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November 21, 2017

US Agencies (FDIC, FED, and OCC) are adopting the final rule to extend the regulatory capital treatment applicable during 2017, under the regulatory capital rules for certain items. These items include regulatory capital deductions, risk-weights, and certain minority interest limitations. The final rule becomes effective from January 01, 2018.

The relief provided under the final rule applies to banking organizations that are not subject to the advanced approaches of capital rules (known as non-advanced approaches banking organizations). For these banking organizations, the final rule extends the current regulatory capital treatment of the following:

  • Mortgage servicing assets
  • Deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks
  • Significant investments in the capital of unconsolidated financial institutions in the form of common stock
  • Non-significant investments in the capital of unconsolidated financial institutions
  • Significant investments in the capital of unconsolidated financial institutions that are not in the form of common stock
  • Common equity tier 1 minority interest, tier 1 minority interest, and total capital minority interest exceeding the capital rules’ minority interest limitations

Under the final rule, advanced approaches banking organizations continue to be subject to the transition provisions established by capital rules for the above capital items. Therefore, the transition schedule for advanced approaches banking organizations remains and these banking organizations are required to apply the capital rules’ fully phased-in treatment for these capital items beginning January 01, 2018. The capital rules limit the amount of capital that is eligible for inclusion in regulatory capital in cases of minority interest. The capital rules contain transition provisions that phase-in certain requirements over several years, to give banking organizations time to adjust and adapt to the new requirements.

 

Related Link: Final Rule (PDF)

Effective Date: January 01, 2018

Keywords: Americas, US, Banking, Basel III, Non-Advanced Approaches Organizations, Transition Provisions, Capital Rules, US Agencies

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