[Federal Register Volume 75, Number 156 (Friday, August 13, 2010)]
[Proposed Rules]
[Pages 49423-49427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20048]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 75, No. 156 / Friday, August 13, 2010 / 
Proposed Rules  

[[Page 49423]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 1, 16, and 28

[Docket ID: OCC-2010-0017]
RIN 1557-AD36


Alternatives to the Use of External Credit Ratings in the 
Regulations of the OCC

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: Section 939A of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the Act) directs all Federal agencies to review, no 
later than one year after enactment, any regulation that requires the 
use of an assessment of credit-worthiness of a security or money market 
instrument and any references to or requirements in regulations 
regarding credit ratings. The agencies are also required to remove 
references or requirements of reliance on credit ratings and to 
substitute an alternative standard of credit-worthiness.
    Through this ANPR, the OCC seeks comment on the implementation of 
section 939A with respect to its regulations (other than risk-based 
capital regulations, which are the subject of a separate ANPR issued 
jointly with the other Federal banking agencies), including alternative 
measures of credit-worthiness that may be used in lieu of credit 
ratings.

DATES: Comments on this ANPR must be received by October 12, 2010.

ADDRESSES: Comments should be directed to:
    OCC: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments by 
the Federal eRulemaking Portal or e-mail, if possible. Please use the 
title ``Alternatives to the Use of External Credit Ratings in the 
Regulations of the OCC'' to facilitate the organization and 
distribution of the comments. You may submit comments by any of the 
following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
http://www.regulations.gov. Select ``Document Type'' of ``Proposed 
Rules,'' and in ``Enter Keyword or ID Box,'' enter Docket ID ``OCC-
2010-0017,'' and click ``Search.'' On ``View By Relevance'' tab at 
bottom of screen, in the ``Agency'' column, locate the advance notice 
of proposed rulemaking for OCC, in the ``Action'' column, click on 
``Submit a Comment'' or ``Open Docket Folder'' to submit or view public 
comments and to view supporting and related materials for this 
rulemaking action.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting or viewing public comments, viewing other supporting and 
related materials, and viewing the docket after the close of the 
comment period.
     E-mail: [email protected].
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 2-3, Washington, DC 20219.
     Fax: (202) 874-5274.
     Hand Delivery/Courier: 250 E Street, SW., Mail Stop 2-3, 
Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2010-0017'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, e-mail addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this advance notice of proposed rulemaking by any of the following 
methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Select ``Document Type'' of ``Public 
Submissions,'' in ``Enter Keyword or ID Box,'' enter Docket ID ``OCC-
2010-0017,'' and click ``Search.'' Comments will be listed under ``View 
By Relevance'' tab at bottom of screen. If comments from more than one 
agency are listed, the ``Agency'' column will indicate which comments 
were received by the OCC.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 250 E Street, SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 874-
4700. Upon arrival, visitors will be required to present valid 
government-issued photo identification and to submit to security 
screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.

FOR FURTHER INFORMATION CONTACT: OCC: Michael Drennan, Senior Advisor, 
Credit and Market Risk Division, (202) 874-5670; or Carl Kaminski, 
Senior Attorney, Legislative and Regulatory Activities Division, (202) 
874-5090; or Beth Kirby, Special Counsel, Securities and Corporate 
Practices Division, (202) 874-5210, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 939A of the Act requires each Federal agency to review (1) 
any regulation issued by such agency that requires the use of an 
assessment of the credit-worthiness of a security or money market 
instrument; and (2) any references to or requirements in such 
regulations regarding credit ratings.\1\ Each Federal agency must then 
modify any such regulations identified by the review * * * to remove 
any reference to or requirement of reliance on credit ratings and to 
substitute in such regulations such standard of credit-worthiness as 
each respective agency shall determine as appropriate for such 
regulations. In developing substitute standards of credit-worthiness, 
an agency shall seek to establish, to the extent feasible, uniform 
standards of

[[Page 49424]]

credit-worthiness for use by the agency, taking into account the 
entities it regulates that would be subject to such standards.\2\
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    \1\ Public Law 111-203, 124 Stat. 1376, section 939A (July 21, 
2010).
    \2\ Id.
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    This ANPR describes the areas where the OCC's regulations, other 
than those that establish regulatory capital requirements, currently 
rely on credit ratings; sets forth the considerations underlying such 
reliance; and requests comment on potential alternatives to the use of 
credit ratings. The OCC and the other Federal banking agencies are 
issuing a separate joint advance notice of proposed rulemaking focused 
on the agencies' risk-based capital frameworks.

