Risk-Based Capital Guidelines Proposal on Treatment of Servicing Assets Comments due October 6
August 21, 1997
Circular No. 10974

To All State Member Banks and Bank Holding Companies in the Second Federal Reserve District:

The following is from a statement by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has requested comment on a proposal to amend its risk-based and Tier 1 leverage capital guidelines for state member banks and bank holding companies, to address the treatment of servicing assets on both mortgage assets and financial assets other than mortgages (non-mortgages).

Comment is requested by October 6, 1997.

Under this proposed rule, the amount of mortgage servicing assets (and purchased credit card relationships) includable in regulatory capital would be increased from 50 to 100 percent. In addition, all non-mortgage servicing assets would be fully deducted from Tier 1 capital. This proposed rule was developed in response to a recent Financial Accounting Standards Board accounting standard, Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (FAS 125), which changed the accounting treatment for servicing assets.

The proposal also is being issued by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision.

The joint agency notice, as published in the Federal Register of August 4, is available as a file (pdf - 87kb). Comments should be submitted by October 6, 1997, to the Board, as specified in the notice, or, at this Bank, to Brian L. Peters, Assistant Vice President, Advisory and Technical Services Function.