Risk-Based Capital Standards; Bilateral Netting Requirements — 1994-05-20 [94-12409]

The OCC and the Board (the banking agencies) are proposing to amend their risk-based capital standards to recognize the risk reducing benefits of netting arrangements. Under the proposal, institutions regulated by the OCC and the Federal Reserve would be permitted to net, for risk-based capital purposes, interest and exchange rate contracts (rate contracts) subject to legally enforceable bilateral netting contracts that meet certain criteria. The OCC and the Board are proposing these amendments on the basis of proposed revisions to the Basle Accord which would permit the recognition of such netting arrangements. The effect of the proposed amendments would be to allow banks and bank holding companies regulated by the OCC and the Federal Reserve (banking organizations, institutions) to net positive and negative mark-to-market values of rate contracts in determining the current exposure portion of the credit equivalent amount of such contracts to be included in risk-weighted assets.