Highlights:
-
Before acquiring a corporate debt security, and periodically thereafter, a
savings association must determine that an issuer has adequate capacity to
meet all financial commitments under the security for the projected life of
the security.
-
FDIC standards of creditworthiness will be satisfied if an issuer presents a
low risk of default and is likely to make full and timely repayment of
principal and interest.
-
A due diligence analysis may include consideration of internal analyses,
third-party research and analytics including internal risk ratings, the
default statistics of external credit rating agencies, and other sources of
information appropriate for the particular security.
-
The range and type of specific factors an institution should consider will
vary depending on the particular type and nature of the security.
-
The FDIC does not expect the final rule to change the scope of permissible
corporate debt securities investments. That is, if a corporate bond was a
permissible investment prior to this final rule (because it was rated in one
of the four highest categories), a bond with similar default probabilities
will be permissible under this rule.
Distribution:
FDIC-Insured Savings Associations
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Investment Officer
Chief Risk Officer
Attachments:
Final Rule:
Permissible Investments for Federal and State Savings Associations: Corporate
Debt Securities
Guidance on
Due Diligence Requirements for Savings Associations in Determining Whether a
Corporate Debt Security Is Eligible for Investment Under Part 362
Contact:
Eric Reither, Senior Capital Markets Specialist, Capital Markets Branch, at ereither@fdic.gov or
(202) 898-3707
Kyle Hadley, Chief, Examination Support, Capital Markets Branch, at khadley@fdic.gov or (202) 898-6532
Note:
FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web
site at
www.fdic.gov/news/news/financial/2012/index.html
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html
Paper copies may be obtained through the FDIC's Public Information Center, 3501
Fairfax Drive, E-1002, Arlington, VA 22226 (877-275-3342 or 703-562-2200).
|