56856 Federal Register / Vol. 79, No. 184 / Tuesday, September 23, 2014 / Notices
1 Prior to 2011, the Office of Thrift Supervision
(OTS) joined the agencies in submitting this annual
report to Congress. Title III of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, Public
Law. 111–203, 124 Stat. 1376 (2010) (Dodd-Frank
Act), transferred the powers, authorities, rights, and
duties of the OTS to other federal banking agencies
on July 21, 2011 (the transfer date), and the OTS
was abolished 90 days later. Under Title III, the
OCC assumed all functions of the OTS and the
Director of the OTS relating to federal savings
associations, and thus the OCC has responsibility
for the ongoing supervision, examination, and
regulation of federal savings associations as of the
transfer date. Title III transferred all supervision,
examination, and certain regulatory functions of the
OTS relating to state savings associations to the
FDIC and all functions relating to the supervision
of any savings and loan holding company and non-
depository institution subsidiaries of such holding
companies to the Board. Accordingly, this report is
being submitted by the OCC, Board, and FDIC.
2 See, e.g., 77 FR 75259 (December 19, 2012).
3 12 U.S.C. 4803(a).
4 See BCBS, ‘‘Basel III: A Global Regulatory
Framework for More Resilient Banks and Banking
Systems’’ (December 2010), available at
www.bis.org/publ/bcbs189.htm.
5 See 77 FR 52792 (August 30, 2012).
6 The Board adopted the revised capital rules as
final on July 2, 2013 (78 FR 62018 (October 11,
2013)); the OCC adopted the revised capital rules
as final on July 9, 2013 (78 FR 62018 (October 11,
2013)); and the FDIC adopted the revised capital
rules on an interim basis on July 9, 2013 (78 FR
55340 (September 10, 2013)).
7 See 77 FR 53060 (August 30, 2012).
8 See 78 FR 62018 (October 11, 2013) (OCC and
FRB) and 78 FR 55340 (September 10, 2013) (FDIC).
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 December 31, 2013; 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 the Congressional
Committees.
SUMMARY: The OCC, the Board, and the
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 between the
accounting and capital standards used
by the agencies. The report must be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
OCC: Benjamin Pegg, Risk Specialist,
Capital Policy, (202) 649–7146, Office of
the Comptroller of the Currency, 400 7th
Street SW., Washington, DC 20219.
Board: Sviatlana Phelan, Senior
Financial Analyst, Capital and
Regulatory Policy, (202) 912–4306,
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
FDIC: David W. Riley, Senior Analyst
(Capital Markets), (202) 898–3728,
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
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) must jointly submit an annual
report to the Committee on Financial
Services of the U.S. House of
Representatives and the Committee on
Banking, Housing, and Urban Affairs of
the U.S. Senate describing any
differences between the accounting and
capital standards used by the agencies.1
The report must be published in the
Federal Register.
The agencies are submitting this joint
report, which covers differences
between their uses of accounting or
capital standards existing as of
December 31, 2013, pursuant to section
37(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1831n(c)), as amended.
This report covers 2012 and 2013 and
describes capital differences similar to
those presented in previous reports.2
Since the agencies filed their first
reports on accounting and capital
differences in 1990, they have acted in
concert to harmonize their accounting
and capital standards and eliminate as
many differences as possible. Section
303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (12 U.S.C.
4803) also directs the agencies to work
jointly to make uniform all regulations
and guidelines implementing common
statutory or supervisory policies. The
results of these efforts must be
‘‘consistent with the principles of safety
and soundness, statutory law and
policy, and the public interest.’’ 3 In
recent years, the agencies have revised
their capital standards to harmonize
their regulatory capital requirements in
a comprehensive manner and to align
the amount of capital institutions are
required to hold more closely with the
credit risks and certain other risks to
which they are exposed. These revisions
have been made in a uniform manner
whenever possible to minimize
interagency differences. Although the
differences in capital standards have
diminished over time significantly, a
few differences remain, some of which
are statutorily mandated.
