Almost nine years after it was originally contemplated, a notice of proposed rulemaking designed to revise the risk-based capital treatment of asset-backed and mortgage-backed securities was finally in the process of being approved by the four main federal banking agencies last week, sources said. A 90-day public comment period is to follow the proposal's imminent public release.

The Proposal to Revise the Risk-Based Capital Treatment of Recourse and Direct Credit Substitutes, set to go public within days, presents a ratings-based approach to risk weightings which would lower capital requirements on highly rated ABS (see chart on page 7) and offers alternate approaches for unrated direct credit substitutes, which are guarantees on a third party's assets.

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