Agencies Revise Classification of Bank-Held Securities

The Federal Reserve, FDIC and OCC yesterday revised the classification of assets and appraisal of securities held by banks to align with Dodd-Frank Act-mandated changes. Updating a 2004 agreement, the guidance removes all references to credit ratings in regulations on classifying securities held by banks.

The agencies emphasized the importance of fundamental credit analysis to properly managing risk associated with bank assets and clarified that banks’ security creditworthiness assessments should not rely solely on external credit ratings. They provided specific examples of how to apply new standards of creditworthiness that are consistent with the regulators’ pre-existing asset classifications.

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