Bank regulatory agencies

Federal Reserve Bulletin, Summer, 2004

The proposal is being issued under the auspices of the Federal Financial Institutions Examination Council (FFIEC) by its member agencies: the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.

Rule on Affiliate Marketing Opt Outs

The federal financial institutions supervisory agencies on July 2, 2004, issued proposed regulations that would give consumers the chance to opt out before a financial institution uses information provided by an affiliated company to market its products and services to the consumer.

The proposed rulemaking would implement the affiliate marketing provisions in section 214 of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which adds a new section 624 to the Fair Credit Reporting Act (FCRA). The proposal generally would prohibit an institution from using certain information about a consumer it receives from an affiliate to make a solicitation to the consumer unless the consumer has been given notice and an opportunity to opt out of the solicitation. An institution that has a pre-existing business relationship with the consumer would not be subject to this marketing limitation. Nothing in the new affiliate marketing opt out supercedes or replaces the provisions in section 603 of the FCRA concerning the right to opt out of the sharing of information among affiliates, although there is some overlap between the two opt out requirements.

The proposal was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.

Final Rule on Capital Requirements for Asset-Backed Commercial Paper Programs

The federal banking and thrift institution regulatory agencies on July 20, 2004, issued a final rule amending their risk-based capital standards. The rule permits sponsoring banks, bank holding companies, and thrift institutions (banking organizations) to continue to exclude from their risk-weighted asset base, for purposes of calculating the risk-based capital ratios asset-backed commercial paper (ABCP) program, assets that are consolidated onto sponsoring banking organizations' balance sheets as a result of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, as revised (FIN 46R). This provision of the final rule will make permanent an existing interim final rule.

The final rule also requires banking organizations to hold risk-based capital against eligible ABCP liquidity facilities with an original maturity of one year or less that provide liquidity support to ABCP by imposing a 10 percent credit conversion factor on such facilities. Eligible ABCP liquidity facilities with an original maturity exceeding one year remain subject to the current 50 percent credit conversion factor. Ineligible liquidity facilities are treated as direct credit substitutes or recourse obligations and are subject to a 100 percent credit conversion factor. The resulting credit equivalent amount is then risk weighted according to the underlying assets, after consideration of any collateral, guarantees, or external ratings, if applicable. All liquidity facilities that provide liquidity support to ABCP will be treated as eligible liquidity facilities for a one-year transition period.