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To: Chief Executive Officers of National Banks, Department and Division Heads, Examining Personnel and Other Interested Parties

Description: Interim Rule and Request for Comment


This bulletin transmits an interim rule and a request for comment on the risk-based capital (RBC) treatment of securities borrowing transactions in which the borrower of the security posts cash collateral.  The interim rule was published in the Federal Register on December 5, 2000.


The interagency interim rule alters the treatment of certain securities borrowing transactions for banks that have implemented the market risk amendment to the RBC rules (12 CFR Part 3, appendix B).  Specifically, the interim rule permits these banks to exclude from risk-weighted assets a large portion of the receivable arising from their posting of cash collateral when they borrow a security.  This exclusion is conditional on the following requirements:

  • The transaction is based on securities includable in the trading book that are liquid and readily marketable.
  • The transaction is marked to market daily.
  • The transaction is subject to daily margin maintenance requirements.  
  • The transaction is a securities contract for the purposes of Section 555 of the Bankruptcy Code (11 USC 555), a qualified financial contract for the purpose of Section 11(e)(8) of the Federal Deposit Insurance Act (12 USC 1821(e)(8)), or a netting contract between or among financial institutions for the purposes of Sections 401-407 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 USC 4401-4407), or the Federal Reserve Board’s Regulation EE (12 CFR Part 231).

If these conditions are met, then a bank may incorporate into its risk-weighted assets an amount that is based on the difference between the amount of cash collateral it posted and the market value of the borrowed security.  Thus, only the net exposure (i.e., cash collateral less the value of the borrowed security) rather than the gross exposure, would be incorporated into the RBC calculation.  Also, though the rule is effective on January 5, 2001, national banks may apply the provisions of the interim rule beginning December 5, 2000.

Comments on the Proposal

The OCC encourages all interested parties to review and comment on the attached interim rule and request for comment.  Comments on the proposed rule are due January 19, 2001.  Please forward all comments to Communications Division, Office of the Comptroller of the Currency, 250 E Street SW, Washington, DC 20219, Attention Docket No. 00-28.


Roger Tufts, senior economic advisor, Capital Policy Division, (202) 874-5070; or Ron Shimabukuro, senior attorney, Legislative and Regulatory Activities Division, (202) 874-5090.


Jonathan L. Fiechter
Senior Deputy Comptroller for International and Economic Affairs

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