64475Federal Register / Vol. 86, No. 220 / Thursday, November 18, 2021 / Notices
1 12 U.S.C. 1831n(c)(1) and 12 U.S.C. 1831n(c)(3).
2 Although not required under section 37(c), this
report includes descriptions of certain of the
Board’s capital standards applicable to depository
institution holding companies where such
descriptions are relevant to the discussion of capital
standards applicable to institutions.
3 See 78 FR 62018 (October 11, 2013) (final rule
issued by the OCC and the Board); 78 FR 55340
(September 10, 2013) (interim final rule issued by
the FDIC). The FDIC later issued its final rule in 79
FR 20754 (April 14, 2014). The agencies’ respective
capital rule is at 12 CFR part 3 (OCC), 12 CFR part
217 (Board), and 12 CFR part 324 (FDIC). The
capital rule applies to institutions, as well as to
certain bank holding companies and savings and
loan holding companies. See 12 CFR 217.1(c).
providers and FHFA–OIG-authorized
contractor networks located within the
Continental United States. Paper records
are stored in locked offices, locked file
rooms and locked file cabinets or safes.
POLICIES AND PRACTICES FOR RETRIEVAL OF
RECORDS:
Records may be retrieved by any of
the following: name, contact
information such as address (home,
mailing, and/or business); telephone
numbers (personal and/or business);
electronic mail addresses (personal and/
or business), photographic identifiers;
geospatial and/or geolocation data, date
of entry into FHFA–OIG facilities;
symptoms or other medical information
reported; offices or floors visited within
FHFA–OIG facilities; names of
individuals reported as being in close
proximity to another individual; the
names of individuals contacted as part
of contact tracing effort; vaccination
status; vaccination date(s); vaccination
type(s); and work status (full or part
time contractor, etc.).
POLICIES AND PRACTICIES FOR RETENTION AND
DISPOSAL OF RECORDS:
Records are retained and disposed of
in accordance with National Archives
and Records Administration General
Records Schedule 2.7, Item 060 and
Item 070.
ADMINISTRATIVE, TECHNICAL, AND PHYSICAL
SAFEGUARDS:
Records are maintained in controlled
access areas. Electronic records are
protected by restricted access
procedures, including user
identifications and passwords. Only
FHFA–OIG staff (and FHFA–OIG
contractors assisting such staff) whose
official duties require access are allowed
to view, administer, and control these
records.
RECORD ACCESS PROCEDURES:
See ‘‘Notification Procedures,’’ below.
CONTESTING RECORD PROCEDURES:
See ‘‘Notification Procedures,’’ below.
NOTIFICATION PROCEDURES:
Individuals seeking notification of
any records about themselves contained
in this system should address their
inquiry via email to privacy@
fhfaoig.gov, or by mail to the Office of
Inspector General, Federal Housing
Finance Agency, 400 Seventh Street
SW, 3rd Floor, Washington, DC 20219,
or in accordance with the procedures set
forth in 12 CFR part 1204. Please note
that all mail sent to FHFA–OIG via the
U.S. Postal Service is routed through a
national irradiation facility, a process
that may delay delivery by
approximately two weeks. For any time-
sensitive correspondence, please plan
accordingly.
EXEMPTIONS PROMULGATED FOR THE SYSTEM:
None.
HISTORY:
None.
Leonard DePasquale,
Chief Counsel, Federal Housing Finance
Agency, Office of Inspector General.
[FR Doc. 2021–25189 Filed 11–17–21; 8:45 am]
BILLING CODE 8070–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
Joint Report: Differences in
Accounting and Capital Standards
Among the Federal Banking Agencies
as of September 30, 2021; Report to
Congressional Committees
AGENCY: Office of the Comptroller of the
Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Report to Congressional
committees.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), and the Federal Deposit
Insurance Corporation (FDIC)
(collectively, the agencies) have
prepared this report pursuant to section
37(c) of the Federal Deposit Insurance
Act. Section 37(c) requires the agencies
to jointly submit an annual report to the
Committee on Financial Services of the
U.S. House of Representatives and to the
Committee on Banking, Housing, and
Urban Affairs of the U.S. Senate
describing differences among the
accounting and capital standards used
by the agencies for insured depository
institutions (institutions).1 Section 37(c)
requires that this report be published in
the Federal Register. The agencies have
not identified any material differences
among the agencies’ accounting and
capital standards applicable to the
insured depository institutions they
regulate and supervise.