Several of the differences described in
this report will be resolved beginning in
2014, when revised capital rules take
effect for institutions subject to the
advanced approaches risk-based capital
rules, and in 2015, when revised capital
rules take effect for all other institutions
subject to those rules. In 2012, the
agencies published three notices of
proposed rulemaking seeking public
comment on the implementation of the
Basel III capital standards,4 a
standardized approach for risk
weighting assets and off-balance sheet
exposures, as well as revisions to the
agencies’ advanced approaches rules.5
The agencies adopted these proposals
with some revisions and published the
revised capital rules in the Federal
Register in 2013 (revised capital rules).6
In 2012, the agencies also revised
their market risk capital rules in a
uniform manner to better capture
positions subject to market risk, reduce
pro-cyclicality in market risk capital
requirements, enhance sensitivity to
market risks, and increase transparency
through enhanced disclosures.7 In the
revised capital rules, the agencies also
expanded the scope of the market risk
capital rules to include savings
associations and incorporated the
market risk rules into the revised
regulatory capital framework.8
In addition to the specific differences
in capital standards noted below, the
VerDate Sep<11>2014 17:55 Sep 22, 2014 Jkt 232001 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 E:\FR\FM\23SEN1.SGM 23SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
1 Prior to 2011, the Office of Thrift Supervision
(OTS) joined the agencies in submitting this annual
report to Congress. Title III of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, Public
Law. 111–203, 124 Stat. 1376 (2010) (Dodd-Frank
Act), transferred the powers, authorities, rights, and
duties of the OTS to other federal banking agencies
on July 21, 2011 (the transfer date), and the OTS
was abolished 90 days later. Under Title III, the
OCC assumed all functions of the OTS and the
Director of the OTS relating to federal savings
associations, and thus the OCC has responsibility
for the ongoing supervision, examination, and
regulation of federal savings associations as of the
transfer date. Title III transferred all supervision,
examination, and certain regulatory functions of the
OTS relating to state savings associations to the
FDIC and all functions relating to the supervision
of any savings and loan holding company and non-
depository institution subsidiaries of such holding
companies to the Board. Accordingly, this report is
being submitted by the OCC, Board, and FDIC.
2 See, e.g., 77 FR 75259 (December 19, 2012).
3 12 U.S.C. 4803(a).
4 See BCBS, ‘‘Basel III: A Global Regulatory
Framework for More Resilient Banks and Banking
Systems’’ (December 2010), available at
www.bis.org/publ/bcbs189.htm.
5 See 77 FR 52792 (August 30, 2012).
6 The Board adopted the revised capital rules as
final on July 2, 2013 (78 FR 62018 (October 11,
2013)); the OCC adopted the revised capital rules
as final on July 9, 2013 (78 FR 62018 (October 11,
2013)); and the FDIC adopted the revised capital
rules on an interim basis on July 9, 2013 (78 FR
55340 (September 10, 2013)).
7 See 77 FR 53060 (August 30, 2012).
8 See 78 FR 62018 (October 11, 2013) (OCC and
FRB) and 78 FR 55340 (September 10, 2013) (FDIC).
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 December 31, 2013; 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 the Congressional
Committees.
SUMMARY: The OCC, the Board, and the
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 between the
accounting and capital standards used
by the agencies. The report must be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
OCC: Benjamin Pegg, Risk Specialist,
Capital Policy, (202) 649–7146, Office of
the Comptroller of the Currency, 400 7th
Street SW., Washington, DC 20219.
Board: Sviatlana Phelan, Senior
Financial Analyst, Capital and
Regulatory Policy, (202) 912–4306,
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
FDIC: David W. Riley, Senior Analyst
(Capital Markets), (202) 898–3728,
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
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) must jointly submit an annual
report to the Committee on Financial
Services of the U.S. House of
Representatives and the Committee on
Banking, Housing, and Urban Affairs of
the U.S. Senate describing any
differences between the accounting and
capital standards used by the agencies.1
The report must be published in the
Federal Register.
The agencies are submitting this joint
report, which covers differences
between their uses of accounting or
capital standards existing as of
December 31, 2013, pursuant to section
37(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1831n(c)), as amended.
This report covers 2012 and 2013 and
describes capital differences similar to
those presented in previous reports.2
Since the agencies filed their first
reports on accounting and capital
differences in 1990, they have acted in
concert to harmonize their accounting
and capital standards and eliminate as
many differences as possible. Section
303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (12 U.S.C.
