OCC Rule Proposal Downplays Credit Ratings

The Office of the Comptroller of the Currency (OCC) has proposed removing references to credit ratings from its various regulations and related guidance on due diligence requirements for banks to use when assessing portfolio-investment credit risk.

The proposed rule and guidance have been published in the Federal Register, and the public comment period is open through Dec. 29. The proposal was prompted by a provision in the Dodd-Frank Act that requires federal agencies to review and modify regulations to lessen their reliance on credit ratings.

Specifically, the proposed rule would remove references to credit ratings in the OCC's non-capital regulations, specifically amending the definition of "investment grade" in 12 CFR Part 1 to no longer reference credit ratings.

The proposed guidance, meanwhile, clarifies steps that institutions should take to demonstrate they have properly verified that their investments meet the newly established credit quality standards.

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