FOR FURTHER INFORMATION CONTACT:
OCC: Andrew Tschirhart, Risk Expert,
Capital and Regulatory Policy, (202)
649–6370, Rima Kundnani, Counsel,
Chief Counsel’s Office, (202) 649–5490,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Andrew Willis, Manager, (202)
912–4323, Jennifer McClean, Senior
Financial Institution Policy Analyst II,
(202) 785–6033, Division of Supervision
and Regulation, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue NW,
Washington, DC 20551.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, (703) 245–0778, Richard
Smith, Capital Policy Analyst, Capital
Policy Section, (703) 254–0782, Division
of Risk Management Supervision,
Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION: The text of
the report follows:
Report to the Committee on Financial
Services of the U.S. House of
Representatives and to the Committee
on Banking, Housing, and Urban
Affairs of the U.S. Senate Regarding
Differences in Accounting and Capital
Standards Among the Federal Banking
Agencies
Introduction
In accordance with section 37(c), the
agencies are submitting this joint report,
which covers differences among their
accounting or capital standards existing
as of September 30, 2021, applicable to
institutions.2 In recent years, the
agencies have acted together to
harmonize their accounting and capital
standards and eliminate as many
differences as possible. As of September
30, 2021, the agencies have not
identified any material differences
among the agencies’ accounting
standards applicable to institutions.
In 2013, the agencies revised the risk-
based and leverage capital rule for
institutions (capital rule),3 which
harmonized the agencies’ capital rule in
VerDate Sep<11>2014 17:11 Nov 17, 2021 Jkt 256001 PO 00000 Frm 00031 Fmt 4703 Sfmt 4703 E:\FR\FM\18NON1.SGM 18NON1
khammond on DSKJM1Z7X2PROD with NOTICES
1 12 U.S.C. 1831n(c)(1) and 12 U.S.C. 1831n(c)(3).
2 Although not required under section 37(c), this
report includes descriptions of certain of the
Board’s capital standards applicable to depository
institution holding companies where such
descriptions are relevant to the discussion of capital
standards applicable to institutions.
3 See 78 FR 62018 (October 11, 2013) (final rule
issued by the OCC and the Board); 78 FR 55340
(September 10, 2013) (interim final rule issued by
the FDIC). The FDIC later issued its final rule in 79
FR 20754 (April 14, 2014). The agencies’ respective
capital rule is at 12 CFR part 3 (OCC), 12 CFR part
217 (Board), and 12 CFR part 324 (FDIC). The
capital rule applies to institutions, as well as to
certain bank holding companies and savings and
loan holding companies. See 12 CFR 217.1(c).
providers and FHFA–OIG-authorized
contractor networks located within the
Continental United States. Paper records
are stored in locked offices, locked file
rooms and locked file cabinets or safes.
POLICIES AND PRACTICES FOR RETRIEVAL OF
RECORDS:
Records may be retrieved by any of
the following: name, contact
information such as address (home,
mailing, and/or business); telephone
numbers (personal and/or business);
electronic mail addresses (personal and/
or business), photographic identifiers;
geospatial and/or geolocation data, date
of entry into FHFA–OIG facilities;
symptoms or other medical information
reported; offices or floors visited within
FHFA–OIG facilities; names of
individuals reported as being in close
proximity to another individual; the
names of individuals contacted as part
of contact tracing effort; vaccination
status; vaccination date(s); vaccination
type(s); and work status (full or part
time contractor, etc.).
POLICIES AND PRACTICIES FOR RETENTION AND
DISPOSAL OF RECORDS:
Records are retained and disposed of
in accordance with National Archives
and Records Administration General
Records Schedule 2.7, Item 060 and
Item 070.
ADMINISTRATIVE, TECHNICAL, AND PHYSICAL
SAFEGUARDS:
Records are maintained in controlled
access areas. Electronic records are
protected by restricted access
procedures, including user
identifications and passwords. Only
FHFA–OIG staff (and FHFA–OIG
contractors assisting such staff) whose
official duties require access are allowed
to view, administer, and control these
records.
RECORD ACCESS PROCEDURES:
See ‘‘Notification Procedures,’’ below.
CONTESTING RECORD PROCEDURES:
See ‘‘Notification Procedures,’’ below.
