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Financial Institution Letters

The FDIC, the Office of the Comptroller of the Currency and the Federal Reserve Board have amended their respective risk-based capital requirements to incorporate a measure for market risk to cover debt and equity positions located in an institution's trading account and foreign exchange and commodity positions wherever located. The effect of the final rule is that any bank or bank holding company regulated by the agencies with significant exposure to market risk must measure that risk using its own internal value-at-risk model, subject to the parameters contained in the rule, and hold a commensurate amount of capital. The agencies anticipate that approximately 15 of the largest U. S. institutions and a few small institutions will be affected by this rule. Compliance with the rule is not required until January 1, 1998. Subject to supervisory approval, voluntary compliance may begin January 1, 1997. A copy of the Federal Register notice of the amendments is attached. For more information, please contact one of the FDIC officials listed on Page 47358 of the attached Federal Register notice.

Distribution: FDIC-Supervised Banks (Commercial and Savings)

Note: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 ((703) 562-2200)

Last Updated 07/13/1999

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