Featured Product

    US Agencies Amend Capital Rule to Facilitate Emergency Investment

    March 22, 2021

    US Agencies (FDIC, FED, and OCC) issued an interim final rule to revise the capital rules to allow investments of the U.S. Treasury, under the Emergency Capital Investment Program (ECIP), to qualify as regulatory capital. A banking institution is generally eligible to receive capital investments from Treasury if it is a low- and moderate-income community financial institution, which is defined to include any financial institution that is a community development financial institution or minority depository institution and an insured depository institution, bank holding company, savings and loan holding company, or federally insured credit union (also known as eligible banking organizations). The revised rule specifies that the preferred stock issued under the ECIP would qualify as additional tier 1 capital and the subordinated debt issued under the ECIP would qualify as tier 2 capital under the capital rule. The rule will become effective on March 22, 2021 while comments will be accepted until May 21, 2021.

    Nevertheless, the authority of the U.S. Treasury to make capital investments under ECIP is time limited. The Program will end six months after the date on which the national emergency concerning the COVID–19 outbreak terminates. On March 04, 2021, Treasury published the terms of the Senior Preferred Stock and Subordinated Debt. As described in the terms published by Treasury, Senior Preferred Stock issued under ECIP will be noncumulative, perpetual preferred stock that is senior to the issuer’s common stock and pari passu with (or, in some cases, senior to) the issuer’s most senior class of existing preferred stock. Subordinated Debt issued under ECIP will be unsecured subordinated debt that will rank junior to all other debt of the issuer, except to mutual capital certificates or similar instruments issued by a mutual banking organization and to any equity instruments issued by an S corporation. On March 04, 2021, Treasury also issued an interim final rule that established restrictions on executive compensation, capital distributions, and luxury expenditures for entities, under the ECIP.

    Overall, the ECIP is intended to support the efforts of minority depository institutions and community development financial institutions to provide loans, grants, and forbearance to small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities, which may be disproportionately affected by COVID-19 pandemic. Under the program, the Treasury will purchase preferred stock or subordinated debt from qualifying minority depository institutions and community development financial institutions, with the corresponding dividend or interest rate based on the institution meeting lending targets. Through the interim final rule of the US Agencies, one of the issues the agencies seek comments on involves the regulatory capital treatment of the preferred stock and subordinated debt issued under ECIP.

     

    Related Links

    Comment Due Date: May 21, 2021

    Effective Date: March 22, 2021

    Keywords: Americas, US, Banking, Regulatory Capital, ECIP, COVID-19, Basel, US Agencies

    Featured Experts
    Related Articles
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News
    News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News
    News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News
    News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News
    News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938