The Board of Governors of the Federal Reserve System proposed rules to minimize the credit exposure of large banking organizations to a single organization. Generally, under the proposed rules, a globally systemically important bank (GSIB) would be prohibited from maintaining a credit exposure of more than 15% of its Tier 1 capital with another systemically important financial firm and more than 25% of its Tier 1 capital with any other counterparty. (Tier 1 capital is the core capital of a bank typically consisting of its shareholder equity and retained earnings; it might include certain preferred stock.) Banks, other than GSIBs, with US $250 billion or more of assets would be limited to a credit exposure to any single counterparty of no more than 25% of their Tier 1 capital, while banks holding between US $50 billion and US $250 billion in assets could have no more than 25% of their total regulatory capital (a broader base than Tier 1 capital) exposed to any single counterparty. Banks with less that US $50 billion in assets would not have counterparty exposure limits under the proposed rules. In assessing credit exposure, covered entities would consider their aggregate net exposure with a counterparty, taking into account any available credit offsets including collateral, guarantees, credit or equity derivatives or other hedges, provided the offsets satisfied certain requirements. Credit exposure would consider to arise from a number of enumerated type of credit transactions, including (among others) all extensions of credit, repurchase or reverse repurchase transactions, securities lending transaction and derivatives transactions. In assessing credit exposure under derivatives transactions, different rules would apply to derivatives transactions subject and not subject to a qualifying master netting agreement. Derivatives transactions subject to a qualifying master netting agreement could potentially be accorded more favorable treatment. The FRB previously proposed rules restricting counterparty credit exposures for banks in December 2011. The FRB will accept comments on its proposed new rules through June 3, 2016.