4803) also directs the agencies to work
jointly to make uniform all regulations
and guidelines implementing common
statutory or supervisory policies. The
results of these efforts must be
‘‘consistent with the principles of safety
and soundness, statutory law and
policy, and the public interest.’’ 3 In
recent years, the agencies have revised
their capital standards to harmonize
their regulatory capital requirements in
a comprehensive manner and to align
the amount of capital institutions are
required to hold more closely with the
credit risks and certain other risks to
which they are exposed. These revisions
have been made in a uniform manner
whenever possible to minimize
interagency differences. Although the
differences in capital standards have
diminished over time significantly, a
few differences remain, some of which
are statutorily mandated.
Several of the differences described in
this report will be resolved beginning in
2014, when revised capital rules take
effect for institutions subject to the
advanced approaches risk-based capital
rules, and in 2015, when revised capital
rules take effect for all other institutions
subject to those rules. In 2012, the
agencies published three notices of
proposed rulemaking seeking public
comment on the implementation of the
Basel III capital standards,4 a
standardized approach for risk
weighting assets and off-balance sheet
exposures, as well as revisions to the
agencies’ advanced approaches rules.5
The agencies adopted these proposals
with some revisions and published the
revised capital rules in the Federal
Register in 2013 (revised capital rules).6
In 2012, the agencies also revised
their market risk capital rules in a
uniform manner to better capture
positions subject to market risk, reduce
pro-cyclicality in market risk capital
requirements, enhance sensitivity to
market risks, and increase transparency
through enhanced disclosures.7 In the
revised capital rules, the agencies also
expanded the scope of the market risk
capital rules to include savings
associations and incorporated the
market risk rules into the revised
regulatory capital framework.8
In addition to the specific differences
in capital standards noted below, the
VerDate Sep<11>2014 17:55 Sep 22, 2014 Jkt 232001 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 E:\FR\FM\23SEN1.SGM 23SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
56857Federal Register / Vol. 79, No. 184 / Tuesday, September 23, 2014 / Notices
9 The agencies’ general risk-based capital rules are
at 12 CFR part 3 (national banks) and 12 CFR part
167.6 (federal savings associations); 12 CFR parts
208 and 225, appendix A (state member banks and
bank holding companies, respectively); 12 CFR part
325, appendix A (state nonmember banks); and 12
CFR part 390, subpart Z (state savings associations).
10 12 U.S.C. 1813(c).
11 Prior to issuance of the revised capital rules,
the agencies’ advanced approaches rules were at 12
CFR part 3, appendix C (national banks) and 12 CFR
part 167, appendix C (federal savings associations);
12 CFR part 208, appendix F, and 12 CFR part 225,
appendix G (state member banks and bank holding
companies, respectively); 12 CFR part 325,
appendix D (state nonmember banks); and 12 CFR
part 390, subpart Z, appendix A (state savings
associations).
12 See 72 FR 69288 (December 7, 2007).
13 See 76 FR 37620 (June 28, 2011). See also
revised capital rules. Some minor differences
remain in the application of the advanced
approaches rule to savings associations, as
statutorily mandated.
14 As mentioned, the revised capital rules
eliminate a majority of the non-statutory differences
described in this report.
15 Prior to 2012, the OTS required all OTS-
supervised savings associations to file the Thrift
Financial Report (TFR). However, in 2011, the
agencies adopted revisions to the reporting
requirements for savings associations, including a
requirement to transition from the quarterly TFR to
the quarterly Call Report, effective 2012.
16 A national bank that has a financial subsidiary
must satisfy a number of statutory requirements in
addition to the capital deduction and
deconsolidation requirements described in the text.
The bank (and each of its depository institution
affiliates) must be well capitalized and well
managed. Asset size restrictions apply to the
aggregate amount of the assets of the bank’s
financial subsidiaries. Certain debt rating
requirements apply, depending on the size of the
national bank. The national bank is required to
maintain policies and procedures to protect the
bank from financial and operational risks presented
by the financial subsidiary. It is also required to
have policies and procedures to preserve the
corporate separateness of the financial subsidiary
and the bank’s limited liability. Finally,
transactions between the bank and its financial
subsidiary generally must comply with the Federal
Reserve Act (FRA) restrictions on affiliate
transactions, and the financial subsidiary is
considered an affiliate of the bank for purposes of
the anti-tying provisions of the Bank Holding
Company Act. See 12 U.S.C. 24a.