NOTIFICATION PROCEDURES:
Individuals seeking notification of
any records about themselves contained
in this system should address their
inquiry via email to privacy@
fhfaoig.gov, or by mail to the Office of
Inspector General, Federal Housing
Finance Agency, 400 Seventh Street
SW, 3rd Floor, Washington, DC 20219,
or in accordance with the procedures set
forth in 12 CFR part 1204. Please note
that all mail sent to FHFA–OIG via the
U.S. Postal Service is routed through a
national irradiation facility, a process
that may delay delivery by
approximately two weeks. For any time-
sensitive correspondence, please plan
accordingly.
EXEMPTIONS PROMULGATED FOR THE SYSTEM:
None.
HISTORY:
None.
Leonard DePasquale,
Chief Counsel, Federal Housing Finance
Agency, Office of Inspector General.
[FR Doc. 2021–25189 Filed 11–17–21; 8:45 am]
BILLING CODE 8070–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
Joint Report: Differences in
Accounting and Capital Standards
Among the Federal Banking Agencies
as of September 30, 2021; Report to
Congressional Committees
AGENCY: Office of the Comptroller of the
Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Report to Congressional
committees.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), and the Federal Deposit
Insurance Corporation (FDIC)
(collectively, the agencies) have
prepared this report pursuant to section
37(c) of the Federal Deposit Insurance
Act. Section 37(c) requires the agencies
to jointly submit an annual report to the
Committee on Financial Services of the
U.S. House of Representatives and to the
Committee on Banking, Housing, and
Urban Affairs of the U.S. Senate
describing differences among the
accounting and capital standards used
by the agencies for insured depository
institutions (institutions).1 Section 37(c)
requires that this report be published in
the Federal Register. The agencies have
not identified any material differences
among the agencies’ accounting and
capital standards applicable to the
insured depository institutions they
regulate and supervise.
FOR FURTHER INFORMATION CONTACT:
OCC: Andrew Tschirhart, Risk Expert,
Capital and Regulatory Policy, (202)
649–6370, Rima Kundnani, Counsel,
Chief Counsel’s Office, (202) 649–5490,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Andrew Willis, Manager, (202)
912–4323, Jennifer McClean, Senior
Financial Institution Policy Analyst II,
(202) 785–6033, Division of Supervision
and Regulation, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue NW,
Washington, DC 20551.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, (703) 245–0778, Richard
Smith, Capital Policy Analyst, Capital
Policy Section, (703) 254–0782, Division
of Risk Management Supervision,
Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION: The text of
the report follows:
Report to the Committee on Financial
Services of the U.S. House of
Representatives and to the Committee
on Banking, Housing, and Urban
Affairs of the U.S. Senate Regarding
Differences in Accounting and Capital
Standards Among the Federal Banking
Agencies
Introduction
In accordance with section 37(c), the
agencies are submitting this joint report,
which covers differences among their
accounting or capital standards existing
as of September 30, 2021, applicable to
institutions.2 In recent years, the
agencies have acted together to
harmonize their accounting and capital
standards and eliminate as many
differences as possible. As of September
30, 2021, the agencies have not
identified any material differences
among the agencies’ accounting
standards applicable to institutions.
In 2013, the agencies revised the risk-
based and leverage capital rule for
institutions (capital rule),3 which
harmonized the agencies’ capital rule in
VerDate Sep<11>2014 17:11 Nov 17, 2021 Jkt 256001 PO 00000 Frm 00031 Fmt 4703 Sfmt 4703 E:\FR\FM\18NON1.SGM 18NON1
khammond on DSKJM1Z7X2PROD with NOTICES
64476 Federal Register / Vol. 86, No. 220 / Thursday, November 18, 2021 / Notices
4 The capital rule reflects the scope of each
agency’s regulatory jurisdiction. For example, the
Board’s capital rule includes requirements related
to bank holding companies, savings and loan
holding companies, and state member banks, while
the FDIC’s capital rule includes provisions for state
nonmember banks and state savings associations,
and the OCC’s capital rule includes provisions for
national banks and federal savings associations.
5 See e.g., 84 FR 35234 (July 22, 2019). The OCC
and FDIC revised their capital rule to conform with
language in the Board’s capital rule related to the
qualification criteria for additional tier 1 capital
instruments and the definition of corporate
exposures. As a result, these differences, which
were included in previous reports submitted by the
agencies pursuant to section 37(c), have been
eliminated.
6 Certain minor differences, such as terminology
specific to each agency for the institutions that it
supervises, are not included in this report.
