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News Release 2012-92 | June 20, 2012

OCC Issues an Interim Final Lending Limit Rule

WASHINGTON—The Office of the Comptroller of the Currency (OCC) has adopted an interim final rule amending its lending limit rule to apply to certain credit exposures arising from derivative transactions and securities financing transactions.

Effective July 21, 2012, section 610 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 revises the statutory definition of loans and extensions of credit for purposes of the lending limit to include certain credit exposures arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction. The interim final rule adopted by the OCC implements this statutory change which applies to both national banks and savings associations. State banks are subject to separate restrictions under section 611 of the Dodd-Frank Act.

National banks and savings associations have through January 1, 2013, to comply with the rule's requirements as to derivative transactions and securities financing transactions. The OCC provided a short-term exception under its lending limits authority to allow time for national banks and savings associations to adjust for compliance with the new standard.

The interim final rule, which amends 12 CFR part 32, also consolidates the lending limit rules applicable to national banks and savings associations. The interim final rule applies to both federal and state savings associations, pursuant to section 312 of the Dodd-Frank Act, which gives the OCC rulemaking authority for both federal and state savings associations. The interim final rule is effective July 21, 2012.

To reduce the burden of these new credit exposure calculations, particularly for smaller and mid-size banks and savings associations, the rule permits use in certain circumstances of look-up tables for measuring the exposures for each transaction type. This method permits institutions to adopt compliance alternatives that fit their size and risk management requirements, consistent with safety and soundness and the goals of the statute.

The revised lending limit rule continues to provide that loans and extensions of credit, including those that arise from derivative and securities financing transactions, must be consistent with safe and sound banking practices.

The rule will be published in the Federal Register on June 21, 2012. Comments on the interim final rule are due by August 6, 2012.

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Dean DeBuck
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