The American Bankers Association on Monday joined the Independent Community Bankers of America and 75 state bankers associations in urging the Federal Communications Commission to discontinue its requirement that banks obtain certain types of Weiss safety ratings to be eligible to provide a letter of credit to telecommunications provider recipients of the FCC’s Rural Digital Opportunity Fund.
The RDOF was launched in 2020 to expand high-speed broadband in rural areas of the U.S. The FCC currently requires banks issuing LOCs to telecommunications provider recipients of financial support from the program to maintain a Weiss bank safety rating of B- or higher. As a result, many banks learned in late 2023 that they could no longer issue LOCs because their safety ratings had dropped for no transparent reason, according to joint comments filed by the associations. The FCC issued a temporary waiver for the requirement earlier this year. Then in July, it proposed changing the requirement and requested public comment on possible revisions.
In their comments, the associations said that the regulatory structure and supervision of banks should provide the FCC with a strong assurance that banks that issue a LOC do not present a risk of failure. The Weiss rating organization is not a nationally recognized statistical rating organization, or NRSRO, which is registered with the Securities and Exchange Commission, they noted. “There is no transparency as to the formula used for generating their bank safety ratings and several comments on their website raise concerns as to the reliability of their analysis.”
The associations offered two options they said were superior to the Weiss rating system should the FCC insist on retaining a verification method. One option is to require an eligible bank to have a rating issued by an NRSRO that is equivalent to a BBB- or better rating by Standard & Poor’s. A second option would be an affidavit signed by a bank officer stating that the bank is “adequately capitalized” or “well capitalized” as of the date the LOC is issued, along with a requirement that the bank officer promptly notify the telecommunications provider customer if the bank’s capital ratio changes such that it is less than “adequately capitalized.”
