REVISED CAPITAL PROPOSAL FOR NONFINANCIAL EQUITY INVESTMENTS.The Federal Reserve Board and the Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (or OCC) was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. on January 18, 2001, announced proposed new rules governing the regulatory capital treatment for equity investments in nonfinancial companies held by banks, bank holding companies, and financial holding companies. The new proposed capital treatment, revised in response to public comment and in consultation with the Treasury Department and other federal banking agencies, represents a significant modification of a proposal made by the Federal Reserve Board in March 2000. The Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. has announced that it will consider the new proposal Friday. The new proposal would apply symmetrically sym·met·ri·cal also sym·met·ric adj. Of or exhibiting symmetry. sym·met  ri·cal·ly adv.Adv. 1. to banks and their holding companies and would apply to equity investments made under the new merchant banking authority granted by the Gramm-Leach-Bliley Act The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition and to equity investments in nonfinancial companies made under other specifically identified legal authorities. The new proposal generally would impose a capital charge that would increase in steps as the banking organization's level of concentration in equity investments increased. An 8 percent tier 1 capital Tier 1 Capital A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Notes: Equity capital includes instruments that can't be redeemed at the option of the holder. deduction would apply on covered investments that in the aggregate represent up to 15 percent of an organization's tier I capital. A top marginal charge of 25 percent would be set for covered investments that aggregate more than 25 percent of the organization's tier 1 capital. Equity investments through small business investment companies would be exempt from these new capital deduction requirements and would continue to be subject to the same capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. that currently apply, unless the value of those investments exceeds 15 percent of the bank's tier 1 capital. Grandfathered investments under section 24(f) of the Federal Deposit Insurance Act would also be exempt under the new proposal. Under the new proposal, the agencies also would heighten height·en v. height·ened, height·en·ing, height·ens v.tr. 1. To raise or increase the quantity or degree of; intensify. 2. To make high or higher; raise. v.intr. their monitoring of banking organizations as the level of concentration in equity investment increases. The agencies intend to request public comment within sixty days after publication in the Federal Register. |
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