17 See 12 U.S.C. 335 (state member banks are
subject to the ‘‘same conditions and limitations’’
that apply to national banks that hold financial
subsidiaries).
18 The applicable statutory requirements for state
nonmember banks are as follows: The bank (and
each of its insured depository institution affiliates)
must (1) be well capitalized, (2) comply with the
capital deduction and deconsolidation
requirements, and (3) satisfy the requirements for
policies and procedures to protect the bank from
financial and operational risks and to preserve
corporate separateness and limited liability for the
bank. In addition, the statute requires that any
transaction between the bank and a subsidiary that
would be classified as a financial subsidiary
generally shall be subject to the affiliate
transactions restrictions of the FRA. See 12 U.S.C.
1831w.
19 See 65 FR 12914 (March 10, 2000) (national
banks); 66 FR 1018 (January 5, 2001) (state
nonmember banks); 66 FR 42929 (August 16, 2001)
(state member banks).
agencies may have differences in how
they apply certain aspects of their rules.
These differences usually arise as a
result of case-specific inquiries that
have been presented to only one agency.
Agency staffs seek to minimize these
occurrences by coordinating responses
to the fullest extent reasonably
practicable. Furthermore, while the
agencies work together to adopt and
apply generally uniform capital
standards, there are wording differences
in various provisions of the agencies’
standards that largely date back to each
agency’s separate initial adoption of
these standards prior to 1990.
In general, however, the agencies have
substantially similar capital adequacy
standards.9 These standards are based
on a common regulatory framework that
establishes minimum leverage and risk-
based capital ratios for depository
institutions (banks and savings
associations).10 The agencies view the
leverage and risk-based capital
requirements as minimum standards,
and most institutions generally are
expected to operate with capital levels
well above the minimums, particularly
those institutions that are expanding or
experiencing unusual or high levels of
risk.
The agencies note that, with respect to
the advanced approaches rules,11 there
are virtually no differences across the
agencies’ rules because the agencies
adopted a joint rule establishing a
common advanced approaches
framework in December 2007,12 with
subsequent joint revisions.13 Therefore,
most of the risk-based capital
differences described below pertain to
the agencies’ Basel I-based risk-based
capital standards.14
With respect to reporting standards,
under the auspices of the Federal
Financial Institutions Examination
Council (FFIEC), the agencies have
developed the uniform Consolidated
Reports of Condition and Income (Call
Report) for all insured commercial
banks and certain state-chartered
savings banks, as well as savings
associations.15
Differences in Capital Standards
Among the Federal Banking Agencies
Financial Subsidiaries
The Gramm-Leach-Bliley Act (GLBA),
also known as the Financial Services
Modernization Act of 1999, established
the framework for financial subsidiaries
of banks.16 GLBA amended the Revised
Statutes to permit national banks to
conduct certain expanded financial
activities through financial subsidiaries.
Section 5136A of the Revised Statutes
(12 U.S.C. 24a) imposes a number of
conditions and requirements upon
national banks that have financial
subsidiaries, including the regulatory
capital treatment applicable to equity
investments in such subsidiaries. The
statute requires that a national bank
deduct from assets and tangible equity
the aggregate amount of its equity
investments in financial subsidiaries.
The statute further requires that the
financial subsidiary’s assets and
liabilities not be consolidated with
those of the parent national bank for
applicable capital purposes.
State member banks may have
financial subsidiaries subject to the
same restrictions that apply to national
banks.17 State nonmember banks may
also have financial subsidiaries, but
they are subject only to a subset of the
statutory requirements that apply to
national banks and state member
banks.18
The agencies adopted final rules
implementing their respective
provisions arising from section 121 of
the GLBA for national banks in March
2000, for state nonmember banks in
January 2001, and for state member
banks in August 2001.19 The GLBA did
not provide new authority to savings
associations to own, hold, or operate
financial subsidiaries, as defined, and
thus the capital rules for savings
associations do not contain parallel
provisions.
