District Circular Letters

April 12, 2000

BANKING SUPERVISION AND REGULATION:
LESSONS LEARNED FROM YEAR 2000 PROJECT AND
INTERIM RULE ON ALTERNATIVE TO RATED
DEBT REQUIREMENT FOR FINANCIAL SUBSIDIARIES

To State Member Banks, Bank
Holding Companies, Edge Act Corporations,
U.S. Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District

Federal Financial Institutions Examination Council (FFIEC) Urges Financial Institutions to Remember Lessons Learned from Year 2000 (Y2K) Project

The document released by the FFIEC encourages financial institutions to conduct their own review of lessons from the Y2K effort and incorporate them in future project and technology risk management.

Interim Rule on Alternative to Rated Debt Requirement for Financial Subsidiaries (R-1066)

The Federal Reserve Board and the Department of the Treasury have approved an interim rule, effective March 14, 2000, establishing alternative criteria for debt ratings that certain large banks may satisfy in order to establish a financial subsidiary under the Financial Modernization Act.

Under the act, a national or state member bank ranked among the largest fifty insured banks may control a financial subsidiary only if the bank meets certain criteria, including having an issue of highly rated debt outstanding. The next fifty largest insured banks may control a financial subsidiary if they satisfy this debt rating requirement or an alternative requirement determined by the United States Treasury and the Federal Reserve. Under the interim rule, a bank meets the alternative requirement if it has a current long-term issuer credit rating from a nationally recognized statistical rating organization that is within the three highest investment-grade rating categories used by the rating organization.

Comments will be accepted on the interim rule until May 15, 2000.

Copies

Copies of the Board's notice (Docket R-1066) are available from our Corporate Services Department. To request copies to be sent via mail, please call (415) 974-2060. To request copies to be sent via fax, please call (415) 974-3333, and specify for SR 00-5, document number 4144; and for Docket R-1066, document number 4140.

Additional Information

For additional information regarding these matters, please contact our Banking Supervision and Regulation Department, at (415) 974-3007.

FEDERAL RESERVE BANK OF SAN FRANCISCO