55309Federal Register / Vol. 82, No. 223 / Tuesday, November 21, 2017 / Rules and Regulations
1 Banking organizations subject to the agencies’
capital rules include national banks, state member
banks, state nonmember banks, savings
associations, and top-tier bank holding companies
and savings and loan holding companies domiciled
in the United States that are not subject to the
Board’s Small Bank Holding Company Policy
Statement (12 CFR part 225, appendix C), but
excluding certain savings and loan holding
companies that are substantially engaged in
insurance underwriting or commercial activities or
that are estate trusts, or bank holding companies
and savings and loan holding companies that are
employee stock ownership plans. The Board and
the OCC issued a joint final rule on October 11,
2013 (78 FR 62018), and the FDIC issued a
substantially identical interim final rule on
September 10, 2013 (78 FR 55340). In April 2014,
the FDIC adopted the interim final rule as a final
rule with no substantive changes. 79 FR 20754
(April 14, 2014).
2 12 CFR 217.21 (Board); 12 CFR 3.21 (OCC); 12
CFR 324.21 (FDIC).
3 See 12 CFR 217.22(c)(4), (c)(5), and (d)(1)
(Board); 12 CFR 3.22(c)(4), (c)(5), and (d)(1) (OCC);
12 CFR 324.22(c)(4), (c)(5), and (d)(1) (FDIC).
Banking organizations are permitted to net
associated deferred tax liabilities against assets
subject to deduction.
* * * * *
Dated: November 16, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2017–25209 Filed 11–20–17; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2017–0012]
RIN 1557–AE 23
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R–1571]
RIN 7100–AE 83
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 324
RIN 3064–AE 63
Regulatory Capital Rules: Retention of
Certain Existing Transition Provisions
for Banking Organizations That Are
Not Subject to the Advanced
Approaches Capital Rules
AGENCIES: Office of the Comptroller of
the Currency, Treasury; the Board of
Governors of the Federal Reserve
System; and the Federal Deposit
Insurance Corporation.
ACTION: Final rule.
SUMMARY: 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 agencies) are adopting
a final rule to extend the regulatory
capital treatment applicable during 2017
under the regulatory capital rules
(capital rules) for certain items. These
items include regulatory capital
deductions, risk weights, and certain
minority interest limitations. The relief
provided under the final rule applies to
banking organizations that are not
subject to the capital rules’ advanced
approaches (non-advanced approaches
banking organizations). Specifically, for
these banking organizations, the final
rule extends the current regulatory
capital treatment of mortgage servicing
assets, deferred tax assets arising from
temporary differences that could not be
realized through net operating loss
carrybacks, significant investments in
the capital of unconsolidated financial
institutions in the form of common
stock, non-significant investments in the
capital of unconsolidated financial
institutions, significant investments in
the capital of unconsolidated financial
institutions that are not in the form of
common stock, and common equity tier
1 minority interest, tier 1 minority
interest, and total capital minority
interest exceeding the capital rules’
minority interest limitations. Under the
final rule, advanced approaches banking
organizations continue to be subject to
the transition provisions established by
the capital rules for the above capital
items. Therefore, for advanced
approaches banking organizations, their
transition schedule is unchanged, and
advanced approaches banking
organizations are required to apply the
capital rules’ fully phased-in treatment
for these capital items beginning
January 1, 2018.
DATES: This rule is effective January 1,
2018.
FOR FURTHER INFORMATION CONTACT:
OCC: Mark Ginsberg, Senior Risk
Expert (202) 649–6983; or Benjamin
Pegg, Risk Expert (202) 649–7146,
Capital and Regulatory Policy; or Carl
Kaminski, Special Counsel, or Rima
Kundnani, Attorney, Legislative and
Regulatory Activities Division, (202)
649–5490, for persons who are deaf or
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW.,
Washington, DC 20219.
Board: Constance M. Horsley, Deputy
Associate Director, (202) 452–5239; Juan
Climent, Manager, (202) 872–7526;
Elizabeth MacDonald, Manager, (202)
475–6316; Andrew Willis, Supervisory
Financial Analyst, (202) 912–4323; Sean
Healey, Supervisory Financial Analyst,
(202) 912–4611 or Matthew McQueeney,
Senior Financial Analyst, (202) 452–
2942, Division of Supervision and
Regulation; or Benjamin W.
