OCC Final Rule on Short-Term Investment Funds

On October 9, the OCC published a final rule that revises the requirements on U.S. banks and federal branches of foreign banks pursuant to 12 CFR 9.18(b)(4)(ii)(B), the short-term investment fund rule.  Under the final rule, a short-term investment fund must: (i) operate with a primary objective to maintain a stable NAV of $1.00 per participating interest; (ii) have a dollar-weighted average portfolio maturity of 60 days; (iii) have a dollar-weighted average portfolio life maturity of 120 days; (iv) adopt portfolio and issuer qualitative standards and concentration restrictions and standards to address contingency funding needs; (v) adopt shadow pricing procedures and calculate the difference on at least a weekly basis; (vi) adopt procedures for stress testing the fund’s ability to maintain a stable NAV and report adverse stress testing results to the managing bank’s senior risk management; (vii) provide monthly disclosures to fund plan participants and the OCC; (viii) adopt procedures that require a bank that administers a fund to notify the OCC before or within one business day after the occurrence of one or more of six specific events; (ix) use mark-to-market value accounting instead of amortized cost accounting if the market value of the portfolio falls below a NAV of $0.995 per participating interest; and (x) adopt procedures to take certain actions if a bank suspends or limits withdrawals and initiates liquidation of the fund as a result of redemptions.  The final rule will be effective on July 1, 2013.  OCC Release.