Non-financial Subsidiaries and
Subordinate Organizations of Savings
Associations
Banks supervised by the agencies
generally consolidate all significant
majority-owned subsidiaries other than
financial subsidiaries for regulatory
capital purposes. For subsidiaries other
than financial subsidiaries that are not
consolidated on a line-by-line basis for
financial reporting purposes, joint
ventures, and associated companies, the
parent organization’s investment in each
such subordinate organization is, for
risk-based capital purposes, deducted
from capital or assigned to the 100
percent risk-weight category, depending
upon the circumstances. The Board’s
and the FDIC’s rules also permit banks
to consolidate the investment on a pro
rata basis under appropriate
circumstances.
The capital regulations for savings
associations are different in some
respects because of statutory
requirements. A statutorily mandated
distinction is drawn between
subsidiaries, which generally are
majority-owned, that are engaged in
activities that are permissible for
national banks, and those that are
engaged in activities that are not
VerDate Sep<11>2014 17:55 Sep 22, 2014 Jkt 232001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 E:\FR\FM\23SEN1.SGM 23SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
9 The agencies’ general risk-based capital rules are
at 12 CFR part 3 (national banks) and 12 CFR part
167.6 (federal savings associations); 12 CFR parts
208 and 225, appendix A (state member banks and
bank holding companies, respectively); 12 CFR part
325, appendix A (state nonmember banks); and 12
CFR part 390, subpart Z (state savings associations).
10 12 U.S.C. 1813(c).
11 Prior to issuance of the revised capital rules,
the agencies’ advanced approaches rules were at 12
CFR part 3, appendix C (national banks) and 12 CFR
part 167, appendix C (federal savings associations);
12 CFR part 208, appendix F, and 12 CFR part 225,
appendix G (state member banks and bank holding
companies, respectively); 12 CFR part 325,
appendix D (state nonmember banks); and 12 CFR
part 390, subpart Z, appendix A (state savings
associations).
12 See 72 FR 69288 (December 7, 2007).
13 See 76 FR 37620 (June 28, 2011). See also
revised capital rules. Some minor differences
remain in the application of the advanced
approaches rule to savings associations, as
statutorily mandated.
14 As mentioned, the revised capital rules
eliminate a majority of the non-statutory differences
described in this report.
15 Prior to 2012, the OTS required all OTS-
supervised savings associations to file the Thrift
Financial Report (TFR). However, in 2011, the
agencies adopted revisions to the reporting
requirements for savings associations, including a
requirement to transition from the quarterly TFR to
the quarterly Call Report, effective 2012.
16 A national bank that has a financial subsidiary
must satisfy a number of statutory requirements in
addition to the capital deduction and
deconsolidation requirements described in the text.
The bank (and each of its depository institution
affiliates) must be well capitalized and well
managed. Asset size restrictions apply to the
aggregate amount of the assets of the bank’s
financial subsidiaries. Certain debt rating
requirements apply, depending on the size of the
national bank. The national bank is required to
maintain policies and procedures to protect the
bank from financial and operational risks presented
by the financial subsidiary. It is also required to
have policies and procedures to preserve the
corporate separateness of the financial subsidiary
and the bank’s limited liability. Finally,
transactions between the bank and its financial
subsidiary generally must comply with the Federal
Reserve Act (FRA) restrictions on affiliate
transactions, and the financial subsidiary is
considered an affiliate of the bank for purposes of
the anti-tying provisions of the Bank Holding
Company Act. See 12 U.S.C. 24a.
17 See 12 U.S.C. 335 (state member banks are
subject to the ‘‘same conditions and limitations’’
that apply to national banks that hold financial
subsidiaries).
18 The applicable statutory requirements for state
nonmember banks are as follows: The bank (and
each of its insured depository institution affiliates)
must (1) be well capitalized, (2) comply with the
capital deduction and deconsolidation
requirements, and (3) satisfy the requirements for
policies and procedures to protect the bank from
financial and operational risks and to preserve
corporate separateness and limited liability for the
bank. In addition, the statute requires that any
transaction between the bank and a subsidiary that
would be classified as a financial subsidiary
generally shall be subject to the affiliate
transactions restrictions of the FRA. See 12 U.S.C.
