Federal Banking Agencies Issue Joint Rule Extending 2017 Transition Provisions under Capital Rules

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the “Federal Banking Agencies”) have issued a final rule stating that the 2017 transitional treatment applicable under the regulatory capital rules shall apply as of January 1, 2018 to national banks or Federal savings associations that are not advanced approaches national banks or Federal savings associations.

The transitional rules apply to regulatory capital deductions and risk weights for mortgage servicing assets, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks, non-significant investments in the capital of unconsolidated financial institutions, and significant investments in the capital of unconsolidated financial institutions that are not in the form of common stock.  The final rule also provides the extended transition period for certain minority interest limitations, including common equity tier 1 minority interest, tier 1 minority interest, and total capital minority interest exceeding the regulatory capital rules’ minority interest limitations.

However, the extended transition period only applies to banking organizations that are not subject to the advanced approaches capital rule.  Therefore, the transition schedule is unchanged for advanced approaches banking organizations.  These organizations must apply the capital rules’ fully phased-in treatment for the capital items beginning January 1, 2018.

For more information, the final rule can be found here: https://www.gpo.gov/fdsys/pkg/FR-2017-11-21/pdf/2017-25172.pdf?source=govdelivery&utm_medium=email&utm_source=govdelivery.