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Type: FCA Regulation
PART 615 - FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS, AND FUNDING OPERATIONS
Subpart H - Capital Adequacy


615.5211 Risk categories--balance sheet assets.
Section 615.5210(c) specifies certain balance sheet assets that are not assigned to the risk categories set forth below. All other balance sheet assets are assigned to the percentage risk categories as follows:
(a) Category 1: 0 Percent
(1) Cash (domestic and foreign).
(2) Balances due from Federal Reserve Banks and central banks in other OECD countries.
(3) Direct claims on, and portions of claims unconditionally guaranteed by, the U.S. Treasury, government agencies, or central governments in other OECD countries.
(4) Portions of local currency claims on, or unconditionally guaranteed by, non-OECD central governments (including non-OECD central banks), to the extent the institution has liabilities booked in that currency.
(5) Claims on, or guaranteed by, qualifying securities firms that are collateralized by cash held by the institution or by securities issued or guaranteed by the United States (including U.S. Government agencies) or OECD central governments, provided that a positive margin of collateral is required to be maintained on such a claim on a daily basis, taking into account any change in the institution's exposure to the obligor or counterparty under the claim in relation to the market value of the collateral held in support of the claim.
(b) Category 2: 20 Percent
(1) Cash items in the process of collection.
(2) Loans and other obligations of and investments in Farm Credit institutions.
(3) All claims (long- and short-term) on, and portions of claims (long- and short-term) guaranteed by, OECD banks.
(4) Short-term (remaining maturity of 1 year or less) claims on, and portions of short-term claims guaranteed by, non-OECD banks.
(5) Portions of loans and other claims conditionally guaranteed by the U.S. Treasury, government agencies, or central governments in other OECD countries and portions of local currency claims conditionally guaranteed by non-OECD central governments to the extent that the institution has liabilities booked in that currency.
(6) All securities and other claims on, and portions of claims guaranteed by, Government-sponsored agencies.
(7) Portions of loans and other claims (including repurchase agreements) collateralized by securities issued or guaranteed by the U.S. Treasury, government agencies, Government-sponsored agencies or central governments in other OECD countries.
(8) Portions of loans and other claims collateralized by cash held by the institution or its funding bank.
(9) General obligation claims on, and portions of claims guaranteed by, the full faith and credit of states or other political subdivisions or OECD countries, including U.S. state and local governments.
(10) Claims on, and portions of claims guaranteed by, official multinational lending institutions or regional development institutions in which the U.S. Government is a shareholder or a contributing member.
(11) Portions of claims collateralized by securities issued by official multilateral lending institutions or regional development institutions in which the U.S. Government is a shareholder or contributing member.
(12) Investments in shares of mutual funds whose portfolios are permitted to hold only assets that qualify for the zero or 20-percent risk categories.
(13) Recourse obligations, direct credit substitutes, residual interests (other than credit-enhancing interest-only strips) and asset- or mortgage-backed securities that are externally rated in the highest or second highest investment grade category, e.g., AAA, AA, in the case of long-term ratings, or the highest rating category, e.g., A-1, P-1, in the case of short-term ratings.
(14) Claims on, and claims guaranteed by, qualifying securities firms provided that:
(i) The qualifying securities firm, or at least one issue of its long-term debt, has a rating in one of the highest two investment grade rating categories from an NRSRO (if the securities firm or debt has more than one NRSRO rating the lowest rating applies); or
(ii) The claim is guaranteed by a qualifying securities firm's parent company with such a rating.
(15) Certain collateralized claims on qualifying securities firms without regard to satisfaction of the rating standard, provided that the claim arises under a contract that:
(i) Is a reverse repurchase/repurchase agreement or securities lending/borrowing transaction executed under standard industry documentation;
(ii) Is collateralized by liquid and readily marketable debt or equity securities;
(iii) Is marked-to-market daily;
(iv) Is subject to a daily margin maintenance requirement under the standard documentation; and
