OCC Issues Rule on Investments in Corporate Debt Securities, Applicable to Federal Savings Associations

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On September 12, the Office of the Comptroller of the Currency (OCC) advised federal savings associations to review the Federal Deposit Insurance Corporation’s (FDIC) final rule and guidance issued on July 24 on investments in corporate debt securities. Federal savings associations have until January 1, 2013, to comply with the FDIC’s final rule. In addition, the OCC reminded federal savings associations they must comply by January 1, 2013 with the OCC’s final rules and guidance regarding investments in other securities, published on June 26.

The Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the FDIC to issue a final rule to establish “standards of creditworthiness” to replace previously used “investment grade” standards for corporate debt security investments held or acquired by savings associations. The FDIC published its final rule July 24 in the Federal Register (77 FR 43151) and in FDIC Financial Institution Letter FIL-34-2012. The FDIC’s final rule amended 12 CFR 362 and was effective July 21, 2012. The FDIC, however, is allowing savings associations a transition period, ending January 1, 2013, to comply.

The FDIC’s standards of creditworthiness, requirement for consistency with safety and soundness principles, and due diligence guidance “are comparable and largely consistent with the OCC’s previously released final rules and guidance regarding securities investments.” On June 26, the OCC published OCC Bulletin 2012-18, “Alternatives to the Use of External Credit Ratings in the Regulations of the OCC: Final Rules and Guidance.” The bulletin informed federal savings associations that they are required to follow the FDIC’s standards of creditworthiness when purchasing corporate debt, pursuant to 12 USC 1831(e)(d), as amended by the Dodd–Frank Act, section 939(a)(2). The OCC expects federal savings associations to comply with the final rules by January 1, 2013.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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