Fed issues final rule on capital treatment for some cash collateral

Bank News, April, 2006 by Anonymous

A final rule for state member banks and bank holding companies that revises the risk-based capital treatment for cash collateral posted in connection with securities borrowing transactions has been approved by the Federal Reserve Board. The Fed said this final rule makes permanent, and expands the scope of, an interim final rule issued in 2000, that reduced risk-based capital requirements for certain cash-collateralized securities borrowing transactions.

Under the interim rule, a banking organization could exclude receivables associated with securities borrowing transactions that met certain criteria from its risk-weighted assets to the extent the transactions were collateralized by the market value of the securities borrowed. The final rule is substantially similar to the...

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