On August 30, the Fed, FDIC, and the OCC issued a final rule amending their respective market risk capital rules, which generally apply to banking organizations that engage in substantial trading activity. The final rule improves sensitivity to risks under the current regulatory measurement methodologies, including default and migration risks associated with illiquid products. The agencies anticipate that the final rule will significantly increase the risk-based capital allocated to market risk. The final rule will be effective on January 1, 2013. OCC Release. Final Rule.
Market Risk Capital Rules
Agencies Request for Comment on Market Risk Capital Rules
On December 7, the OCC, Fed, and FDIC released a notice of proposed rulemaking to seek comment on an amendment to a December 2010 notice of proposed rulemaking to modify the agencies’ market risk capital rules for banks with significant trading activities. The new notice of proposed rulemaking proposes to replace the use of credit ratings with new methodologies to determine risk-specific capital requirements for debt and securitization positions. Comments must be submitted by February 3, 2012. Joint Release. Proposed Rule.
Proposed Rule on Market Risk Capital Revisions
On January 12, the OCC, the Fed, and the FDIC requested comments on a notice of proposed rulemaking that would revise their market risk capital rules. The revisions would broaden the scope of these rules to better capture the risk inherent in trading positions by improving the rules’ sensitivity to risks not adequately captured under the current regulatory measurement methodologies, such as the default and migrations risks associated with less liquid products. Comments are requested by April 12. OCC Release. Proposed Rule.
Agencies Seek Comment on Capital Rules
On December 15, the Fed, OCC, and FDIC requested comments on a proposed rule that would implement changes approved by the Basel Committee on Banking Supervision to revise the market risk capital rules for banking organizations with significant trading activity. Comments are requested within 90 days after publication in the Federal Register. The Fed, OCC, and FDIC also requested comments on a proposed rule that would amend Basel II to be consistent with the Dodd-Frank Act provisions on capital standards. Comments are requested within 60 days after publication in the Federal Register. Agencies Risk-Based Capital Guidelines Release. Agencies Basel II Release.