[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Rules and Regulations]
[Pages 76840-76841]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31485]


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DEPARTMENT OF THE TREASURY

Comptroller of the Currency

12 CFR Part 3


Minimum Capital Ratios; Issuance of Directives

CFR Correction

    In Title 12 of the Code of Federal Regulations, Parts 1 to 199, 
revised as of January 1, 2012, on page 52, in appendix C to Part 3, 
Part I, Section 1 is revised to read as follows:

Appendix C to Part 3--Capital Adequacy Guidelines for Banks: Internal-
Ratings-Based and Advanced Measurement Approaches

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Part I. General Provisions

Section 1. Purpose, Applicability, Reservation of Authority, and 
Principle of Conservatism

    (a) Purpose. This appendix establishes:
    (1) Minimum qualifying criteria for banks using bank-specific 
internal risk measurement and management processes for calculating 
risk-based capital requirements;
    (2) Methodologies for such banks to calculate their risk-based 
capital requirements; and
    (3) Public disclosure requirements for such banks.
    (b) Applicability. (1) This appendix applies to a bank that:
    (i) Has consolidated assets, as reported on the most recent 
year-end Consolidated Report of Condition and Income (Call Report) 
equal to $250 billion or more;
    (ii) Has consolidated total on-balance sheet foreign exposure at 
the most recent year-end equal to $10 billion or more (where total 
on-balance sheet foreign exposure equals total cross-border claims 
less claims with head office or guarantor located in another country 
plus redistributed guaranteed amounts to the country of head office 
or guarantor plus local country claims on local residents plus 
revaluation gains on foreign exchange and derivative products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report);
    (iii) Is a subsidiary of a depository institution that uses 12 
CFR part 3, appendix C, 12 CFR part 208, appendix F, 12 CFR part 
325, appendix D, or 12 CFR part 567, appendix C, to calculate its 
risk-based capital requirements; or
    (iv) Is a subsidiary of a bank holding company that uses 12 CFR 
part 225, appendix G, to calculate its risk-based capital 
requirements.
    (2) Any bank may elect to use this appendix to calculate its 
risk-based capital requirements.
    (3) A bank that is subject to this appendix must use this 
appendix unless the OCC determines in writing that application of 
this appendix is not appropriate in light of the bank's asset size, 
level of complexity, risk profile, or scope of operations. In making 
a determination under this paragraph, the OCC will apply notice and 
response procedures in the same manner and to the same extent as the 
notice and response procedures in 12 CFR 3.12.
    (c) Reservation of authority--(1) Additional capital in the 
aggregate. The OCC may require a bank to hold an amount of capital 
greater than otherwise required under this appendix if the OCC 
determines that the bank's risk-based capital requirement under this 
appendix is not commensurate with the bank's credit, market, 
operational, or other risks. In making a determination under this 
paragraph, the OCC will apply notice and response procedures in the 
same manner and to the same extent as the notice and response 
procedures in 12 CFR 3.12.
    (2) Specific risk-weighted asset amounts. (i) If the OCC 
determines that the risk-weighted asset amount calculated under this 
appendix by the bank for one or more exposures is not commensurate 
with the risks associated with those exposures, the OCC may require 
the bank to assign a different risk-weighted asset amount to the 
exposures, to assign different risk parameters to the exposures (if 
the exposures are wholesale or retail exposures), or to use 
different model assumptions for the exposures (if relevant), all as 
specified by the OCC.
    (ii) If the OCC determines that the risk-weighted asset amount 
for operational risk produced by the bank under this appendix is not 
commensurate with the operational risks of the bank, the OCC may 
require the bank to assign a different risk-weighted asset amount 
for operational risk, to change elements of its operational risk 
analytical framework, including distributional and dependence 
assumptions, or to make other changes to the bank's operational risk 
management processes, data and assessment systems, or quantification 
systems, all as specified by the OCC.
    (3) Regulatory capital treatment of unconsolidated entities. If 
the OCC determines that the capital treatment for a bank's exposure 
or other relationship to an entity not consolidated on the bank's 
balance sheet is not commensurate with the actual risk relationship 
of the bank to the entity, for risk-based capital purposes, it may 
require the bank to treat the entity as if it were consolidated onto 
the bank's balance sheet and require the bank to hold capital 
against the entity's exposures. The OCC will look to the substance 
of and risk associated with the transaction as well as other 
relevant factors the OCC deems appropriate in determining whether to 
require such treatment and in determining the bank's compliance with 
minimum risk-based capital requirements. In making a determination 
under this paragraph, the OCC will apply notice and response 
procedures in the same manner and to the same extent as the notice 
and response procedures in 12 CFR 3.12.
    (4) Other supervisory authority. Nothing in this appendix limits 
the authority of the OCC under any other provision of law or 
regulation to take supervisory or enforcement action, including 
action to address unsafe or unsound practices or conditions, 
deficient capital levels, or violations of law.

[[Page 76841]]

    (d) Principle of conservatism. Notwithstanding the requirements 
of this appendix, a bank may choose not to apply a provision of this 
appendix to one or more exposures, provided that:
    (1) The bank can demonstrate on an ongoing basis to the 
satisfaction of the OCC that not applying the provision would, in 
all circumstances, unambiguously generate a risk-based capital 
requirement for each such exposure greater than that which would 
otherwise be required under this appendix;
    (2) The bank appropriately manages the risk of each such 
exposure;
    (3) The bank notifies the OCC in writing prior to applying this 
principle to each such exposure; and
    (4) The exposures to which the bank applies this principle are 
not, in the aggregate, material to the bank.
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[FR Doc. 2012-31485 Filed 12-28-12; 8:45 am]
BILLING CODE 1505-01-D