II. OCC Regulations Referencing Credit Ratings

    The non-capital regulations of the OCC include various references 
to and requirements for use of a credit rating issued by a nationally 
recognized statistical rating organization (NRSRO).\3\ For example, the 
OCC's regulations regarding permissible investment securities, 
securities offerings, and international activities each reference or 
rely upon NRSRO credit ratings.\4\ A description of these regulations 
is set forth below.
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    \3\ An NRSRO is an entity registered with the U.S. Securities 
and Exchange Commission (SEC) under section 15E of the Securities 
Exchange Act of 1934. See, 15 U.S.C. 78o-7, as implemented by 17 CFR 
240.17g-1.
    \4\ See generally, 12 CFR part 1 (investment securities), 12 CFR 
part 16 (securities offerings), and 12 CFR part 28 (international 
banking activities).
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A. Investment Securities Regulations

    The OCC's investment securities regulations at 12 CFR part 1 use 
credit ratings as a factor for determining the credit quality, 
liquidity/marketability, and appropriate concentration levels of 
investment securities purchased and held by national banks. For 
example, under these rules, an investment security must not be 
``predominantly speculative in nature.'' \5\ The OCC rules provide that 
an obligation is not ``predominantly speculative in nature'' if it is 
rated investment grade or, if unrated, is the credit equivalent of 
investment grade. ``Investment grade,'' in turn, is defined as a 
security rated in one of the four highest rating categories by two or 
more NRSROs (or one NRSRO if the security has been rated by only one 
NRSRO).\6\
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    \5\ See, 12 CFR 1.5(e).
    \6\ 12 CFR 1.2(d).
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    Credit ratings are also used to determine marketability in the case 
of a security that is offered and sold pursuant to Securities and 
Exchange Commission Rule 144A. Under Part 1, a 144A security is deemed 
to be marketable if it is rated investment grade or the credit 
equivalent of investment grade.
    In addition, credit ratings are used to determine concentration 
limits on certain investment securities. For example, Part 1 limits 
holdings of Type IV small business related securities of any one issuer 
that are rated in the third or fourth highest investment grade rating 
categories to 25 percent of the bank's capital and surplus.\7\ However, 
there is no concentration limit for small business-related securities 
that are rated in the highest or second highest investment grade 
categories.\8\
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    \7\ A Type IV investment security includes certain small 
business related securities, commercial mortgage related securities, 
or residential mortgage related securities. See, 12 CFR 1.2(m).
    \8\ See, 12 CFR 1.3(e), 1.2(m).
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Current Safety and Soundness Standards
    In addition to current regulatory provisions that generally limit 
banks to purchasing securities that are rated investment grade or, if 
not rated, are the credit equivalent of investment grade, OCC 
regulations also require that banks make the investments consistent 
with safe and sound banking practices.\9\ Specifically, banks must 
consider the interest rate, credit, liquidity, price and other risks 
presented by investments, and the investments must be appropriate for 
the particular bank.\10\ Whether a security is an appropriate 
investment for a particular bank will depend upon a variety of factors, 
including the bank's capital level, the security's impact on the 
aggregate risk of the portfolio, and management's ability to measure 
and manage bank-wide risks. In addition, a bank must determine that 
there is adequate evidence that the obligor possesses resources 
sufficient to provide for all required payments on its obligations.\11\ 
Each bank also must maintain records available for examination purposes 
adequate to demonstrate that it meets the above requirements.\12\
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    \9\ 12 CFR 1.5.
    \10\ 12 CFR 1.5(a).
    \11\ 12 CFR 1.5(b).
    \12\ 12 CFR 1.5(c).
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    The OCC has issued guidance on safe and sound investment securities 
practices. The OCC expects banks to understand the price sensitivity of 
securities before purchase (pre-purchase analysis) and on an ongoing 
basis.\13\ Appropriate ongoing due diligence includes the ability to 
assess and manage the market, credit, liquidity, legal, operational and 
other risks of investment securities. As a matter of sound practice, 
banks are expected to perform quantitative tests to ensure that they 
thoroughly understand the accompanying cash flow and interest rate 
risks of their investment securities.
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    \13\ OCC Bulletin 98-20, ``Supervisory Policy Statement on 
Investment Securities and End-User Derivatives Activities.''
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    Sound investment practices dictate additional due diligence for 
purchases of certain structured or complex investment securities. The 
more complex a security's structure, the more due diligence that bank 
management should conduct. For securities with long maturities or 
complex options management should understand the structure and price 
sensitivity of its securities purchased. For complex asset-backed 
securities, such as collateralized debt obligations, bank management 
should ensure that they understand the security's structure and how the 
security will perform in different default environments.\14\
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    \14\ OCC Bulletin 2002-19, ``Unsafe and Unsound Investment 
Portfolio Practices.''
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Alternative Standards
    Three options for replacing the references to external credit 
ratings in the OCC's investment securities regulations include the 
following.
1. Credit Quality Based Standard
    One alternative would be to replace the references to credit 
ratings with a standard that is focused primarily on credit quality. 
The OCC could adopt standards similar to those applied to unrated 
securities. Specifically, banks could be required to document, through 
their own credit assessment and analysis, that the security meets 
specified internal credit rating standards.
    Part 1 permits the purchase of investment securities that are not 
predominately speculative in nature. Under the current rules, a 
security is not predominately speculative in nature if it is rated 
investment grade or, if unrated, is the credit-equivalent of investment 
grade. To show that a non-rated security is the credit equivalent of 
investment grade, a bank must document, through its own credit 
assessment and analysis, that the security is a strong ``pass'' asset 
under its internal credit rating standards. (Because most internal bank 
rating systems ``pass'' some credit exposures that are not, or would 
not be, rated investment grade, a security will generally have to be 
rated higher than the bottom tier of internal credit rating ``pass'' 
standards in order to be the credit equivalent of investment grade.) 
Moreover, as a prudent credit practice, the OCC currently expects banks 
to

