August 8, 1997

REGULATIONS H & Y:
RISK-BASED CAPITAL GUIDELINES

To All State Member Banks,
Bank Holding Companies, and Others Concerned
in the Twelfth Federal Reserve District

Proposed Amendments to Capital Guidelines (Docket R-0976)

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.

Copies

Copies of the Board's notice (Docket R-0976) are available from our Corporate Services Department. To request copies to be sent via mail, please call (415) 974-2748. To request copies to be sent via fax, please call (415) 974-3333, and specify document number 4166.

Additional Information

For additional information regarding the capital guidelines, please contact our Banking Supervision and Regulation Department, at (415) 974-2927.

FEDERAL RESERVE BANK OF SAN FRANCISCO