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Home Basel III - US Federal Reserve Makes Technical Revisions to Market Risk Capital Rule and U.S. Basel III

Federal Reserve Makes Technical Revisions to Market Risk Capital Rule and U.S. Basel III

Today, the Federal Reserve issued a final rule that makes technical changes to the market risk capital rule to align it with the U.S. Basel III capital framework adopted by the Federal Reserve earlier this year.

The market risk capital rule is used by banking organizations with significant trading activities to calculate regulatory capital requirements for market risk.  The technical changes to the rule reflect modifications by the Organization for Economic Cooperation and Development regarding country risk classifications.  The revisions also clarify the criteria for determining whether underlying assets are delinquent for certain securitization positions in the trading book.  A technical change is made to the definition of a covered position.

Separately, the Federal Reserve made minor modifications to the U.S. Basel III capital framework to clarify the eligibility criteria for subordinated debt instruments to qualify as Tier 2 capital.

Materials:

Federal Reserve, Risk-Based Capital Guidelines; Market Risk, available here: http://www.gpo.gov/fdsys/pkg/FR-2013-12-18/pdf/2013-29785.pdf

Federal Reserve, Regulatory Capital Rules: Regulatory Capital, Implementation of Basel III, available here: http://www.gpo.gov/fdsys/pkg/FR-2013-12-20/pdf/2013-29711.pdf

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