Both Tier 1 and Tier 2 capital can be counted to meet the requirements of the interest rate risk rules proposed last week in a revised form by the Office of Thrift Supervision. The less complex system devised by the Federal Reserve Board for banks requires that any excess interest rate risk be met solely out of Tier 1 capital. (See The Mortgage Marketplace, June 29, page 1.)

The revised OTS system, which updates a methodology originally proposed Posed in December 1990, would require thrifts with more than a "normal" level of interest rate risk to maintain capital in addition to 8% of core capital that must now be held in reserve for investment assets.

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