Fed, FDIC still accept U.S. debt

Despite the downgrade of the U.S. government’s credit rating, its bonds remain solid in the eyes of regulators.

Almost immediately after the downgrade, the Federal Reserve and the Federal Deposit Insurance Corporation released a joint statement directed at banks, savings associations, credit unions, and bank and savings and loan holding companies.

“For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change,” the notice said.

“The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board’s Regulation W, will also be unaffected.”

In Canada, a quick call to OSFI found that Canadian institutions need not worry either.

“We believe the impact of the US debt downgrade will be minimal on Canadian institutions,” a spokesman for OSFI said. “For example, basic Basel capital rules do not make a distinction between AAA to AA- securities (as these are deemed to be the highest quality), and even for more risk-based model approaches, the differences between AAA and AA+ would be immaterial.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.