News Release 2008-110 | September 19, 2008
OCC Approves Interim Final Rule on Bank Purchases of ABCP from Money Market Mutual Funds
WASHINGTON—The Office of the Comptroller of the Currency announced today it has approved for publication an interim final rule that would recognize the substantial protection from risk provided to national banks under the Federal Reserve System’s newly announced special lending facility. Under that facility, depository institutions may borrow on a nonrecourse basis from the Federal Reserve Bank of Boston if the depository institution uses the loan proceeds to purchase asset-backed commercial paper (ABCP) from money market mutual funds.
"The interim final rule we approved today will help to reduce liquidity pressures faced by many U.S. money market funds during this credit crisis," said Comptroller of the Currency John C. Dugan. "We believe use of this new facility is fully consistent with safe and sound banking practices, and we are encouraging national banks to act as intermediaries and assist the Federal Reserve System in its implementation of this new lending facility."
The interim final rule, which will be in effect immediately until January 30, 2009, recognizes that the nonrecourse basis of the loan protects the bank from the credit and market risks of the purchased ABCP. Under the interim final rule, the ABCP purchased by the bank as a result of its participation in the special lending facility will be subject to a zero percent risk weight for purposes of risk-based capital requirements.
Robert M. Garsson