The Federal Deposit Insurance Corporation, together with the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, issued a proposal to significantly revise how risk-weighted assets are measured for Category I and Category II banking organizations and banking organizations with significant trading activity, covering credit, operational, market and credit valuation adjustment (CVA) risk. The proposed approach would also be available on an elective basis to all banking organizations and would eliminate the current requirement for large banking organizations to calculate two sets of risk-based capital ratios and hold capital against the more stringent outcome. Under the proposal, internal models would be removed from the credit risk framework, while the standardized approach would be revised with more granular, risk-sensitive treatments and several new credit exposure categories. Targeted changes would also adjust methodologies for counterparty credit risk exposure amounts and securitization risk-weighted assets, update recognition of the benefits of certain synthetic risk transactions, and revise the treatment of credit risk mitigants. For operational risk, the existing models-based approach would be replaced with a standardized approach that uses income and expense items to proxy operational risk and determine an operational risk capital requirement. The market risk framework would be replaced with a more robust models-based approach and include a standardized approach intended to better capture tail and market liquidity risk in severe market stress and downturn conditions. The CVA framework would be revised to include basic and standardized approaches, expand recognition of hedge instruments, and exempt client-facing derivative transactions from the CVA requirement. The proposal would also remove the regulatory capital deduction requirement for mortgage servicing assets and seek comment on further changes, and it would provide for future inflation indexing of certain dollar-based thresholds in the capital rule under a pre-determined methodology. Comments are due June 18, 2026.
Federal Deposit Insurance Corporation 2026-03-19
United States Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System and Office of the Comptroller of the Currency propose revised risk-weighted asset framework for Category I and II banks with optional adoption for others
The Federal Deposit Insurance Corporation, Federal Reserve, and Office of the Comptroller of the Currency proposed revisions to risk-weighted asset measurement for Category I and II banks and those with significant trading activity. Changes include eliminating internal models for credit risk, revising the standardized approach, and updating methodologies for counterparty credit risk and securitization. The proposal also introduces a standardized approach for operational risk and revises the market risk and credit valuation adjustment frameworks.