[[Page 49425]]

review the quality of material holdings of non-rated securities on an 
ongoing basis after purchase. Banks that fail to perform and document 
the necessary credit analysis are not in compliance with 12 CFR part 1 
and the sound investment practices outlined in OCC Bulletin 98-20, 
``Supervisory Policy Statement on Investment Securities and End-User 
Derivatives Activities.''
    If the OCC adopts a general credit-quality based test that does not 
rely on external credit ratings, the OCC could require banks to 
determine that their investment securities meet certain credit quality 
standards. Banks could be required to document an internal credit 
assessment and analysis demonstrating that the issuer of a security is 
an entity that has an adequate capacity to meet its financial 
commitments, is subject only to moderate credit risk, and for whom 
expectations of default risk are currently low. As is currently the 
case for non-rated securities,\15\ the OCC would require banks to 
document their credit assessment and analysis using systems and 
criteria similar to the bank's internal loan credit grading system. 
These reviews would be subject to examiner review and classification, 
similar to the process used for loan classifications.
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    \15\ See, 12 CFR 1.5(c).
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    If this alternative were adopted, national banks would continue to 
be expected to understand and manage the associated price, liquidity 
and other-related risks associated with their investment securities 
activities.
2. Investment Quality Based Standard
    As an alternative to a standard that focuses solely on credit-
worthiness, the OCC could adopt a broader ``investment quality'' 
standard that, in addition to credit-worthiness elements (such as the 
timely repayment of principal and interest and the probability of 
default), such a standard also would establish criteria for 
marketability, liquidity and price risk associated with market 
volatility.
    As previously noted, the OCC's current investment securities 
regulations and guidance emphasize that national banks must consider, 
as appropriate, credit, liquidity, and market risk, as well as any 
other risks presented by proposed securities activities. An investment 
quality based standard could reflect some combination of these 
considerations and place quantitative limits on banks' investment 
securities activities based on the levels and types of risks in its 
portfolio. As with the credit quality standard, the OCC could require 
banks to document their credit assessment and analysis using systems 
and criteria similar to the bank's internal loan credit grading system. 
Such reviews would be subject to examiner review and classification, 
similar to the process used for loan classifications.
    Under such a standard, a security with a low probability of default 
may nevertheless be deemed ``predominantly speculative in nature,'' and 
therefore impermissible, if, under the new standard, it is deemed to be 
subject to significant liquidity or market risk. This would be 
consistent with current OCC guidance, which warns that complex and 
illiquid instruments often can involve greater risk than actively 
traded, more liquid securities. Oftentimes, this higher potential risk 
arising from illiquidity is not captured by standardized financial 
modeling techniques. Such risk is particularly acute for instruments 
that are highly leveraged or that are designed to benefit from 
specific, narrowly defined market shifts. If market prices or rates do 
not move as expected, the demand for such instruments can evaporate, 
decreasing the market value of the instrument below the modeled value.
3. Reliance on Internal Risk Ratings
    A third alternative could establish a credit worthiness standard 
