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| TO: |
CHIEF EXECUTIVE OFFICER |
| SUBJECT: |
Amended Risk-Based Capital Definition of
Claims on OECD-Based Governments and Banks
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The FDIC Board of Directors has approved a final rule modifying the
risk-based capital definition for claims on central governments and
banks in countries that are members of the Organization for
Economic Cooperation and Development (OECD). This rule, which was
adopted jointly with the Federal Reserve Board and the Office of
the Comptroller of the Currency, amends the FDIC's Statement of
Policy on Risk-Based Capital (Appendix A to Part 325) and becomes
effective on April 1, 1996.
The OECD is an international organization of countries committed to
market-oriented economic policies. Under the FDIC's existing risk-
based capital standards, claims on OECD-based countries (such as
loans to and securities issued by their central governments and
banks) generally receive lover risk-weights than corresponding
claims on countries that are not OECD-based. However, questions
were raised as to whether this favorable capital treatment should
be limited to the countries that were OECD members when the risk-
based capital framework was adopted in 1989 or expanded so that new
OECD members also could receive the favorable risk-weightings. The
final rule clarifies that any country that is a full member of the
OECD, regardless of entry date, will be eligible for the favorable
capital treatment unless that country has rescheduled its external
sovereign debt within the previous five years.
The attached Federal Register notice includes a detailed
explanation of the FDIC's final rule. For more information,
contact Stephen G. Pfeifer, an Examination Specialist in the
Division of Supervision's Accounting Section (202-898-8904).
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