Regulatory Alerts2025-06-12 | Interpretive Letter 1185Added
Interpretive Letter 1185 — National Bank Use of Certain Debt and Equity Securities as Collateral in Repo Transactions
National banks may use certain debt securities acquired for investment purposes and equity securities acquired to hedge customer-driven equity derivatives as collateral in repurchase agreements without engaging in impermissible dealing under 12 U.S.C. §§ 24(7) and 378. This use of equity securities is consistent with the OCC’s derivatives regulation at 12 C.F.R. § 7.1030, provided the securities are held solely to hedge risks and the banks do not maintain an inventory for resale or make a market in the securities. The banks must retain credit and market risk, ensure counterparties cannot rehypothecate the collateral, and monitor the activity to prevent it from evolving into impermissible dealing.
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