Featured Product

    US Agencies Simplify Capital Calculation Rules for Banks

    November 13, 2019

    US Agencies (FDIC, FED, and OCC) published a final rule, effective January 01, 2020, that introduces an optional simplified measure of capital adequacy. As part of this measure, certain qualifying community banks will be eligible to opt into the community bank leverage ratio (CBLR) framework. The agencies also published a compliance guide to help community banking organizations understand the CBLR framework. In addition, the US Agencies published a final rule that permits non-advanced approaches banking organizations to use the simpler regulatory capital requirements for certain instruments when measuring their tier 1 capital as of January 01, 2020, instead of on the previous effective date of April 01, 2020. These simpler capital requirements relate to mortgage-servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, and the calculation of minority interest. Banking organizations may use this new measure of tier 1 capital under the CBLR framework.

    The final rule on CBLR framework provides for a simple measure of capital adequacy for certain community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. Under this rule, depository institutions and depository institution holding companies that have less than USD 10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9%, will be eligible to opt into the CBLR framework. The qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.

    The final rule on CBLR includes a two-quarter grace period, during which a qualifying community banking organization that temporarily fails to meet any of the qualifying criteria, including the greater than 9% leverage ratio requirement, generally, would still be deemed well-capitalized as long as the banking organization maintains a leverage ratio greater than 8%. The final rule will require changes to the Consolidated Reports of Condition and Income (FFIEC 031, FFIEC 041, and FFIEC 051) and the Consolidated Financial Statements for Holding Companies (FR Y–9C; OMB No. 7100-0128), which will be addressed in one or more separate Federal Register notices.

    The capital simplifications rule simplifies, for non-advanced approaches banking organizations, the calculation for the amount of capital issued by a consolidated subsidiary of a banking organization and held by third parties (sometimes referred to as a minority interest) that is "includable" in regulatory capital. The simpler capital requirements are being implemented via amendments to 12 CFR 3.21, 3.22, 3.300, 217.21, 217.22, 217.300(b) and (d), 324.21, 324.22, and 324.300. This direct final rule is being adopted to permit non-advanced approaches banking organizations to implement the sections of the capital simplifications rule (that were originally expected to be effective on April 01, 2020) from January 01, 2020. Non-advanced approaches banking organizations can elect whether to implement the changes in the quarter beginning January 01, 2020 or to implement them in the quarter beginning April 01, 2020. If a non-advanced approaches banking organization elects to adopt these revisions for the quarter beginning January 01, 2020, it must adopt all of these revisions for that quarter and thereafter.

     

    Related Links

    Effective Date: January 01, 2020

    Keywords: Americas, US, Banking, Community Banks, CBLR Framework, EGRRCP Act, Leverage Ratio, Capital Adequacy, Reporting, Call Reports, Capital Simplification Rule, Regulatory Capital, Non-Advanced Approaches Organizations, Tier 1 Capital, US Agencies

    Featured Experts
    Related Articles
    News

    BCBS Amends Guidelines on Sound Management of AML/CFT Risks

    BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).

    July 02, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Swap Margin Rule

    US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.

    July 01, 2020 WebPage Regulatory News
    News

    PRA Letter Sets Expectations on Approach to Managing Climate Risks

    PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.

    July 01, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS Publishes List of Internationally Active Insurance Groups

    IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.

    July 01, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act

    FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).

    July 01, 2020 WebPage Regulatory News
    News

    EC Launches Consultation on Review of Solvency II Directive

    EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.

    July 01, 2020 WebPage Regulatory News
    News

    ECB Consults on Supervisory Approach to Consolidation in Banking

    ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5425