Proposed FDIC Rule Would Nix References to Credit Ratings

A rule proposed by the Federal Deposit Insurance Corp. would remove references to credit ratings from the agency’s international banking regulations, replacing them with alternative “standards of creditworthiness.”

Tuesday’s proposal would conform to a provision in the 2010 Dodd-Frank law requiring federal agencies to remove regulatory references to credit ratings and replace them with alternative standards, in the hope of reducing agencies’ reliance on credit ratings. The FDIC rule would establish an “investment grade” standard for trustworthy securities.

The rule would require assets pledged to the FDIC by the insured branches of foreign banks meet a liquidity standard and subject them to a fair value discount. It would also add two types of assets to the list of assets eligible for pledging: cash and obligations issued by government-sponsored enterprises.

The FDIC said it is seeking public comment on the rule over the next two months.

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