Capital Standards Supervisory Guidance on the Eligibility of Asset-Backed Commercial Paper Liquidity Facilities and the Resulting Risk-Based Capital Treatment

• Supplements the "Final Rule on Capital Requirements for Asset-Backed Commercial Paper Programs" issued on July 28, 2004 (see FIL-87-2004).
• Provides clarification on the application of the asset quality test for determining the eligibility or ineligibility of an ABCP liquidity facility and the resulting risk-based capital treatment for banks that provide liquidity facilities.
• Provides the agencies' determination of the forms of credit enhancements that are acceptable for mitigating credit risk that would otherwise be assumed by a liquidity facility for purposes of satisfying the asset quality test.
• Allows banks that meet the criteria set forth in the final rule or in this guidance to continue to apply a credit conversion factor of 10 percent for short-term liquidity facilities and 50 percent for long-term liquidity facilities. Banks that fail to meet either the criteria set forth in the final rule or in this guidance will be required to apply a 100 percent credit conversion factor on the liquidity facility starting with the reporting period ending September 30, 2005.
• Generally applies to large banks that provide liquidity facilities to ABCP programs.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer

Interagency Guidance on the Eligibility of Asset-Backed Commercial Paper Liquidity Facilities and the Resulting Risk-Based Capital Treatment - PDF 28k ( PDF Help )

Bobby R. Bean, Senior Quantitative Risk Analyst, at bbean@fdic.gov or (202) 898-3575.

Note:
FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/financial-institution-letters/2005/index.html .

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html .

Paper copies of FDIC FILs may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).