that is based on a bank's internal risk rating systems. The OCC could 
require a bank to document its credit assessment and analysis using 
systems and criteria similar to its internal loan credit rating system. 
Such reviews also would be subject to examiner review and 
classification, similar to the process used for loan classifications.
    The bank regulatory agencies use a common risk rating scale to 
identify problem credits. The regulatory definitions are used for all 
credit relationships--commercial, retail, and those that arise outside 
lending areas, such as from capital markets. The regulatory ratings 
``special mention,'' ``substandard,'' ``doubtful,'' and ``loss'' 
identify different degrees of credit weakness. Therefore, for example, 
the rule could define all investments deemed ``special mention'' or 
worse as predominately speculative. Credits that are not covered by 
these definitions would be ``pass'' credits, for which no formal 
regulatory definition exists (because regulatory ratings currently do 
not distinguish among pass credits). Many banks have internal rating 
systems that distinguish between levels of credit-worthiness in the 
regulatory ``pass'' grade. In these systems, ``pass'' grades that 
denote lower levels of credit-worthiness usually do not equate to 
investment grade as defined in the current rule.
    This option would be similar to the OCC's current treatment of 
unrated securities. Part 1 permits the purchase of investment 
securities that are not predominately speculative in nature. Under the 
current rules, a security is not predominately speculative in nature if 
it is rated investment grade, or if unrated, is the credit-equivalent 
of investment grade. National banks must document, through its own 
credit assessment and analysis, that the security is a strong ``pass'' 
asset under its internal credit rating standards to demonstrate that a 
non-rated security is the credit equivalent of investment grade. 
Because most internal bank rating systems ``pass'' some credit 
exposures that are not, or would not be, rated investment grade, a 
security will generally have to be rated higher than the bottom tier of 
internal credit rating ``pass'' standards in order to be the credit 
equivalent of investment grade.

B. Securities Offerings

    Securities issued by national banks are not covered by the 
registration provisions and SEC regulations governing other issuers' 
securities under the Securities Act of 1933. However, the OCC has 
adopted part 16 to require disclosures related to national bank-issued 
securities. Part 16 includes references to ``investment grade'' 
ratings. For example, section 16.6, which provides an optional 
abbreviated registration system for debt securities that meet certain 
criteria, requires that a security receive an investment grade rating 
in order to qualify for the abbreviated registration system.\16\ The 
OCC designed the requirements of the abbreviated registration system to 
ensure that potential purchasers of nonconvertible debt have access to 
necessary information on the issuing bank and commonly controlled 
depository institutions, as well as the appropriate knowledge and 
experience to evaluate that information.
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    \16\ In addition, section 16.2(g) defines the term ``investment 
grade'' as a security that is rated in one of the top four ratings 
categories by each NRSRO that has rated the security.
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    Part 16 also cross-references to SEC regulations governing the 
offering of securities under the Securities Act of 1933 that may 
include references to or reliance on NRSRO credit ratings. The SEC is 
preparing to undertake a similar review of its regulations in 
accordance with the Dodd-Frank Act.\17\ The OCC will consider any 
proposed and final changes to SEC regulations that are

