The United States federal bank regulators, including the Office of the Comptroller of the Currency (the "OCC"), the Board of Governors of the Federal Reserve System (the "Board"), the Federal Deposit Insurance Corporation (the "FDIC"), and the Office of Thrift Supervision (the "OTS") (collectively, the "Agencies") are proposing to revise their risk-based capital standards. The proposal would significantly change the risk-based capital treatment of most securitization transactions. This memorandum provides some background to the proposal and summarizes the most significant provisions of the proposal.
Background
Current Treatment Of Recourse And Direct Credit Substitutes
Direct credit substitutes are treated differently from recourse under the current risk-based capital standards. Under the current standards applied by the OCC, the Board and the FDIC, off-balance sheet direct credit substitutes, such as financial standby letters of credit provided for third-party assets, carry a 100%
