As required by the Dodd-Frank Act, the federal banking agencies have begun to eliminate reliance on credit ratings issued by nationally-recognized statistical rating organizations (NRSROs) from their rules and to identify other ways to measure credit risk. This ANPR addresses ratings in the regulatory-capital rules, with other proposals to focus on additional rating citations in the banking rules to eliminate them as well. An end to CRA criteria that drive risk weightings for capital requirements could significantly affect the degree to which the U.S. complies with pending Basel III rules despite the strong commitment of U.S. leadership and regulators to the revised capital accord. Questions for comment include the degree to which capital standards going forward should rely on simple risk weightings such as those now provided under the U.S. rules implementing the Basel I standards. Alternatively, new approaches to risk weightings could attempt to reach comparable conclusions to those in Basel III without CRA designations. The revised capital rules could also significantly vary risk weightings based on new criteria that could affect the availability and cost of credit or the ability of banks and other obligors to issue debt or other financial instruments (e.g., asset-backed securities). Thus, the final approach to risk weightings will have far-reaching capital-market and competitiveness implications.
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