[[Page 49426]]

cross-referenced in part 16 in deciding whether to amend the references 
to the SEC's regulations in part 16, and whether the application of the 
SEC's regulations continues to be appropriate under part 16 in order to 
provide comparable investor protections covering bank-issued 
securities.
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    \17\ See, http://www.sec.gov/spotlight/regreformcomments.shtml.
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C. International Banking Activities

    Pursuant to section 4(g) of the International Banking Act 
(IBA),\18\ foreign banks with Federal branches or agencies must 
establish and maintain a capital equivalency deposit (CED) with a 
member bank located in the state where the Federal branch or agency is 
located. The IBA authorizes the OCC to prescribe regulations describing 
the types and amounts of assets that qualify for inclusion in the CED, 
``as necessary or desirable for the maintenance of a sound financial 
condition, the protection of depositors, creditors, and the public 
interest.'' \19\ At 12 CFR 28.15, OCC regulations set forth the types 
of assets eligible for inclusion in a CED. Among these assets are 
certificates of deposit, payable in the United States, and banker's 
acceptances, provided that, in either case, the issuer or the 
instrument is rated investment grade by an internationally recognized 
rating organization, and neither the issuer nor the instrument is rated 
lower than investment grade by any such rating organization that has 
rated the issuer or the instrument.\20\
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    \18\ 12 U.S.C. 3102(g).
    \19\ 12 U.S.C. 3102(g)(4).
    \20\ See, 12 CFR 28.15(a).
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III. Request for Comment

    The OCC is seeking public input as it begins reviewing its 
regulations pursuant to section 939A of the Dodd-Frank Act. In 
particular, the OCC is seeking comment on alternative measures of 
credit-worthiness that may be used instead of credit ratings in the 
regulations described in this ANPR. Commenters are encouraged to 
address the specific questions set forth below; the OCC also invites 
comment on any and all aspects of this ANPR.

General Questions

    1. In some cases the regulations described in this ANPR use credit 
ratings for purposes other than measuring credit-worthiness (for 
example, the definition of ``marketability'' at 12 CFR 1.2(f)(3)). 
Should the Dodd-Frank Act's requirement for the removal of references 
to credit ratings be construed to prohibit the use of credit ratings as 
a proxy for measuring other characteristics of a security, for example, 
liquidity or marketability?
    2a. If continued reliance on credit ratings is permissible for 
purposes other than credit-worthiness, should the OCC permit national 
banks to continue to use credit ratings in their risk assessment 
process for the purpose of measuring the liquidity and marketability of 
investment securities, even though alternative measures to determine 
credit-worthiness would be prescribed?
    2b. What alternative measures could the OCC and banks use to 
measure the marketability, and liquidity of a security?
    3. What are the appropriate objectives for any alternative 
standards of credit-worthiness that may be used in regulations in place 
of credit ratings?
    4. In evaluating potential standards of credit-worthiness, the 
following criteria appear to be most relevant; that is, any alternative 
to credit ratings should:
    a. Foster prudent risk management;
    b. Be transparent, replicable, and well defined;
    c. Allow different banking organizations to assign the same 
assessment of credit quality to the same or similar credit exposures;
    d. Allow for supervisory review;
    f. Differentiate among investments in the same asset class with 
different credit risk; and
    g. Provide for the timely and accurate measurement of negative and 
positive changes in investment quality, to the extent practicable.
    Are these criteria appropriate? Are there other relevant criteria? 
Are there standards of credit-worthiness that can satisfy these 
criteria?
    5. The OCC recognizes that any measure of credit-worthiness likely 
will involve tradeoffs between more refined differentiation of credit-
worthiness and greater implementation burden. What factors are most 
important in determining the appropriate balance between precise 
measurement of credit risk and implementation burden in considering 
alternative measures of credit-worthiness?
    6. Would the development of alternatives to the use of credit 
ratings, in most circumstances, involve cost considerations greater 
than those under the current regulations? Are there specific cost 
considerations that the OCC should take into account? What additional 
burden, especially at community and regional banks, might arise from 
the implementation of alternative methods of measuring credit-
worthiness?
    7. The credit rating alternatives discussed in this ANPR differ, in 
certain respects, from those being proposed by the OCC and other 
federal banking agencies for regulatory capital purposes. The OCC 
believes such distinctions are consistent with current differences in 
the application and evaluation of credit quality for evaluating loans 
and investment securities and those used for risk-based capital 
standards. Are such distinctions warranted? What are the benefits and 
costs of using different standards for different regulations?

