Featured Product

    US Agencies Adopt Amendments to Simplify Regulatory Capital Rules

    July 22, 2019

    US Agencies (FDIC, FED, and OCC) adopted a final rule that reduces regulatory burden by simplifying several requirements in the regulatory capital rules for banks. The simplifications in the final rule only apply to banking organizations that do not use the “advanced approaches” capital framework, which are generally firms with less than USD 250 billion in consolidated assets and less than USD 10 billion in total foreign exposure. For the amendments to simplify capital rules, the final rule will be effective as of April 01, 2020; for revisions to the pre-approval requirements for the redemption of common stock and other technical amendments, the rule will be effective as of October 01, 2019.

    The final rule is intended to simplify the capital treatment for certain acquisition, development, and construction loans; mortgage servicing assets; certain deferred tax assets; investments in the capital instruments of unconsolidated financial institutions; and minority interest. The final rule also would allow bank holding companies and savings and loan holding companies to redeem common stock without prior approval unless otherwise required. In addition, the final rule makes technical amendments to, and clarifies certain aspects of, the agencies’ capital rule for both non-advanced approaches banking organizations and advanced approaches banking organizations (technical amendments). Revisions to the definition of high-volatility commercial real estate (HVCRE) exposure in the agencies’ capital rule are being addressed in a separate rulemaking. The final rule:

    • Increases common equity tier 1 (CET1) capital threshold deductions from 10% to 25% for mortgage servicing assets, deferred tax assets arising from temporary differences (temporary difference DTAs), and non-significant and significant investments in the capital of unconsolidated financial institutions.
    • Removes the need to distinguish between non-significant and significant investments in the capital of unconsolidated financial institutions.
    • Removes the aggregate 15% CET1 threshold deduction for mortgage servicing assets, deferred tax assets, and significant investments in the capital of unconsolidated financial institutions.
    • Replaces the complicated methodology to determine the amount of minority interest "includable" in capital with a simple limit of 10% for minority interest includable in each tier of regulatory capital (not including the minority interest itself), less any deductions and adjustments.
    • Retains the 250% risk-weight applicable to non-deducted amounts of mortgage servicing assets and temporary difference deferred tax assets.
    • Requires a bank to apply the risk-weight applicable to the exposure category of the investment for any non-deducted amount of investments in the capital of unconsolidated financial institutions.
    • Removes the 250% risk-weight to be applied to non-deducted amounts of significant investments in the capital of unconsolidated financial institutions.

     

    Related Links

    Effective Date: April 01, 2020 (capital rules); October 01, 2019 (other amendments)

    Keywords: Americas, US, Banking, CET 1, Technical Amendments, HVCRE, Regulatory Capital, Non-Advanced Approaches Organizations, EGRRCP Act, US Agencies

    Featured Experts
    Related Articles
    News

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News
    News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News
    News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News
    News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News
    News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News
    News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News
    News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751