7 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12
CFR 324.2 (FDIC).
8 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR
324.2 (FDIC).
9 12 CFR 217.2.
10 12 CFR 217.20(b)(1)(v) and 217.20(c)(1)(viii)
(Board).
11 12 CFR 217.20(b)(1)(v) and 217.20(c)(1)(viii)
(Board); 12 CFR 324.20(b)(1)(v) and
324.20(c)(1)(viii) (FDIC). Although not referenced in
the capital rule, the OCC has similar restrictions on
dividends; 12 CFR 5.55 and 12 CFR 5.63. Certain
restrictions on the payment of dividends that apply
under separate regulations, and therefore not
discussed in this report, are different among the
agencies. Compare 12 CFR 208.5 (Board) and 12
CFR 5.64 (OCC) with 12 CFR 303.241 (FDIC).
12 Board-regulated institution means a state
member bank, bank holding company, or savings
and loan holding company. See 12 CFR 217.2.
13 12 CFR 217.20(f); see also 12 CFR
217.20(b)(1)(iii).
14 See 12 CFR 5.46, 5.47, 5.55, and 5.56 (OCC);
12 CFR 208.5 (Board); 12 CFR 303.241 (FDIC).
15 12 CFR 324.22(a)(9).
a comprehensive manner.4 Since 2013,
the agencies have revised the capital
rule on several occasions, further
reducing the number of differences in
the agencies’ capital rule.5 Today, only
a few differences remain, which are
statutorily mandated for certain
categories of institutions or which
reflect certain technical, generally
nonmaterial differences among the
agencies’ capital rule. No new material
differences were identified in the capital
standards applicable to institutions in
this report compared to the previous
report submitted by the agencies
pursuant to section 37(c).
Differences in the Standards Among the
Federal Banking Agencies
Differences in Accounting Standards
As of September 30, 2021, the
agencies have not identified any
material differences among themselves
in the accounting standards applicable
to institutions.
Differences in Capital Standards
The following are the remaining
technical differences among the capital
standards of the agencies’ capital rule.6
Definitions
The agencies’ capital rule largely
contains the same definitions.7 The
differences that exist generally serve to
accommodate the different needs of the
institutions that each agency charters,
regulates, and/or supervises.
The agencies’ capital rule has
differing definitions of a pre-sold
construction loan. The capital rule of all
three agencies provides that a pre-sold
construction loan means any ‘‘one-to-
four family residential construction loan
to a builder that meets the requirements
of section 618(a)(1) or (2) of the
Resolution Trust Corporation
Refinancing, Restructuring, and
Improvement Act of 1991 (12 U.S.C.
1831n), and, in addition to other
criteria, the purchaser has not
terminated the contract.’’ 8 The Board’s
definition provides further clarification
that, if a purchaser has terminated the
contract, the institution must
immediately apply a 100 percent risk
weight to the loan and report the revised
risk weight in the next quarterly
Consolidated Reports of Condition and
Income (Call Report).9 Similarly, if the
purchaser has terminated the contract,
the OCC and FDIC capital rule would
immediately disqualify the loan from
receiving a 50 percent risk weight, and
would apply a 100 percent risk weight
to the loan. The change in risk weight
would be reflected in the next quarterly
Call Report. Thus, the minor wording
difference between the agencies should
have no practical consequence.
Capital Components and Eligibility
Criteria for Regulatory Capital
Instruments
While the capital rule generally
provides uniform eligibility criteria for
regulatory capital instruments, there are
some textual differences among the
agencies’ capital rule. The capital rule of
each of the three agencies requires that,
for an instrument to qualify as common
equity tier 1 or additional tier 1 capital,
cash dividend payments be paid out of
net income and retained earnings, but
the Board’s capital rule also allows cash
dividend payments to be paid out of
related surplus.10 In addition, both the
Board’s capital rule and the FDIC’s
capital rule include an additional
sentence noting that institutions
regulated by each agency are subject to
restrictions independent of the capital
rule on paying dividends out of surplus
and/or that would result in a reduction
of capital stock.11 These additional
sentences do not create differences in
substance between the agencies’ capital
standards, but rather note that
restrictions apply under separate
regulations.
The provision in the Board’s capital
rule that allows dividends to be paid out
of related surplus is a difference in
substance among the agencies’ capital
rule. However, due to the restrictions on
institutions regulated by the Board in
separate regulations, this additional
language in the Board’s rule has a
practical impact only on bank holding
companies and savings and loan
holding companies and is not a
difference as applied to institutions. The
agencies apply the criteria for
determining eligibility of regulatory
capital instruments in a manner that
ensures consistent outcomes for
institutions.