(v) Can be liquidated, terminated, or accelerated immediately in bankruptcy or similar proceedings, and the security or collateral agreement will not be stayed or avoided, under applicable law of the relevant country.
(16) Claims on other financing institutions provided that:
(i) The other financing institution qualifies as an OECD bank or it is owned and controlled by an OECD bank that guarantees the claim, or
(ii) The other financing institution has a rating in one of the highest three investment-grade rating categories from a NRSRO or the claim is guaranteed by a parent company with such a rating, and
(iii) The other financing institution has endorsed all obligations it pledges to its funding Farm Credit bank with full recourse.
(c) Category 3: 50 Percent
(1) All other investment securities with remaining maturities under 1 year, if the securities are not eligible for the ratings-based approach or subject to the dollar-for-dollar capital treatment.
(2) Qualified residential loans.
(3) Recourse obligations, direct credit substitutes, residual interests (other than credit-enhancing interest-only strips) and asset- or mortgage-backed securities that are rated in the third highest investment grade category, e.g., A, in the case of long-term ratings, or the second highest rating category, e.g., A-2, P-2, in the case of short-term ratings.
(4) Revenue bonds or similar obligations, including loans and leases, that are obligations of state or political subdivisions of the United States or other OECD countries but for which the government entity is committed to repay the debt only out of revenue from the specific projects financed.
(5) Claims on other financing institutions that:
(i) Are not covered by the provisions of paragraph (b)(17) of this section, but otherwise meet similar capital, risk identification and control, and operational standards, or
(ii) Carry an investment-grade or higher NRSRO rating or the claim is guaranteed by a parent company with such a rating, and
(iii) The other financing institution has endorsed all obligations it pledges to its funding Farm Credit bank with full recourse.
(d) Category 4: 100 Percent. This category includes all assets not specified in the categories above or below nor deducted dollar-for-dollar from capital and assets as discussed in 615.5210(c). This category comprises standard risk assets such as those typically found in a loan or lease portfolio and includes:
(1) All other claims on private obligors.
(2) Claims on, or portions of claims guaranteed by, non-OECD banks with a remaining maturity exceeding 1 year.
(3) Claims on, or portions of claims guaranteed by, non-OECD central governments that are not included in paragraphs (a)(4) or (b)(4) of this section, and all claims on non-OECD state and local governments.
(4) Industrial-development bonds and similar obligations issued under the auspices of states or political subdivisions of the OECD-based group of countries for the benefit of a private party or enterprise where that party or enterprise, not the government entity, is obligated to pay the principal and interest.
(5) Premises, plant, and equipment; other fixed assets; and other real estate owned.
(6) Recourse obligations, direct credit substitutes, residual interests (other than credit-enhancing interest-only strips) and asset- or mortgage-backed securities that are rated in the lowest investment grade category, e.g., BBB, in the case of long-term ratings, or the third highest rating category, e.g., A-3, P-3, in the case of short-term ratings.
(7) Stripped mortgage-backed securities and similar instruments, such as interest-only strips that are not credit-enhancing and principal-only strips (including such instruments guaranteed by Government-sponsored agencies).
(8) Investments in Rural Business Investment Companies.
(9) If they have not already been deducted from capital:
(i) Investments in unconsolidated companies, joint ventures, or associated companies.
(ii) Deferred-tax assets.
(iii) Servicing assets.
(10) All non-local currency claims on foreign central governments, as well as local currency claims on foreign central governments that are not included in any other category.
(11) Claims on other financing institutions that do not otherwise qualify for a lower risk-weight category under this section; and
(12) All other assets not specified above, including but not limited to leases and receivables.
(e) Category 5: 200 Percent. Recourse obligations, direct credit substitutes, residual interests (other than credit-enhancing interest-only strips) and asset- or mortgage-backed securities that are rated one category below the lowest investment grade category, e.g., BB.

[70 FR 35354, June 17, 2005]

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