Risk-Based Capital RequirementsRecourse and Direct Credit Substitutes; Proposed Rule DEPARTMENT OF THE TREASURY — 1994-05-25 [94-11513]

The FDIC, FRB, OCC, and OTS (the Agencies) are proposing revisions to their risk-based capital standards to address the regulatory capital treatment of recourse arrangements and direct credit substitutes that expose banks, bank holding companies, and thrifts to credit risk. The proposal is intended to correct certain inconsistencies in the Agencies' risk-based capital standards and allow banks and bank holding companies (banking organizations) to maintain lower amounts of capital against low-level recourse transactions. The proposal would require higher amounts of risk-based capital to be maintained against certain direct credit substitutes, including, for banking organizations, purchased servicing rights that provide loss protection to the owners of the loans serviced and purchased subordinated interests that absorb the first dollars of losses from the underlying assets, and, for both banking organizations and thrifts, certain guarantee-type arrangements (such as standby letters of credit) provided for third-party assets that absorb the first dollars of losses from those