Highlights:
- FAS 159 requires that securities to which the fair value option is applied be reported as trading securities. For most banks, FAS 159 is effective on January 1, 2008; however, early adoption is permitted under certain conditions.
- Market risk capital requirements may apply to banks with gross trading assets and liabilities of either 10 percent or more of quarter-end total assets or $1 billion or more as reported on the most recent quarterly Call Report.
- Banks that report significant amounts of securities as trading securities as a result of FAS 159, or for other reasons, could become subject to the market risk capital requirements as a result of the 10 percent of total assets threshold.
- Banks that are subject to market risk capital requirements are required to measure market risk using a Value-at-Risk (VaR) model that meets the requirements set forth in the market risk capital rules.
- Banks whose trading activity is nearing or exceeding the threshold minimums should contact their FDIC Regional Office to discuss their plans regarding the adoption of the risk measurement and management requirements set forth in Appendix C.
- The market risk capital rules are currently under review. Proposed changes to the market risk rules are set forth in the federal banking agencies' Joint Notice of Proposed Rulemaking (see FIL 87-2006, dated September 25, 2006).
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer
Related Topics:
Risk-Based Capital Rules
12 CFR Part 325
Appendix C: Market Risk
Contact:
Marc Steckel, Chief, Exam Support Section, at
MSteckel@fdic.gov or (202) 898-3618
Robert Storch, Chief Accountant, at RStorch@fdic.gov
or (202) 898-8906
Printable Format:
FIL-64-2007 - PDF (PDF Help)
Note:
FDIC financial institution letters (FILs) may be accessed
from the FDIC's Web site at
www.fdic.gov/news/news/financial/2007/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may be
obtained through the FDIC's Public Information Center,
3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-
877-275-3342 or 703-562-2200).
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