This NPR is the third issued by the U.S. agencies to implement Basel III and capital-related provisions in the Dodd-Frank Act. Building on the proposed definition of capital and new prompt corrective action (PCA) standards and the revised risk weightings in the standardized approach, the proposal revises the advanced approach covering the nation’s largest banking organizations. It also formally proposes that the new, final market-risk framework apply to covered savings-and-loan holding companies (SLHCs), consistent with the Dodd-Frank requirement that SLHCs come under FRB capital requirements. While much in the NPR reflects the risk weightings and other changes to the advanced internal ratings-based (A-IRB) methodology finalized in Basel II, significant changes are made to tighten standards and reflect the Dodd-Frank requirement that references to credit-rating agency (CRA) determinations be deleted. The most significant changes in the NPR address counterparty credit risk, particularly with regard to derivatives, although many other product areas (e.g., securitizations, money-market funds) are also addressed.
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