[Code of Federal Regulations]
[Title 12, Volume 2]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR206.5]

[Page 196]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 206--LIMITATIONS ON INTERBANK LIABILITIES (REGULATION F)--Table of Contents
 
Sec. 206.5  Capital levels of correspondents.

    (a) Adequately capitalized correspondents.\1\ For the purpose of 
this part, a correspondent is considered adequately capitalized if the 
correspondent has:
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    \1\ As used in this part, the term ``adequately capitalized'' is 
similar but not identical to the definition of that term as used for the 
purposes of the prompt corrective action standards. See, e.g. 12 CFR 
part 208, subpart B.
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    (1) A total risk-based capital ratio, as defined in paragraph (e)(1) 
of this section, of 8.0 percent or greater;
    (2) A Tier 1 risk-based capital ratio, as defined in paragraph 
(e)(2) of this section, of 4.0 percent or greater; and
    (3) A leverage ratio, as defined in paragraph (e)(3) of this 
section, of 4.0 percent or greater.
    (b) Frequency of monitoring capital levels. A bank shall obtain 
information to demonstrate that a correspondent is at least adequately 
capitalized on a quarterly basis, either from the most recently 
available Report of Condition and Income, Thrift Financial Report, 
financial statement, or bank rating report for the correspondent. For a 
foreign bank correspondent for which quarterly financial statements or 
reports are not available, a bank shall obtain such information on as 
frequent a basis as such information is available. Information obtained 
directly from a correspondent for the purpose of this section should be 
based on the most recently available Report of Condition and Income, 
Thrift Financial Report, or financial statement of the correspondent.
    (c) Foreign banks. A correspondent that is a foreign bank may be 
considered adequately capitalized under this section without regard to 
the minimum leverage ratio required under paragraph (a)(3) of this 
section.
    (d) Reliance on information. A bank may rely on information as to 
the capital levels of a correspondent obtained from the correspondent, a 
bank rating agency, or other party that it reasonably believes to be 
accurate.
    (e) Definitions. For the purposes of this section:
    (1) Total risk-based capital ratio means the ratio of qualifying 
total capital to weighted risk assets.
    (2) Tier 1 risk-based capital ratio means the ratio of Tier 1 
capital to weighted risk assets.
    (3) Leverage ratio means the ratio of Tier 1 capital to average 
total consolidated assets, as calculated in accordance with the capital 
adequacy guidelines of the correspondent's primary federal supervisor.
    (f) Calculation of capital ratios. (i) For a correspondent that is a 
U.S. depository institution, the ratios shall be calculated in 
accordance with the capital adequacy guidelines of the correspondent's 
primary federal supervisor.
    (ii) For a correspondent that is a foreign bank organized in a 
country that has adopted the risk-based framework of the Basle Capital 
Accord, the ratios shall be calculated in accordance with the capital 
adequacy guidelines of the appropriate supervisory authority of the 
country in which the correspondent is chartered.
    (iii) For a correspondent that is a foreign bank organized in a 
country that has not adopted the risk-based framework of the Basle 
Capital Accord, the ratios shall be calculated in accordance with the 
provisions of the Basle Capital Accord.