Financial Services Alert

In response to significant adverse comment to its March, 2000 proposal (described in the March 21, 2000 Alert), the FRB and OCC substantially revised their proposal to modify the methods of calculating the risk-weighted and leverage capital ratios for bank holding companies ("BHCs") and banks with respect to the risks associated with merchant banking and other investments in nonfinancial companies, including: shares held under Regulation K, shares representing less than 5% of the voting stock of a company, shares held through a small business investment company ("SBIC"), and certain shares held by a state bank in accordance with Section 24 of the Federal Deposit Insurance Act. Comments on the revised proposal are due 60 days after its publication in the Federal Register. The proposal is intended to apply equally to banks and BHCs.