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FDIC Federal Register Citations
From: Ed Kofman [mailto:email@example.com]
On October 23, 2008 the Federal Deposit Insurance Corporation announced an interim rule for coverage under the Temporary Liquidity Guarantee Program.
One aspect of the TLG Program is the Debt Guarantee Program. This interim rule specifically excludes derivatives from the Debt Guarantee Program.
At Banc Investment Group and Pacific Coast Bankersí Bank we help community banks and community bank holding companies manage their interest rate risk. Managing interest rate exposure is naturally difficult for our customers, especially in this volatile interest rate environment.
Many of our customers are seeking to fix their interest rate payments on their floating rate debt securities (their trust preferred shares) by entering into a swap to pay fixed and receive floating.
Since the TLG Program is designed to preserve confidence and encourage liquidity in the banking system in order to ease lending to creditworthy businesses, it seems counterproductive to exclude hedging transactions like the swap described above from the program.
Hedging interest rate risk is especially difficult for holding companies which typically do not possess sufficient funds to be able to post collateral for hedge transactions.
We seek FDICís position on allowing non-speculative, interest-rate derivatives to be included in the TLG Program. Allowing this inclusion will enhance banksí and holding companiesí abilities to manage their risk and thus improve their performance and preserve confidence and encourage liquidity in the banking system in order to ease lending to creditworthy businesses and consumers.
Please let us know if we can provide you with any additional information or answer any questions.
|Last Updated 10/29/2008||Regs@fdic.gov|