1831w.
19 See 65 FR 12914 (March 10, 2000) (national
banks); 66 FR 1018 (January 5, 2001) (state
nonmember banks); 66 FR 42929 (August 16, 2001)
(state member banks).
agencies may have differences in how
they apply certain aspects of their rules.
These differences usually arise as a
result of case-specific inquiries that
have been presented to only one agency.
Agency staffs seek to minimize these
occurrences by coordinating responses
to the fullest extent reasonably
practicable. Furthermore, while the
agencies work together to adopt and
apply generally uniform capital
standards, there are wording differences
in various provisions of the agencies’
standards that largely date back to each
agency’s separate initial adoption of
these standards prior to 1990.
In general, however, the agencies have
substantially similar capital adequacy
standards.9 These standards are based
on a common regulatory framework that
establishes minimum leverage and risk-
based capital ratios for depository
institutions (banks and savings
associations).10 The agencies view the
leverage and risk-based capital
requirements as minimum standards,
and most institutions generally are
expected to operate with capital levels
well above the minimums, particularly
those institutions that are expanding or
experiencing unusual or high levels of
risk.
The agencies note that, with respect to
the advanced approaches rules,11 there
are virtually no differences across the
agencies’ rules because the agencies
adopted a joint rule establishing a
common advanced approaches
framework in December 2007,12 with
subsequent joint revisions.13 Therefore,
most of the risk-based capital
differences described below pertain to
the agencies’ Basel I-based risk-based
capital standards.14
With respect to reporting standards,
under the auspices of the Federal
Financial Institutions Examination
Council (FFIEC), the agencies have
developed the uniform Consolidated
Reports of Condition and Income (Call
Report) for all insured commercial
banks and certain state-chartered
savings banks, as well as savings
associations.15
Differences in Capital Standards
Among the Federal Banking Agencies
Financial Subsidiaries
The Gramm-Leach-Bliley Act (GLBA),
also known as the Financial Services
Modernization Act of 1999, established
the framework for financial subsidiaries
of banks.16 GLBA amended the Revised
Statutes to permit national banks to
conduct certain expanded financial
activities through financial subsidiaries.
Section 5136A of the Revised Statutes
(12 U.S.C. 24a) imposes a number of
conditions and requirements upon
national banks that have financial
subsidiaries, including the regulatory
capital treatment applicable to equity
investments in such subsidiaries. The
statute requires that a national bank
deduct from assets and tangible equity
the aggregate amount of its equity
investments in financial subsidiaries.
The statute further requires that the
financial subsidiary’s assets and
liabilities not be consolidated with
those of the parent national bank for
applicable capital purposes.
State member banks may have
financial subsidiaries subject to the
same restrictions that apply to national
banks.17 State nonmember banks may
also have financial subsidiaries, but
they are subject only to a subset of the
statutory requirements that apply to
national banks and state member
banks.18
The agencies adopted final rules
implementing their respective
provisions arising from section 121 of
the GLBA for national banks in March
2000, for state nonmember banks in
January 2001, and for state member
banks in August 2001.19 The GLBA did
not provide new authority to savings
associations to own, hold, or operate
financial subsidiaries, as defined, and
thus the capital rules for savings
associations do not contain parallel
provisions.
Non-financial Subsidiaries and
Subordinate Organizations of Savings
Associations
Banks supervised by the agencies
generally consolidate all significant
majority-owned subsidiaries other than
financial subsidiaries for regulatory
capital purposes. For subsidiaries other
than financial subsidiaries that are not
consolidated on a line-by-line basis for
financial reporting purposes, joint
ventures, and associated companies, the
parent organization’s investment in each
such subordinate organization is, for
risk-based capital purposes, deducted
from capital or assigned to the 100
percent risk-weight category, depending
upon the circumstances. The Board’s
and the FDIC’s rules also permit banks
to consolidate the investment on a pro
rata basis under appropriate
circumstances.
The capital regulations for savings
associations are different in some
respects because of statutory
requirements. A statutorily mandated
distinction is drawn between
subsidiaries, which generally are
majority-owned, that are engaged in
activities that are permissible for
national banks, and those that are
engaged in activities that are not
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