Magazine article American Banker

Risk Plan May Force 80 S&Ls to Raise Capital

Magazine article American Banker

Risk Plan May Force 80 S&Ls to Raise Capital

Article excerpt

WASHINGTON - As many as 80 thrifts would have to raise new capital to meet the Office of Thrift Supervision's revised proposal on interest rate risk.

OTS Director T. Timothy Ryan made that estimate Wednesday in a speech outlining the proposal, which is just as stringent as the Federal Reserve Board's version for banks.

"This is preventative medicine," Mr. Ryan said at the Western Secondary Mortgage Market Conference in San Francisco. "We have to stay on top of what you do. If we cannot understand it, you cannot do it."

Under the rule, which the OTS expects to have in place early next year, S&Ls with "above normal" interest rate risk would have to add capital or reduce risk.

Above-normal risk results when an institution's portfolio equity would decline in value by more than 2% of assets in the face of a hypothetical 200-basis-point move in interest rates.

The Fed's recently released model identifies banks with above-normal levels of exposure based on a 100-basis-point change in rates. …

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