of Boston if the depository institution uses the loan proceeds to purchase high-quality ABCP from money market mutual funds. The Federal Reserve established the ABCP Lending Facility on September 19, 2008, and extended it to October 30, 2009. The final rule, which applies to ABCP purchased pursuant to the ABCP Lending Facility, recognizes that the nonrecourse basis of the loan protects the bank from the credit and market risks of the purchased ABCP. Under the final rule, a national bank may assign a zero percent risk weight to the ABCP purchased by the bank.
You may direct questions or comments to Margot Schwadron, Senior Risk Expert, Capital Policy Division, at (202) 874-6022; Ronald Shimabukuro, Senior Counsel; or Hugh Carney, Attorney, Legislative and Regulatory Activities Division, at (202) 874-5090.
Timothy W. Long