The Office of the Comptroller of the Currency (OCC) and Board of Governors of the Federal Reserve System (Fed) published final rules in the Federal Register on October 11, 2013 revising risk-based and leverage capital requirements for banking organizations and replacing existing interim rules. The final rules consolidate three separate notices of proposed rulemaking that the OCC, Board, and FDIC published in the Federal Register on August 30, 2012, with selected changes. The rules establish a new regulatory capital framework that incorporates Basel III standards and other elements. The rule applicable to all national banks and federal savings associations "strengthens the definition of regulatory capital, increases risk-based capital requirements, and amends the methodologies for determining risk-weighted assets." Pursuant to a schedule of transition periods, the rule is effective for advanced approaches banks on January 1, 2014, and for all other banks on January 1, 2015.
Among other things, these final rules:
- implement a revised definition of regulatory capital, a new common equity tier 1 minimum capital requirement, a higher minimum tier 1 capital requirement, and, for banking organizations subject to the advanced approaches risk-based capital rules, a supplementary leverage ratio that incorporates a broader set of exposures in the denominator;
- incorporate these new requirements into the agencies’ prompt corrective action (PCA) framework;
- establish limits on a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements;
- amend the methodologies for
determining risk-weighted assets for all
banking organizations;
- introduces
disclosure requirements that would
apply to top-tier banking organizations
domiciled in the United States with $50
billion or more in total assets;
- adopt changes to the agencies’
regulatory capital requirements that
meet the requirements of section 171
and section 939A of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act; and
- codify the
agencies’ regulatory capital rules, which
have previously resided in various
appendices to their respective
regulations, into a harmonized
integrated regulatory framework.
In
addition, the OCC is amending the
market risk capital rule to apply to Federal savings
associations, and the Fed is amending
the advanced approaches and market
risk rules to apply to top-tier savings
and loan holding companies domiciled
in the United States, except for certain
savings and loan holding companies
that are substantially engaged in
insurance underwriting or commercial
activities.