Alternatives for Replacing References to Credit Ratings in Part 1

    8. What are the advantages and disadvantages of the alternative 
standards described in the SUPPLEMENTARY INFORMATION?
    9. Should the credit-worthiness standard include only high quality 
and highly liquid securities? Should the standard include specific 
standards on probability of default? Should the standard vary by asset 
class? Are there other alternative credit-worthiness standards that 
should be considered?
    10. If the OCC relied upon internal rating systems, should the 
credit-worthiness standard include any pass grade or should it only be 
mapped to higher grades of pass?
    11. Alternatively, should the banking regulators revise the current 
regulatory risk rating system to include more granularity in the pass 
grade and develop a credit-worthiness standard based upon the 
regulatory risk rating system?
    12. Should the OCC adopt standards for marketability and liquidity 
separate from the credit-worthiness standard? If so, how should this 
differ from the credit-worthiness standard?
    13. Should an alternative approach establish different levels of 
quality that, for example, govern the amount of securities that may be 
held?
    14. Should an alternative approach take into account the ability of 
a security issuer to repay under stressed economic or market 
environments? If so, how should stress scenarios be applied?
    15. Should an assessment of credit-worthiness link directly to a 
bank's loan rating system (for example, consistent with the higher 
quality credit ratings)?
    16. Should a bank be permitted to consider credit assessments and 
other analytical data gathered from third parties that are independent 
of the seller or counterparty? What, if any, criteria or standards 
should the OCC impose on the use of such assessments and data?
    17. Should a bank be permitted to rely on an investment quality or 
credit quality determination made by another financial institution or 
another third party that is independent of the seller or counterparty? 
What, if any, criteria or

[[Page 49427]]

standards should the OCC impose on the use of such opinions?
    18. Which alternative would be most appropriate for community banks 
and why?
    19. Are there other alternatives that ought to be considered?
    20. What level of due diligence should be required when considering 
the purchase of an investment security? How should the OCC set minimum 
standards for monitoring the performance of an investment security over 
time so that banks effectively ensure that their investment securities 
remain ``investment quality'' as long as they are held?

Alternatives Credit-Worthiness Standards for Credit Ratings in 
Regulations Pertaining to Securities Issuances and International 
Banking Activities (Parts 16 and 28)

    As discussed above, the OCC's regulations include a number of other 
references to credit ratings, including in regulations pertaining to 
securities issuances \21\ and international banking activities.\22\
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    \21\ Certain limitations in Part 16 refer to a security that is 
``investment grade,'' which means that it is rated in one of the top 
four rating categories by each NSRSO that has rated the security. 
See, e.g, 12 CFR 16.2(g), and 12 CFR 16.6(a)(4).
    \22\ A foreign bank's capital equivalency deposits may consist 
of certificates of deposit, payable in the United States, and 
banker's acceptances, provided that, in either case, the issuer or 
the instrument is rated investment grade by an internationally 
recognized rating organization, and neither the issuer nor the 
instrument is rated lower than investment grade by any such rating 
organization that has rated the issuer or the instrument. 12 CFR 
28.15.
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    21. Are there considerations, in addition to those discussed above, 
that the agency should address in developing alternative credit-
worthiness standards for regulations pertaining to securities issuances 
or international banking activities?
    22. What standard or standards should the OCC adopt to replace the 
investment grade requirement in section 16.6? Please comment on how the 
alternative standard will ensure that potential purchasers of 
nonconvertible debt have access to necessary information about the 
issuing bank and have the appropriate knowledge and experience to 
evaluate that information?
    23. What standard or standards should the OCC adopt to specify the 
types of assets eligible for inclusion in the CED under Part 28 
(section 4(g) of the IBA)? To what extent are alternative standards 
consistent with maintenance of sound financial condition, and the 
protection of depositors, creditors, and the public interest?

    Dated: August 9, 2010.

    By the Office of Comptroller of the Currency.
John C. Dugan,
Comptroller of the Currency.
[FR Doc. 2010-20048 Filed 8-12-10; 8:45 am]
BILLING CODE 4810-01-P