Risk Management Manual of Examination Policies - FDIC

CAPITAL Section 2.1
Appendix supplements and adjusts the risk-based capital
ratio calculations under Appendix A of Part 325.
Prompt Corrective Action (PCA)
Part 325 of the FDIC Rules and Regulations implements
Section 38 of the Federal Deposit Insurance (FDI) Act by
establishing a framework for taking prompt supervisory
actions against insured state nonmember banks that are not
adequately capitalized. A more thorough discussion is
presented later in this section, as well as within the Formal
Administrative Actions Section of this manual. Certain
provisions of the FDIC's PCA rules apply to all insured
depository institutions that are critically undercapitalized.
Other Areas
Capital-based standards are used in the following
regulations to restrict or prohibit an institution's activities.
Risk-Related Insurance Part 327 of the
Premiums FDIC Rules and
Regulations
Brokered Deposits Section 337.6 of the
FDIC Rules and
Regulations
Limits on Extensions of Section 337.3 of the
Credit to Insiders FDIC Rules and
Regulations & FRB
Regulation O
Activities and Investments Part 362 of the
of Insured State Nonmember FDIC Rules and Banks
Regulations
Limitations on Interbank Part 206 of FRB
Liabilities Regulations
Limitations on Federal Section 10B of
Reserve Discount Window the Federal Reserve
Advances Act
Grounds for Appointing Section 11(c)(5) of
Conservator or Receiver the FDI Act
Capital-based Guidance
The FDIC issued substantive capital-based guidance and
rules affecting either insured state nonmember banks or all
insured institutions. A few of the more recent FILs are
presented below. Examiners should refer to the Capital
Markets Website (Resources) for more complete and upto-date
information.
FIL 54-2002: Capital Standards/Interagency Questions
and Answers on the Capital Treatment of Recourse,
Direct Credit Substitutes, and Residual Interests in
Asset Securitizations
This document clarifies several issues arising from the final
rule on the capital treatment of these exposures as
originally presented in FIL 99-2001.
FIL 52-2002: Capital Standards/Interagency Guidance
on Implicit Recourse in Asset Securitizations
This guidance highlights the fundamental concern that
implicit recourse may expose a bank’s earnings and capital
to potential losses. The guidance sets forth a range of
supervisory actions that may be taken against a bank that
provides implicit support to its securitizations.
FIL 48-2002: Capital Standards/Interagency Advisory
on the Regulatory Capital Treatment of Accrued
Interest Receivable Related to Credit Card
Securitizations
This Advisory clarifies the appropriate risk-based capital
treatment for banking organizations that securitize credit
card receivables and record an on-balance sheet asset
commonly referred to as Accrued Interest Receivable
(AIR). The advisory describes how the AIR asset is
created, explains why this asset is considered a
subordinated retained interest for regulatory capital
purposes, and describes the regulatory capital treatment
that applies to the AIR asset.
FIL 31-2002: Capital Standards/Final Rule Lowers
Risk-Weightings for Claims on Securities Firms
This rule lowers the risk weight applied to certain claims
on qualifying securities firms from 100 percent to 20
percent.
FIL 06-2002: Capital Standards/Final Capital Rule for
Nonfinancial Equity Investments
Under this rule, covered equity investments are subject to a
Tier 1 capital charge (for both risk-based and leverage
capital purposes) that increases in steps as the banking
organization’s level of concentration in equity investments
increases.
FIL 99-2001: Capital Standards (Final Rule to Amend
the Regulatory Capital Treatment of Recourse
Arrangements, Direct Credit Substitutes, Residual
Capital (12-04) 2.1-2 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation