Minimum Capital Ratios; Capital Adequacy Guidelines; Capital Maintenance; Capital: Treatment of Certain Claims on, or Guaranteed by, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), 63656-63662 [E8-25555]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY
• Office of Thrift Supervision
• Comptroller of the Currency

[Federal Register Volume 73, Number 208 (Monday, October 27, 2008)]
[Proposed Rules]
[Pages 63656-63662]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-25555]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID: OCC-2008-0016]
RIN 1557-AD18

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Regulations H and Y; Docket No. R-1335]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 325

RIN 3064-AD34

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 567

[No. OTS-2008-0014]
RIN 1550-AC24


Minimum Capital Ratios; Capital Adequacy Guidelines; Capital 
Maintenance; Capital: Treatment of Certain Claims on, or Guaranteed by, 
the Federal National Mortgage Association (Fannie Mae) and the Federal 
Home Loan Mortgage Corporation (Freddie Mac)

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of 
Governors of the Federal Reserve System; Federal Deposit Insurance 
Corporation; and Office of Thrift Supervision, Treasury.

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: On September 7, 2008, the U.S. Department of Treasury 
(Treasury) entered into senior preferred stock purchase agreements (the 
Agreement or Agreements) with the Federal National Mortgage Association 
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie 
Mac), which effectively provide protection to the holders of senior 
debt, subordinated debt, and mortgage-backed securities (MBS) issued or 
guaranteed by these entities. In light of the financial support 
provided under the Agreements, the Office of the Comptroller of the 
Currency (OCC), Board of Governors of the Federal Reserve System 
(Board), Federal Deposit Insurance Corporation (FDIC), and Office of 
Thrift Supervision (OTS) (collectively, the agencies) are

[[Page 63657]]

proposing to adopt a 10 percent risk weight for claims on, and the 
portion of claims guaranteed by, Fannie Mae or Freddie Mac. The 10 
percent risk weight would apply so long as an Agreement remains in 
effect with the respective entity.

DATES: Comments must be received by November 26, 2008.

ADDRESSES: Comments should be directed to:
    OCC: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments by e-
mail, if possible. Please use the title ``Minimum Capital Ratios; 
Capital Adequacy Guidelines; Capital Maintenance; Capital: Treatment of 
Certain Claims on, or Guaranteed by, the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac)'' to facilitate the organization and distribution of the 
comments. You may submit comments by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
https://www.regulations.gov, under the ``More Search Options'' tab click 
next to the ``Advanced Docket Search'' option where indicated, select 
``Comptroller of the Currency'' from the agency drop-down menu, then 
click ``Submit.'' In the ``Docket ID'' column, select OCC-2008-0016 to 
submit or view public comments and to view supporting and related 
materials for this notice of proposed rulemaking. The ``How to Use This 
Site'' link on the Regulations.gov home page provides information on 
using Regulations.gov, including instructions for submitting or viewing 
public comments, viewing other supporting and related materials, and 
viewing the docket after the close of the comment period.
     E-mail: regs.comments@occ.treas.gov.
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Fax: (202) 874-4448.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public 
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket Number OCC-2008-0016'' in your comment. In general, OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, e-mail addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this notice of proposed rulemaking by any of the following methods:
     Viewing Comments Electronically: Go to https://
www.regulations.gov, under the ``More Search Options'' tab click next 
to the ``Advanced Document Search'' option where indicated, select 
``Comptroller of the Currency'' from the agency drop-down menu, then 
click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2008-0016'' 
to view public comments for this rulemaking action.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC's Public Information Room, 250 E 
Street, SW., Washington, DC. For security reasons, the OCC requires 
that visitors make an appointment to inspect comments. You may do so by 
calling (202) 874-5043. Upon arrival, visitors will be required to 
present valid government-issued photo identification and submit to 
security screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.
    Board: You may submit comments, identified by Docket No. R-1335, by 
any of the following methods:
     Agency Web Site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Street, NW.) between 9 a.m. and 5 p.m. on weekdays.
    FDIC: You may submit by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: https://www.FDIC.gov/regulations/laws/
federal/propose.html.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429.
     Hand Delivered/Courier: The guard station at the rear of 
the 550 17th Street Building (located on F Street), on business days 
between 7 a.m. and 5 p.m.
     E-mail: comments@FDIC.gov.
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AD34.'' Comments received will be posted without change to https://
www.FDIC.gov/regulations/laws/federal/propose.html, including any 
personal information provided.
    OTS: You may submit comments, identified by OTS-2008-0014, by any 
of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
https://www.regulations.gov, under the ``more Search Options'' tab click 
next to the ``Advanced Docket Search'' option where indicated, select 
``Office of Thrift Supervision'' from the agency dropdown menu, then 
click ``Submit.'' In the ``Docket ID'' column, select ``OTS-2008-0014'' 
to submit or view public comments and to view supporting and related 
materials for this proposed rulemaking. The ``How to Use This Site'' 
link on the Regulations.gov home page provides information on using 
Regulations.gov, including instructions for submitting or viewing 
public comments, viewing other supporting and related materials, and 
viewing the docket after the close of the comment period.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: OTS-2008-0014.
     Facsimile: (202) 906-6518.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: 
Regulation Comments, Chief Counsel's Office, Attention: OTS-2008-0014.
     Instructions: All submissions received must include the 
agency name and docket number for this rulemaking.

[[Page 63658]]

All comments received will be posted without change, including any 
personal information provided. Comments, including attachments and 
other supporting materials received are part of the public record and 
subject to public disclosure. Do not enclose any information in your 
comment or supporting materials that you consider confidential or 
inappropriate for public disclosure.
     Viewing Comments Electronically: Go to https://
www.regulations.gov, under the ``More Search Options'' tab click next 
to the ``Advanced Document Search'' option where indicated, select 
``Office of Thrift Supervision'' from the agency drop-down menu, then 
click ``Submit.'' In the ``Docket ID'' column, select ``OTS-2008-0014'' 
to view public comments for this notice of proposed rulemaking action.
     Viewing Comments On-Site: You may inspect comments at the 
Public Reading Room, 1700 G Street, NW., by appointment. To make an 
appointment for access, call (202) 906-5922, send an e-mail to 
public.info@ots.treas.gov, or send a facsimile transmission to (202) 
906-6518. (Prior notice identifying the materials you will be 
requesting will assist us in serving you.) We schedule appointments on 
business days between 10 a.m. and 4 p.m. In most cases, appointments 
will be available the next business day following the date we receive a 
request.

FOR FURTHER INFORMATION CONTACT: OCC: Amrit Sekhon, Director, Capital 
Policy, (202) 874-5070, or David Elkes, Risk Expert, (202) 874-3846, or 
Carl Kaminski, Attorney, or Ron Shimabukuro, Senior Counsel, 
Legislative and Regulatory Activities Division, (202) 874-5090, Office 
of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 
20219.
    Board: Barbara J. Bouchard, Associate Director, (202) 452-3072; or 
Anna Lee Hewko, Senior Project Manager, (202) 530-6260, Division of 
Banking Supervision and Regulation; or Mark E. Van Der Weide, Assistant 
General Counsel, (202) 452-2263; or Benjamin W. McDonough, Senior 
Attorney, (202) 452-2036. For the hearing impaired only, 
Telecommunication Device for the Deaf (TDD), (202) 263-4869.
    FDIC: Bobby R. Bean, Policy Section, Chief, (202) 898-3575, or 
Nancy Hunt, Senior Policy Analyst, (202) 898-6643, Capital Markets 
Branch, Division of Supervision and Consumer Protection; or Mark 
Handzlik, Senior Attorney, (202) 898-3990, or Michael Phillips, 
Counsel, (202) 898-3581, Supervision Branch, Legal Division.
    OTS: Michael Solomon, Director, Capital Risk, (202) 906-5654, 
Teresa A. Scott, Senior Policy Analyst, (202) 906-6478, Capital Risk, 
Marvin Shaw, Senior Attorney, (202) 906-6639, Legislation and 
Regulation Division Office of Thrift Supervision, 1700 G Street, NW., 
Washington, DC 20552.

SUPPLEMENTARY INFORMATION: On September 7, 2008, Treasury announced the 
establishment of the Government-Sponsored Enterprise Credit Facility to 
ensure credit availability to Fannie Mae and Freddie Mac. Treasury also 
entered into senior preferred stock purchase agreements, which ensure 
that each entity maintains a positive net worth and effectively support 
the holders of debt and MBS issued or guaranteed by Fannie Mae and 
Freddie Mac. The Agreements enhance market stability by providing 
additional security to debt holders--senior and subordinated--and 
improve mortgage affordability by providing additional confidence to 
investors in MBS guaranteed by Fannie Mae and Freddie Mac. Treasury 
indicated that these actions were necessary because ambiguities in the 
Congressional charters of Fannie Mae and Freddie Mac created a market 
perception of government backing.\1\
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    \1\ U.S. Department of Treasury Office of Public Affairs, ``Fact 
Sheet: Treasury Senior Preferred Stock Purchase Agreement,'' 
September 7, 2008. Available at https://www.treas.gov/press/releases/
reports/pspa_factsheet_090708%20hp1128.pdf.
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    Under the agencies' general risk-based capital rules, claims on, 
and the portion of claims guaranteed by, U.S. government-sponsored 
agencies receive a 20 percent risk weight.\2\ In light of the 
additional financial support Treasury has committed to provide under 
the Agreements, the agencies believe that a reduced risk weight is 
appropriate for claims on, or guaranteed by, Fannie Mae or Freddie Mac.
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    \2\ See 12 CFR part 3, Appendix A, section 3(a)(2) (OCC); 12 CFR 
part 208, Appendix A, section III.C.2.b. and 12 CFR part 225, 
Appendix A section III.C.2.b. (Board); 12 CFR part 325, Appendix A, 
section II.C. (FDIC); and 12 CFR 567.6(a)(ii) (OTS).
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    Specifically, the agencies are proposing to amend their respective 
general risk-based capital rules to permit banks, bank holding 
companies, and savings associations to assign a 10 percent risk weight 
to claims on, or guaranteed by, Fannie Mae or Freddie Mac. Claims 
include all credit exposures, such as senior and subordinated debt and 
counterparty credit risk exposures, but do not include preferred or 
common stock. This risk weight could be applied to credit exposures 
created on, before, or after September 7, 2008. The 10 percent risk 
weight, which would reflect the reduced credit risk of Fannie Mae and 
Freddie Mac in light of the Agreements, would apply to these exposures 
so long as an Agreement remains in effect with the respective entity. 
This proposal would not affect the calculation of the leverage ratio 
with respect to these exposures.
    The Board is also proposing a technical amendment to the advanced 
approaches capital rule \3\ to conform a cross reference affected by 
the proposed change to the general risk-based capital rule. The Board, 
FDIC, and OTS are proposing technical revisions to the general risk-
based capital rules that update references to the risk-weight 
categories to reflect this proposal.
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    \3\ 12 CFR part 208, Appendix F (for state member banks) and 12 
CFR part 225, Appendix G (for bank holding companies).
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    The agencies seek comment on all aspects of this notice of proposed 
rulemaking. In particular, the agencies request comment on the 
potential effects of this proposal on other banking organization claims 
on GSEs, such as Federal Home Loan Bank debt. In that regard, the 
agencies generally request comment on the appropriateness of the 
current 20 percent risk weight on claims on GSEs.

Regulatory Analysis

Executive Order 12866

    Executive Order 12866 requires federal agencies to prepare a 
regulatory impact analysis for agency actions that are found to be 
``significant regulatory actions.'' Significant regulatory actions 
include, among other things, rulemakings that ``have an annual effect 
on the economy of $100 million or more or adversely affect in a 
material way the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or state, 
local, or tribal governments or communities.'' \4\ Regulatory actions 
that satisfy one or more of these criteria are referred to as 
``economically significant regulatory actions.''
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    \4\ Executive Order 12866 (September 30, 1993), 58 FR 51735 
(October 4, 1993), as amended by Executive Order 13258, 67 FR 9385 
(February 28, 2002) and by Executive Order 13422, 72 FR 2763 
(January 23, 2007). For the complete text of the definition of 
``significant regulatory action,'' see E.O. 12866 at Sec.  3(f). A 
``regulatory action'' is ``any substantive action by an agency 
(normally published in the Federal Register) that promulgates or is 
expected to lead to the promulgation of a final rule or regulation, 
including notices of inquiry, advance notices of proposed 
rulemaking, and notices of proposed rulemaking.'' E.O. 12866 at 
Sec.  3(e).
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    The OCC and OTS have each determined that this notice of proposed 
rulemaking likely would be an economically significant regulatory 
action for purposes of Executive Order 12866. However, in light of the 
exigent market circumstances resulting from the

[[Page 63659]]

immediate need to recognize the support provided by the U.S. Treasury 
Department's senior preferred stock purchase agreements with Fannie Mae 
and Freddie Mac, and to reduce strain on the capital positions of 
banking organizations that are holding securities issued by or 
guaranteed by Fannie Mae and Freddie Mac, the issuance of this notice 
of proposed rulemaking is subject to the procedures set forth in 
Section 6(a)(3)(D) of Executive Order 12866.

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (Pub. L. 96-
354, Sept. 19, 1980) (RFA) generally requires an agency that is issuing 
a proposed rule to prepare and make available for public comment an 
initial regulatory flexibility analysis that describes the impact of 
the proposed rule on small entities.\5\ The RFA provides that an agency 
is not required to prepare and publish an initial regulatory 
flexibility analysis if the agency certifies that the proposed rule 
will not, if promulgated, have a significant economic impact on a 
substantial number of small entities.\6\
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    \5\ See 5 U.S.C. 603(a).
    \6\ See 5 U.S.C. 605(b).
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    Under regulations issued by the Small Business Administration,\7\ a 
small entity includes a bank holding company, commercial bank, or 
savings association with assets of $175 million or less (collectively, 
small banking organizations). The proposed rule would permit a banking 
organization to assign a 10 percent risk weight to claims on, and the 
portion of claims guaranteed by, Fannie Mae or Freddie Mac. The 10 
percent risk weight would apply as long as an Agreement remains in 
effect between the Treasury and the respective entity.
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    \7\ See 13 CFR 121.201.
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    Pursuant to section 605(b) of the RFA, each agency certifies that 
this proposed rule will not have a significant economic impact on a 
substantial number of the small entities it supervises. Accordingly, a 
regulatory flexibility analysis is not required. In making this 
determination, each agency considered the number of small banking 
organizations that currently hold claims on or guaranteed by either 
Fannie Mae or Freddie Mac, the cost of implementing the proposed rule 
for those banking organizations, and the size of the impact on those 
banking organizations' regulatory capital levels.
    The Agencies have determined that a substantial number of small 
banking organizations hold claims on or are guaranteed by Fannie Mae or 
Freddie Mac.\8\ However, the cost for each such a banking organization 
to adjust its systems to implement the proposed rule would not be 
significant since the only change would be a simple mathematical 
computation. Although reducing the risk weight for claims on or 
guaranteed by Fannie Mae and Freddie Mac to 10 percent would reduce 
required minimum regulatory capital, the agencies have determined that 
the average change in total risk-weighted assets, Tier 1 risk-based 
capital, and total risk-based capital would not be significant. 
Additionally, the Agencies note that the proposed rule would be 
elective. The proposed rule would apply only to banking organizations 
that choose to take advantage of the proposed 10 percent risk weight. 
Banking organizations not exercising this option would continue to 
apply the current 20 percent risk weight applicable to claims on or 
guaranteed by U.S. government-sponsored entities. The proposed rule 
does not impose any new mandatory requirements or burdens. Finally, 
because the proposed rule would apply to all banking organizations, the 
proposed rule does not have a disproportionate effect on small 
entities.
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    \8\ As of June 30, 2008, there were 2,636 small bank holding 
companies, 889 small national banks, 454 small state member banks, 
3,222 small state nonmember banks, and 412 small savings 
associations. The agencies estimate that the proposal would have an 
impact on 0 small bank holding companies, 679 small national banks, 
420 small state member banks, 2,903 small state nonmember banks, and 
350 small savings associations.
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Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3506), each agency has reviewed the proposed rule to 
assess any information collections. There are no collections of 
information as defined by the Paperwork Reduction Act in the notice of 
proposed rulemaking.

OCC and OTS Unfunded Mandates Reform Act of 1995 Determinations

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (UMRA) requires that an agency prepare a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more (adjusted annually for inflation) in any one year. (The 
inflation adjusted threshold is $133 million or more.) If a budgetary 
impact statement is required, section 205 of the UMRA also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. The OCC and OTS each 
determined that its proposed rule will not result in expenditures by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $133 million or more in any one year. Accordingly, 
neither OCC nor OTS has prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives considered.
Solicitation of Comments on Use of Plain Language
    Section 722 of the GLBA required the Federal banking agencies to 
use plain language in all proposed and final rules published after 
January 1, 2000. The Federal banking agencies invite comment on how to 
make this proposed rule easier to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could the rule be more clearly stated?
     Are the requirements in the rule clearly stated? If not, 
how could the rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would make the regulation easier to 
understand?
     Would more, but shorter, sections be better? If so, which 
sections should be changed?
     What else could we do to make the regulation easier to 
understand?

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Banks, Banking, Capital, 
National banks, Reporting and recordkeeping requirements, Risk.

12 CFR Part 208

    Administrative practice and procedure, Banks, Banking, Capital, 
Reporting and recordkeeping requirements, Risk.

12 CFR Part 225

    Administrative practice and procedure, Banks, Banking, Capital, 
Federal Reserve System, Reporting and recordkeeping requirements, Risk.

12 CFR Part 325

    Administrative practice and procedure, Banks, Banking, Capital 
Adequacy, Reporting and recordkeeping requirements, Risk.

[[Page 63660]]

12 CFR Part 567

    Capital, Reporting and recordkeeping requirements, Risk, Savings 
associations

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons stated in the common preamble, the Office of the 
Comptroller of the Currency proposes to amend Part 3 of chapter I of 
Title 12, Code of Federal Regulations as follows:

PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES

    1. The authority citation for part 3 continues to read as follows:

    Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n 
note, 1835, 3907, and 3909.

    2. In appendix A to part 3, in section 3:
    a. Revise paragraphs (a)(2)(vi) and (a)(2)(vii), except footnote 
10; and
    b. Add a new paragraph (a)(7).
    3. The revision and addition read as follows:

Appendix A to Part 3--Risk-Based Capital Guidelines

* * * * *

Section 3. Risk Categories/Weights for On-Balance Sheet Assets and Off-
Balance Sheet Items

* * * * *
    (a) * * *
    (2) * * *
    (vi) Except as provided in paragraph (a)(7) of this section, 
securities issued by, or other direct claims on, United States 
Government-sponsored agencies.
    (vii) Except as provided in paragraph (a)(7) of this section, 
that portion of assets guaranteed by United States Government-
sponsored agencies.\10\
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    \10\ * * *
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* * * * *
    (7) Federal Home Loan Mortgage Corporation and Federal National 
Mortgage Corporation. Notwithstanding paragraphs (a)(2)(vi) and 
(vii) of this section, claims on, and the portions of claims that 
are guaranteed by, the Federal Home Loan Mortgage Corporation 
(FHLMC) and the Federal National Mortgage Corporation (FNMA), may 
receive a risk weight of 10 percent as long as the U.S. Department 
of Treasury's Senior Preferred Stock Purchase Agreement, dated as of 
September 7, 2008, remains in effect with the respective 
corporations.
* * * * *

Board of Governors of the Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons stated in the common preamble, the Board of 
Governors of the Federal Reserve System proposes to amend parts 208 and 
225 of chapter II of title 12 of the Code of Federal Regulations as 
follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

    1. The authority citation for part 208 continues to read as 
follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b, 
78l(b), 78l(g), 78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w, 1681s, 
1681w, 6801, and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 
4104b, 4106, and 4128.

    2. In Appendix A to part 208, amend section III.C. as set forth 
below:
    a. Remove the introductory paragraph to section III.C.;
    b. Redesignate paragraphs 2, 3, and 4 as paragraphs 3, 4, and 5, 
respectively;
    c. Add new paragraph 2;
    d. In newly redesignated paragraph 3, revise the heading, paragraph 
3(b), and footnote 36, except footnote 37; and
    e. In newly redesignated paragraphs 4 and 5, revise the headings to 
read as follows:

Appendix A to Part 208--Capital Adequacy Guidelines for State Member 
Banks: Risk-Based Measure

    III. * * *
    C. * * *
* * * * *
    2. Category 2: 10 percent. This category includes claims on, and 
the portions of claims that are guaranteed by, the Federal Home Loan 
Mortgage Corporation (Freddie Mac) and the Federal National Mortgage 
Corporation (Fannie Mae), so long as the U.S. Department of 
Treasury's senior preferred stock purchase agreement, dated as of 
September 7, 2008, remains in effect with the respective entity. 
However, at its option, a bank may choose to assign claims described 
in this ten percent risk weight category to the twenty percent risk 
weight category.
    3. Category 3: 20 percent.
* * * * *
    b. This category also includes the portions of claims that are 
conditionally guaranteed by OECD central governments and U.S. 
government agencies, as well as the portions of local currency 
claims that are conditionally guaranteed by non-OECD central 
governments, to the extent that the bank has liabilities booked in 
that currency. In addition, except as provided in paragraph 2 of 
this section, this category also includes claims on, and the 
portions of claims that are guaranteed by, U.S. government-sponsored 
\36\ agencies and claims on, and the portions of claims guaranteed 
by, the International Bank for Reconstruction and Development (World 
Bank), the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African 
Development Bank, the European Investment Bank for Reconstruction 
and Development, the Nordic Investment Bank, and other multilateral 
lending institutions or regional development banks in which the U.S. 
government is a shareholder or contributing member. General 
obligation claims on, or portions of claims guaranteed by the full 
faith and credit of, states or other political subdivisions of the 
United States or other countries of the OECD-based group are also 
assigned to this category.\37\
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    \36\ For this purpose, U.S. government-sponsored agencies are 
defined as agencies originally established or chartered by the 
Federal government to serve public purposes specified by the U.S. 
Congress but whose obligations are not explicitly guaranteed by the 
full faith and credit of the U.S. government. These agencies include 
Freddie Mac, Fannie Mae, the Farm Credit System, the Federal Home 
Loan Bank System, and the Student Loan Marketing Association (SLMA). 
Claims on U.S. government-sponsored agencies include capital stock 
in a Federal Home Loan Bank that is held as a condition of 
membership in that Bank.
    \37\ * * *.
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* * * * *
    4. Category 4: 50 percent. * * *
* * * * *
    5. Category 5: 100 percent. * * *
* * * * *
    3. In Appendix F to part 208, Part I, section 2, revise the 
definition of ``Excluded mortgage exposure'' as set forth below:

Appendix F to Part 208--Capital Adequacy Guidelines for Banks: 
Internal-Ratings-Based and Advanced Measurements Approaches

    Part I. * * *
    Section 2. * * *
* * * * *
    Excluded mortgage exposure means any one-to-four-family 
residential pre-sold construction loan for a residence for which the 
purchase contract is cancelled that would receive a 100 percent risk 
weight under section 618(a)(2) of the Resolution Trust Corporation 
Refinancing, Restructuring, and Improvement Act and under 12 CFR 
part 208, appendix A, section III.C.4.
* * * * *

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

    1. The authority citation for part 225 continues to read as 
follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b),

[[Page 63661]]

1972(1), 3106, 3108, 3310, 3331-3351, 3907, and 3909; 15 U.S.C. 6801 
and 6805.

    2. In Appendix A to part 225, amend section III.C. as set forth 
below:
    a. Remove the introductory paragraph;
    b. Redesignate paragraphs 2, 3, and 4 as paragraphs 3, 4, and 5, 
respectively;
    c. Add new paragraph 2;
    d. In newly redesignated paragraph 3, revise the heading, paragraph 
3(b), and footnote 43, except footnote 44; and
    e. In newly redesignated paragraphs 4 and 5, revise the headings to 
read as follows:

Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Risk-Based Measure

    III. * * *
    C. * * *
* * * * *
    2. Category 2: 10 percent. This category includes claims on, and 
the portions of claims that are guaranteed by, the Federal Home Loan 
Mortgage Corporation (Freddie Mac) and the Federal National Mortgage 
Corporation (Fannie Mae), so long as the U.S. Department of 
Treasury's senior preferred stock purchase agreement, dated as of 
September 7, 2008, remains in effect with the respective entity. 
However, at its option, a banking organization may choose to assign 
claims described in this ten percent risk weight category to the 
twenty percent risk weight category.
    3. Category 3: 20 percent.
* * * * *
    b. This category also includes the portions of claims that are 
conditionally guaranteed by OECD central governments and U.S. 
government agencies, as well as the portions of local currency 
claims that are conditionally guaranteed by non-OECD central 
governments, to the extent that the bank has liabilities booked in 
that currency. In addition, except as provided in paragraph 2 of 
this section, this category also includes claims on, and the 
portions of claims that are guaranteed by, U.S. government-sponsored 
\43\ agencies and claims on, and the portions of claims guaranteed 
by, the International Bank for Reconstruction and Development (World 
Bank), the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African 
Development Bank, the European Investment Bank for Reconstruction 
and Development, the Nordic Investment Bank, and other multilateral 
lending institutions or regional development banks in which the U.S. 
government is a shareholder or contributing member. General 
obligation claims on, or portions of claims guaranteed by the full 
faith and credit of, states or other political subdivisions of the 
United States or other countries of the OECD-based group are also 
assigned to this category.\44\
---------------------------------------------------------------------------

    \43\ For this purpose, U.S. government-sponsored agencies are 
defined as agencies originally established or chartered by the 
Federal government to serve public purposes specified by the U.S. 
Congress but whose obligations are not explicitly guaranteed by the 
full faith and credit of the U.S. government. These agencies include 
Freddie Mac, Fannie Mae, the Farm Credit System, the Federal Home 
Loan Bank System, and the Student Loan Marketing Association (SLMA). 
Claims on U.S. government-sponsored agencies include capital stock 
in a Federal Home Loan Bank that is held as a condition of 
membership in that Bank.
    \44\ * * *.
---------------------------------------------------------------------------

* * * * *
    4. Category 4: 50 percent.
* * * * *
    5. Category 5: 100 percent.
* * * * *

    3. In Appendix G to part 225, Part I, section 2, revise the 
definition of ``Excluded mortgage exposure'' as set forth below:

Appendix G to Part 225--Capital Adequacy Guidelines for Bank Holding 
Companies: Internal-Ratings-Based and Advanced Measurement Approaches

    PART I. * * *
    Section 2. * * *
* * * * *
    Excluded mortgage exposure means any one-to-four-family 
residential pre-sold construction loan for a residence for which the 
purchase contract is cancelled that would receive a 100 percent risk 
weight under section 618(a)(2) of the Resolution Trust Corporation 
Refinancing, Restructuring, and Improvement Act and under 12 CFR 
part 225, appendix A, section III.C.4.
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons stated in the common preamble, the Federal Deposit 
Insurance Corporation proposes to amend Part 325 of chapter III of 
Title 12, Code of Federal Regulations as follows:

PART 325--CAPITAL MAINTENANCE

    1. The authority citation for part 325 continues to read as 
follows:

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 
1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761, 1789, 1790 
(12 U.S.C. 1831n, note); Pub. L. 102-242, 105 Stat. 2236, 2355, 2386 
(12 U.S.C. 1828 note).

    2. In Appendix A to part 325, amend section II.A by revising 
paragraph 1 to read as follows:

Appendix A to Part 325--Statement of Policy on Risk-Based Capital

* * * * *
    II. * * *
    A. * * *
    1. Under the risk-based capital framework, a bank's balance 
sheet assets and credit equivalent amounts of off-balance sheet 
items are assigned to one of six broad risk categories according to 
the obligor or, if relevant, the guarantor or the nature of the 
collateral. The aggregate dollar amount in each category is then 
multiplied by the risk weight assigned to that category. The 
resulting weighted values from each of the six risk categories are 
added together and this sum is the risk-weighted assets total that, 
as adjusted,\10\ comprises the denominator of the risk-based capital 
ratio.
* * * * *
    3. In Appendix A to part 325, amend section II.C. as follows:
    a. Revise the introductory paragraph;
    b. Redesignate Category 2 through Category 5 as Category 3 through 
Category 6, respectively;
    c. Add new Category 2;
    d. Revise redesignated Category 3, paragraph (b) and footnote 34; 
and
    e. Revise the headings for redesignated Categories 3, 4, 5, and 6 
to read as follows:

Appendix A to Part 325--Statement of Policy on Risk-Based Capital

* * * * *
    II. * * *
    C. * * *
    The risk-based capital framework contains six risk weight 
categories--0 percent, 10 percent, 20 percent, 50 percent, 100 
percent and 200 percent. In general, if a particular item can be 
placed in more than one risk category, it is assigned to the 
category that has the lowest risk weight. An explanation of the 
components of each category follows:
* * * * *
    Category 2--10 Percent Risk Weight. This category includes 
claims on, or portions of claims guaranteed by, the Federal Home 
Loan Mortgage Corporation (Freddie Mac) and the Federal National 
Mortgage Corporation (Fannie Mae), so long as the U.S. Department of 
Treasury's Senior Preferred Stock Purchase Agreement, dated as of 
September 7, 2008, remains in effect with Freddie Mac and Fannie 
Mae, respectively. However, at its option, a bank may choose to 
assign claims described in this category to the 20 percent risk 
weight category.

Category 3--20 Percent Risk Weight.

* * * * *
    b. Except as provided in the ten percent risk weight category, 
this category includes claims on, or portions of claims guaranteed 
by, U.S. Government-sponsored agencies;\34\ and portions of claims 
(including repurchase agreements) collateralized by securities 
issued or guaranteed by OECD central governments, U.S. Government 
agencies, or U.S. Government-sponsored agencies. Also included in 
the 20 percent risk weight category are portions of claims that are 
conditionally guaranteed by OECD central governments and U.S. 
Government agencies, as well as portions of local currency claims 
that are conditionally guaranteed by non-OECD central governments to 
the extent that the bank has liabilities booked in that currency.
    \34\ For risk-based capital purposes, U.S. Government-sponsored 
agencies are defined as agencies originally established or

[[Page 63662]]

chartered by the U.S. Government to serve public purposes specified 
by the U.S. Congress but whose debt obligations are not explicitly 
guaranteed by the full faith and credit of the U.S. Government. 
These agencies include the Farm Credit System, the Federal Home Loan 
Bank System, the Student Loan Marketing Association, Freddie Mac, 
and Fannie Mae. For risk-based capital purposes, claims on U.S. 
Government-sponsored agencies also include capital stock in a 
Federal Home Loan Bank that is held as a condition of membership in 
that bank.
* * * * *
    Category 4--50 Percent Risk Weight.
* * * * *
    Category 5--100 Percent Risk Weight.
* * * * *
    Category 6--200 Percent Risk Weight.
* * * * *

    4. In Appendix A to part 325, amend the Table II to section II.C. 
as follows:
    a. Redesignate Category 2 through Category 5 as Category 3 through 
Category 6 respectively;
    b. Add new Category 2;
    c. Revise redesignated Category 3, paragraph (5);
    d. Revise footnote 2; and
    e. Revise the headings for redesignated Categories 3, 4, 5, and 6 
to read as follows:

Appendix A to Part 325--Statement of Policy on Risk-Based Capital

* * * * *
    II. * * *
    C. * * *
* * * * *
    TABLE II--SUMMARY OF RISK WEIGHTS AND RISK CATEGORIES
* * * * *
    Category 2--10 Percent Risk Weight. This category includes 
claims on, or portions of claims guaranteed by, the Federal Home 
Loan Mortgage Corporation (Freddie Mac) and the Federal National 
Mortgage Corporation (Fannie Mae), so long as the U.S. Department of 
Treasury's Senior Preferred Stock Purchase Agreement, dated as of 
September 7, 2008, remains in effect with Freddie Mac and Fannie 
Mae, respectively. However, at its option, a bank may choose to 
assign claims described in this category to the 20 percent risk 
weight category.
    Category 3--20 Percent Risk Weight.
* * * * *
    (5) Except as provided in the ten percent risk weight category, 
securities and other claims on, or portions of claims guaranteed by, 
U.S. Government-sponsored agencies;\2\

    \2\ For risk-based capital purposes, U.S. Government-sponsored 
agencies are defined as agencies originally established or chartered 
by the U.S. Government to serve public purposes specified by the 
U.S. Congress but whose debt obligations are not explicitly 
guaranteed by the full faith and credit of the U.S. Government. 
These agencies include the Farm Credit System, the Federal Home Loan 
Bank System, the Student Loan Marketing Association, Freddie Mac, 
and Fannie Mae. For risk-based capital purposes, claims on U.S. 
Government-sponsored agencies also include capital stock in a 
Federal Home Loan Bank that is held as a condition of membership in 
that bank.
* * * * *
    Category 4--50 Percent Risk Weight. * * *
* * * * *
    Category 5--100 Percent Risk Weight. * * *
* * * * *
    Category 6--200 Percent Risk Weight. * * *
* * * * *

Department of the Treasury

Office of Thrift Supervision

12 CFR Chapter V

    For the reasons set forth in the common preamble, the Office of 
Thrift Supervision proposes to amend part 567 of chapter V of title 12 
of the Code of Federal Regulations as follows:

PART 567--CAPITAL

    1. The authority citation for part 567 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828 
(note).

    2. Section 567.6 is amended as set forth below:
    a. Redesignate paragraphs (a)(1)(ii) through (a)(1)(iv) as 
paragraphs (a)(1)(iii) through (a)(1)(v), respectively;
    b. Revise paragraph (a)(1) and add paragraph (a)(1)(ii);
    c. Revise the headings in redesignated paragraphs (a)(1)(iii), 
(a)(1)(iv) and (a)(1)(v); and
    d. Revise redesignated paragraphs (a)(1)(iii)(E) and (a)(1)(iii)(F) 
to read as follows:


Sec.  567.6  Risk-based capital credit risk-weight categories.

    (a) * * *
    (1) On-balance sheet assets. Except as provided in paragraph (b) of 
this section, risk-weighted on-balance sheet assets are computed by 
multiplying the on-balance sheet asset amounts times the appropriate 
risk-weight categories. The risk-weight categories are zero percent 
risk weight (Category 1) at section 567.6(a)(1)(i), 10 percent risk 
weight (Category 2) at section 567.6(a)(1)(ii), 20 percent risk weight 
(Category 3) at section 567.6(a)(1)(iii), 50 percent risk weight 
(Category 4) at section 567.6(a)(1)(iv), and 100 percent risk weight 
(Category 5) at section 567.6(a)(1)(v).
    (i) Category 1--Zero Percent Risk Weight
* * * * *
    (ii) Category 2--10 Percent Risk Weight
    To the extent that the U.S. Department of Treasury's Senior 
Preferred Stock Purchase Agreement, dated as of September 7, 2008, 
remains in effect with the respective corporations, this category 
includes
    (A) Securities (not including common stock or preferred stock) 
issued by, or other direct claims on, the Federal Home Loan Mortgage 
Corporation (Freddie Mac) or Federal National Mortgage Association 
(Fannie Mae).
    (B) That portion of assets guaranteed by the Federal Home Loan 
Mortgage Corporation (Freddie Mac) or Federal National Mortgage 
Association (Fannie Mae).
    (C) At its option, a savings association may choose to assign 
assets described in section 567.6(a)(1)(ii)(A) and (B) to the twenty 
percent risk weight category.
    (iii) Category 3--20 Percent Risk Weight * * *
* * * * *
    (E) Securities (not including equity securities) issued by, or 
other direct claims on, United States Government-sponsored agencies, 
other than the Federal Home Loan Mortgage Corporation (Freddie Mac) or 
Federal National Mortgage Association (Fannie Mae).
    (F) That portion of assets guaranteed by United States Government-
sponsored agencies, other than the Federal Home Loan Mortgage 
Corporation (Freddie Mac) or Federal National Mortgage Association 
(Fannie Mae).
* * * * *
    (iv) Category 4--50 Percent Risk Weight
* * * * *
    (v) Category 5--100 Percent Risk Weight
* * * * *

    Dated: October 3, 2008.
John C. Dugan,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, October 21, 2008.
Jennifer J. Johnson,
Secretary of the Board.

    Dated at Washington, DC, this 7th day of October 2008.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.

    Dated: October 2, 2008.

    By the Office of Thrift Supervision.
John M. Reich,
Director.
 [FR Doc. E8-25555 Filed 10-24-08; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P