Regulatory Capital Rules: Standardized Approach for Risk-Weighted Assets; Market Discipline and Disclosure Requirements

Gold bugs have gotten it right all along.

http://www.fdic.gov/news/news/financial/2012/fil12027.html

A. Zero Percent Risk-Weighted ItemsThe following exposures would receive a zero percent risk weight under the proposal:

• Cash;

• Gold bullion;

• Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency;

• Exposures unconditionally guaranteed by the U.S. government, its central bank, or a U.S. government agency;

• Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral development banking organizations

• Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed below).

For more information, please refer to sections 32(a) and 37(b)(3)(iii) of the proposal. For exposures to foreign governments and their central banks, see section L below. 

Q. Treatment of Collateralized TransactionsThe proposal allows banking organizations to recognize the risk mitigating benefits of financial collateral in risk-weighted assets, and defines financial collateral to include:

• cash on deposit at the bank or third-party custodian;

• gold;

In all cases the banking organization would be required to have a perfected, first priority interest in the financial collateral.
1. Simple approach: A banking organization may apply a risk weight to the portion of an exposure that is secured by the market value of financial collateral by using the risk weight of the collateral – subject to a risk weight floor of 20 percent. To apply the simple approach, the collateral must be subject to a collateral agreement for at least the life of the exposure; the collateral must be revalued at least every 6 months; and the collateral (other than gold) must be in the same currency.