In addition, the Board’s capital rule
includes a requirement that a Board-
regulated institution 12 must obtain
prior approval before redeeming
regulatory capital instruments.13 This
requirement effectively applies only to a
bank holding company or a savings and
loan holding company and is, therefore,
not included in the OCC and FDIC
capital rule. All three agencies require
institutions to obtain prior approval
before redeeming regulatory capital
instruments in other regulations.14 The
additional provision in the Board’s
capital rule, therefore, only has a
practical impact on bank holding
companies and savings and loan
holding companies and is not a
difference as applied to institutions.
Capital Deductions
There is a technical difference
between the FDIC’s capital rule and the
OCC’s and Board’s capital rule with
regards to an explicit requirement for
deduction of examiner-identified losses.
The agencies require their examiners to
determine whether their respective
supervised institutions have
appropriately identified losses. The
FDIC’s capital rule, however, explicitly
requires FDIC-supervised institutions to
deduct identified losses from common
equity tier 1 capital elements, to the
extent that the institutions’ common
equity tier 1 capital would have been
reduced if the appropriate accounting
entries had been recorded.15 Generally,
identified losses are those items that an
examiner determines to be chargeable
against income, capital, or general
valuation allowances.
For example, identified losses may
include, among other items, assets
classified as loss, off-balance-sheet
items classified as loss, any expenses
that are necessary for the institution to
record in order to replenish its general
VerDate Sep<11>2014 17:11 Nov 17, 2021 Jkt 256001 PO 00000 Frm 00032 Fmt 4703 Sfmt 4703 E:\FR\FM\18NON1.SGM 18NON1
khammond on DSKJM1Z7X2PROD with NOTICES
4 The capital rule reflects the scope of each
agency’s regulatory jurisdiction. For example, the
Board’s capital rule includes requirements related
to bank holding companies, savings and loan
holding companies, and state member banks, while
the FDIC’s capital rule includes provisions for state
nonmember banks and state savings associations,
and the OCC’s capital rule includes provisions for
national banks and federal savings associations.
5 See e.g., 84 FR 35234 (July 22, 2019). The OCC
and FDIC revised their capital rule to conform with
language in the Board’s capital rule related to the
qualification criteria for additional tier 1 capital
instruments and the definition of corporate
exposures. As a result, these differences, which
were included in previous reports submitted by the
agencies pursuant to section 37(c), have been
eliminated.
6 Certain minor differences, such as terminology
specific to each agency for the institutions that it
supervises, are not included in this report.
7 See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12
CFR 324.2 (FDIC).
8 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR
324.2 (FDIC).
9 12 CFR 217.2.
10 12 CFR 217.20(b)(1)(v) and 217.20(c)(1)(viii)
(Board).
11 12 CFR 217.20(b)(1)(v) and 217.20(c)(1)(viii)
(Board); 12 CFR 324.20(b)(1)(v) and
324.20(c)(1)(viii) (FDIC). Although not referenced in
the capital rule, the OCC has similar restrictions on
dividends; 12 CFR 5.55 and 12 CFR 5.63. Certain
restrictions on the payment of dividends that apply
under separate regulations, and therefore not
discussed in this report, are different among the
agencies. Compare 12 CFR 208.5 (Board) and 12
CFR 5.64 (OCC) with 12 CFR 303.241 (FDIC).
12 Board-regulated institution means a state
member bank, bank holding company, or savings
and loan holding company. See 12 CFR 217.2.
13 12 CFR 217.20(f); see also 12 CFR
217.20(b)(1)(iii).
14 See 12 CFR 5.46, 5.47, 5.55, and 5.56 (OCC);
12 CFR 208.5 (Board); 12 CFR 303.241 (FDIC).
15 12 CFR 324.22(a)(9).
a comprehensive manner.4 Since 2013,
the agencies have revised the capital
rule on several occasions, further
reducing the number of differences in
the agencies’ capital rule.5 Today, only
a few differences remain, which are
statutorily mandated for certain
categories of institutions or which
reflect certain technical, generally
nonmaterial differences among the
agencies’ capital rule. No new material
differences were identified in the capital
standards applicable to institutions in
this report compared to the previous
report submitted by the agencies
pursuant to section 37(c).
