WASHINGTON - The Office of Thrift Supervision is about to take the last step toward forcing savings institutions to back their exposure to interest rate risk with extra capital.

In the next few days, the agency will issue a bulletin detailing how thrifts can appeal OTS decisions requiring them to post additional capital to compensate for high interest-rate risk.

The OTS plans to test the process using June 30 thrift financial report data, which will "give us an opportunity to see how many institutions are likely to request an appeal," said Kenneth Ryder, the agency's director of research and analysis.

Once the appeals process is tested and in place, enforcement will begin for real.

But OTS examiners already are using interest rate risk measurements to judge the "liquidity" portion of thrifts' Camel ratings, Mr. Ryder said.

The soon-to-be issued bulletin also will outline how well-capitalized thrifts can substitute their own internal models for the agency's standardized method of measuring interest rate risk.

Interestingly, one of the ways thrift regulators want savings institutions to reduce interest rate risk is by using derivatives.

These financial instruments, among them interest rate swaps and forwards, are infamous in some circles for magnifying risk and causing big losses. Regulators say, however, that if used properly they can help thrifts manage the risk they face in holding long-term, fixed-rate loans in a time of rising interest rates.

"We would certainly like to see more institutions doing a better job of managing interest rate risk, and derivatives can be a way of doing that," said Anthony G. Cornyn, the thrift agency's risk management chief. "We, of course, want thrifts to use derivatives to reduce exposure, not to place a bet."

At present, Mr. Cornyn said, about 120 of the 1,512 OTS-regulated institutions use interest rate swaps, about 60 use interest rate caps, and 12 use interest rate futures to manage risk.

Those numbers are expected to rise as the thrift agency moves closer toward requiring capital backing for interest rate risk.

Thrift regulators have been measuring interest rate risk since 1989, and providing thrifts with information on their risk exposure since 1991. The OTS formally incorporated interest rate risk into its risk-based capital rules in 1993, but opted to give thrifts time to get used to the new requirements before beginning enforcement.

All this puts thrift regulators years ahead of their counterparts at the banking agencies, who are still struggling to meet the mandate of the Federal Deposit Insurance Corporation Improvement Act of 1991 that they develop a formula for measuring commercial banks' interest-rate risk.

The Federal Deposit Insurance Corp. and the Federal Reserve Board voted late last month to issue a joint policy statement detailing how they will begin to gather data from banks on their exposure to interest rate fluctuations. The Office of the Comptroller of the Currency is expected to issue a similar plan soon.

The bank agencies' proposed disclosure form demands far less information from banks than thrift regulators now get from savings institutions.

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