Comptroller of the Currency Issues Bulletin on Simplifications to Capital Rule
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Final Rule
Summary
Specifically, this rule (1) simplifies the current regulatory capital treatment for mortgage servicing assets (MSA), temporary difference deferred tax assets (DTA), and holdings of regulatory capital instruments issued by other financial institutions; and (2) simplifies the calculation for limitations on minority interest includable in regulatory capital. In addition, the final rule makes certain technical amendments to parts of the capital rule that apply to all banks.
In the
Note for
The final rule applies to all national banks and federal savings associations (collectively, banks), including community banks.
Highlights
* With regard to the treatment of MSAs, DTAs, and holdings of regulatory capital instruments issued by other financial institutions:
* For non-advanced approaches banks, the rule replaces the existing individual 10 percent and cumulative 15 percent common equity tier 1 capital deduction thresholds for MSAs and temporary difference DTAs that cannot be realized through net operating loss carrybacks with individual thresholds of 25 percent of common equity tier 1. Non-advanced approaches banks will be required to deduct from common equity tier 1 capital any amount of these assets that individually exceeds the 25 percent threshold.
* To reduce complexity for non-advanced approaches banks, the final rule replaces the current capital rule's different deduction treatments for (i) significant investments in the regulatory capital of other financial institutions in the form of common stock, (ii) significant investments in the regulatory capital of other financial institutions that are not in the form of common stock, and (iii) non-significant investments in the regulatory capital of other financial institutions with one treatment for all investments in the regulatory capital of other financial institutions. Non-advanced approaches banks will be required to deduct from common equity tier 1 capital any amount of its total investments in the regulatory capital of other financial institutions that exceeds 25 percent of common equity tier 1 capital.
* With regard to the inclusion of minority interest in regulatory capital:
* For non-advanced approaches banks, the agencies have simplified the calculation for limiting minority interest in regulatory capital. Specifically, the final rule limits the inclusion of minority interest in regulatory capital as follows: of common equity tier 1 minority interest up to 10 percent of the bank's common equity tier 1 capital; tier 1 minority interest up to 10 percent of the bank's tier 1 capital; and total capital minority interest up to 10 percent of the bank's total capital.
* The final rule also makes several technical amendments to correct and clarify other areas of the capital rule that apply to all banks.
Background
In 2013, the agencies adopted a rule that strengthened the capital requirements applicable to banking organizations (capital rule). The capital rule increased the quantity and improved the quality of required regulatory capital, thereby strengthening the ability of banking organizations to absorb losses in times of market and economic stress.
Since issuance of the capital rule in 2013, banking organizations and other members of the public have raised concerns regarding regulatory burden, complexity, and costs associated with certain aspects of the rule. In response to these concerns, the agencies stated in the
Further Information
Please contact
Senior Deputy Comptroller and Chief Counsel
Related Link
"Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996" (https://www.govinfo.gov/content/pkg/FR-2019-07-22/pdf/2019-15131.pdf)
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Comptroller of the Currency Issues Bulletin on Final Rule
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