Differences in the Standards Among the
Federal Banking Agencies
Differences in Accounting Standards
As of September 30, 2021, the
agencies have not identified any
material differences among themselves
in the accounting standards applicable
to institutions.
Differences in Capital Standards
The following are the remaining
technical differences among the capital
standards of the agencies’ capital rule.6
Definitions
The agencies’ capital rule largely
contains the same definitions.7 The
differences that exist generally serve to
accommodate the different needs of the
institutions that each agency charters,
regulates, and/or supervises.
The agencies’ capital rule has
differing definitions of a pre-sold
construction loan. The capital rule of all
three agencies provides that a pre-sold
construction loan means any ‘‘one-to-
four family residential construction loan
to a builder that meets the requirements
of section 618(a)(1) or (2) of the
Resolution Trust Corporation
Refinancing, Restructuring, and
Improvement Act of 1991 (12 U.S.C.
1831n), and, in addition to other
criteria, the purchaser has not
terminated the contract.’’ 8 The Board’s
definition provides further clarification
that, if a purchaser has terminated the
contract, the institution must
immediately apply a 100 percent risk
weight to the loan and report the revised
risk weight in the next quarterly
Consolidated Reports of Condition and
Income (Call Report).9 Similarly, if the
purchaser has terminated the contract,
the OCC and FDIC capital rule would
immediately disqualify the loan from
receiving a 50 percent risk weight, and
would apply a 100 percent risk weight
to the loan. The change in risk weight
would be reflected in the next quarterly
Call Report. Thus, the minor wording
difference between the agencies should
have no practical consequence.
Capital Components and Eligibility
Criteria for Regulatory Capital
Instruments
While the capital rule generally
provides uniform eligibility criteria for
regulatory capital instruments, there are
some textual differences among the
agencies’ capital rule. The capital rule of
each of the three agencies requires that,
for an instrument to qualify as common
equity tier 1 or additional tier 1 capital,
cash dividend payments be paid out of
net income and retained earnings, but
the Board’s capital rule also allows cash
dividend payments to be paid out of
related surplus.10 In addition, both the
Board’s capital rule and the FDIC’s
capital rule include an additional
sentence noting that institutions
regulated by each agency are subject to
restrictions independent of the capital
rule on paying dividends out of surplus
and/or that would result in a reduction
of capital stock.11 These additional
sentences do not create differences in
substance between the agencies’ capital
standards, but rather note that
restrictions apply under separate
regulations.
The provision in the Board’s capital
rule that allows dividends to be paid out
of related surplus is a difference in
substance among the agencies’ capital
rule. However, due to the restrictions on
institutions regulated by the Board in
separate regulations, this additional
language in the Board’s rule has a
practical impact only on bank holding
companies and savings and loan
holding companies and is not a
difference as applied to institutions. The
agencies apply the criteria for
determining eligibility of regulatory
capital instruments in a manner that
ensures consistent outcomes for
institutions.
In addition, the Board’s capital rule
includes a requirement that a Board-
regulated institution 12 must obtain
prior approval before redeeming
regulatory capital instruments.13 This
requirement effectively applies only to a
bank holding company or a savings and
loan holding company and is, therefore,
not included in the OCC and FDIC
capital rule. All three agencies require
institutions to obtain prior approval
before redeeming regulatory capital
instruments in other regulations.14 The
additional provision in the Board’s
capital rule, therefore, only has a
practical impact on bank holding
companies and savings and loan
holding companies and is not a
difference as applied to institutions.
Capital Deductions
There is a technical difference
between the FDIC’s capital rule and the
OCC’s and Board’s capital rule with
regards to an explicit requirement for
deduction of examiner-identified losses.
The agencies require their examiners to
determine whether their respective
supervised institutions have
appropriately identified losses. The
FDIC’s capital rule, however, explicitly
requires FDIC-supervised institutions to
deduct identified losses from common
equity tier 1 capital elements, to the
extent that the institutions’ common
equity tier 1 capital would have been
reduced if the appropriate accounting
entries had been recorded.15 Generally,
identified losses are those items that an
examiner determines to be chargeable
against income, capital, or general
valuation allowances.
For example, identified losses may
include, among other items, assets
classified as loss, off-balance-sheet
items classified as loss, any expenses
that are necessary for the institution to
record in order to replenish its general
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khammond on DSKJM1Z7X2PROD with NOTICES