The proposal comes as the regulators plan to come up with simpler capital requirements
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Federal banking regulators have proposed extending a transitional capital treatment for community banks as they work to come up with a plan to simplify regulatory capital requirements, according to a joint statement.
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC), and the Office of Comptroller of the Currency made the joint statement.
The extension would apply to the treatment of regulatory capital deductions and risk weights for banks that will not be subject to the regulators’ advanced approaches capital rules. These banks are generally those that have total consolidated assets below $250 billion and total foreign exposure of less than $10 billion. The proposal will not affect banking organizations that will be subject to the advanced approaches rules, which will come into effect on Jan. 1.
The proposed extension follows a review of regulations that led to a plan to simplify capital rules particularly for community banks. Although that plan simplifies the capital treatment of mortgage servicing assets and other items, current capital rules provides that a different treatment will replace the transitional treatment for those items on Jan. 1.
To avoid the implementation of these requirements on banks that are not subject to the advanced approaches capital rules, the agencies have proposed to extend the transitional treatment for the following items: mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests.
“I strongly support the prudential banking agencies’ proposal to freeze the phase-in of the Basel 3 capital rules for community banks,” said FDIC Vice Chairman Thomas Hoenig. “Community banks engaging in traditional activities deserve meaningful relief from risk-based capital rules.”
The federal agencies expect to propose the simplified capital requirement in the coming months.
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The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC), and the Office of Comptroller of the Currency made the joint statement.
The extension would apply to the treatment of regulatory capital deductions and risk weights for banks that will not be subject to the regulators’ advanced approaches capital rules. These banks are generally those that have total consolidated assets below $250 billion and total foreign exposure of less than $10 billion. The proposal will not affect banking organizations that will be subject to the advanced approaches rules, which will come into effect on Jan. 1.
The proposed extension follows a review of regulations that led to a plan to simplify capital rules particularly for community banks. Although that plan simplifies the capital treatment of mortgage servicing assets and other items, current capital rules provides that a different treatment will replace the transitional treatment for those items on Jan. 1.
To avoid the implementation of these requirements on banks that are not subject to the advanced approaches capital rules, the agencies have proposed to extend the transitional treatment for the following items: mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests.
“I strongly support the prudential banking agencies’ proposal to freeze the phase-in of the Basel 3 capital rules for community banks,” said FDIC Vice Chairman Thomas Hoenig. “Community banks engaging in traditional activities deserve meaningful relief from risk-based capital rules.”
The federal agencies expect to propose the simplified capital requirement in the coming months.
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