12 CFR 955.6 - Risk-based capital requirement for acquired member assets.

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§ 955.6 Risk-based capital requirement for acquired member assets.

(a)General. Each Bank shall hold retained earnings plus general allowance for losses as support for the credit risk of all AMA estimated by the Bank to represent a credit risk that is greater than that of comparable instruments that have received the second highest credit rating from an NRSRO in an amount equal to or greater than the outstanding balance of the assets or pools of assets times a factor associated with the putative credit rating of the assets or pools of assets as determined by the Finance Board on a case-by-case basis. For single-family mortgage assets, the factors are as set forth in Table 1 of this part.

Table 1

Putative rating of single-family mortgage assets Percentage applicable to on-balance sheet equivalent value of AMA
Third Highest Investment Grade 0.90
Fourth Highest Investment Grade 1.50
If Downgraded to Below Investment Grade After Acquisition By Bank:
Highest Below Investment Grade 2.25
Second Highest Below Investment Grade 2.60
All Other Below Investment Grade 100.00

(b)Recalculation of credit enhancement. For risk-based capital purposes, each Bank shall recalculate the estimated credit rating of a pool of AMA if there is evidence that a decline in the credit quality of that pool may have occurred.

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