McDonough, Assistant General Counsel,
(202) 452–2036; David W. Alexander,
Counsel (202) 452–2877, or Mark
Buresh, Senior Attorney (202) 452–
5270, Legal Division, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263–
4869.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, bbosco@fdic.gov;
Michael Maloney, Capital Markets
Senior Policy Analyst, mmaloney@
fdic.gov, Capital Markets Branch,
Division of Risk Management
Supervision, (202) 898–6888,
regulatorycapital@fdic.gov; or Michael
Phillips, Counsel, mphillips@fdic.gov;
Catherine Wood, Counsel, cawood@
fdic.gov; Rachel Ackermann, Counsel,
rackmann@fdic.gov; Supervision
Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
In 2013, 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) adopted
rules that strengthened the capital
requirements applicable to banking
organizations supervised by the
agencies (capital rules).1 The capital
rules limit the amount of capital that is
eligible for inclusion in regulatory
capital in cases where the capital is
issued by a consolidated subsidiary of a
banking organization and not owned by
the parent banking organization
(minority interest).2 The capital rules
also require amounts of mortgage
servicing assets (MSAs), deferred tax
assets arising from temporary
differences that could not be realized
through net operating loss carrybacks
(temporary difference DTAs), and
certain investments in the capital of
unconsolidated financial institutions
above certain thresholds to be deducted
from a banking organization’s regulatory
capital.3
The capital rules contain transition
provisions that phase in certain
requirements over several years in order
to give banking organizations time to
VerDate Sep<11>2014 17:18 Nov 20, 2017 Jkt 244001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
asabaliauskas on DSKBBXCHB2PROD with RULES
1 Banking organizations subject to the agencies’
capital rules include national banks, state member
banks, state nonmember banks, savings
associations, and top-tier bank holding companies
and savings and loan holding companies domiciled
in the United States that are not subject to the
Board’s Small Bank Holding Company Policy
Statement (12 CFR part 225, appendix C), but
excluding certain savings and loan holding
companies that are substantially engaged in
insurance underwriting or commercial activities or
that are estate trusts, or bank holding companies
and savings and loan holding companies that are
employee stock ownership plans. The Board and
the OCC issued a joint final rule on October 11,
2013 (78 FR 62018), and the FDIC issued a
substantially identical interim final rule on
September 10, 2013 (78 FR 55340). In April 2014,
the FDIC adopted the interim final rule as a final
rule with no substantive changes. 79 FR 20754
(April 14, 2014).
2 12 CFR 217.21 (Board); 12 CFR 3.21 (OCC); 12
CFR 324.21 (FDIC).
3 See 12 CFR 217.22(c)(4), (c)(5), and (d)(1)
(Board); 12 CFR 3.22(c)(4), (c)(5), and (d)(1) (OCC);
12 CFR 324.22(c)(4), (c)(5), and (d)(1) (FDIC).
Banking organizations are permitted to net
associated deferred tax liabilities against assets
subject to deduction.
* * * * *
Dated: November 16, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2017–25209 Filed 11–20–17; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 3
[Docket ID OCC–2017–0012]
RIN 1557–AE 23
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R–1571]
RIN 7100–AE 83
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 324
RIN 3064–AE 63
Regulatory Capital Rules: Retention of
Certain Existing Transition Provisions
for Banking Organizations That Are
Not Subject to the Advanced
Approaches Capital Rules
AGENCIES: Office of the Comptroller of
the Currency, Treasury; the Board of
Governors of the Federal Reserve
System; and the Federal Deposit
Insurance Corporation.
ACTION: Final rule.
SUMMARY: 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 agencies) are adopting
a final rule to extend the regulatory
capital treatment applicable during 2017
under the regulatory capital rules
(capital rules) for certain items. These
items include regulatory capital
deductions, risk weights, and certain
minority interest limitations. The relief
provided under the final rule applies to
banking organizations that are not
subject to the capital rules’ advanced
approaches (non-advanced approaches
banking organizations). Specifically, for
these banking organizations, the final
rule extends the current regulatory
capital treatment of mortgage servicing
assets, deferred tax assets arising from
temporary differences that could not be
realized through net operating loss
carrybacks, significant investments in
the capital of unconsolidated financial
institutions in the form of common
stock, non-significant investments in the
capital of unconsolidated financial
institutions, significant investments in
the capital of unconsolidated financial
institutions that are not in the form of
common stock, and common equity tier
1 minority interest, tier 1 minority
interest, and total capital minority
interest exceeding the capital rules’
minority interest limitations. Under the
final rule, advanced approaches banking
organizations continue to be subject to
the transition provisions established by
the capital rules for the above capital
items. Therefore, for advanced
approaches banking organizations, their
transition schedule is unchanged, and
advanced approaches banking
organizations are required to apply the
capital rules’ fully phased-in treatment
for these capital items beginning
January 1, 2018.
DATES: This rule is effective January 1,
2018.
FOR FURTHER INFORMATION CONTACT:
OCC: Mark Ginsberg, Senior Risk
Expert (202) 649–6983; or Benjamin
Pegg, Risk Expert (202) 649–7146,
Capital and Regulatory Policy; or Carl
Kaminski, Special Counsel, or Rima
Kundnani, Attorney, Legislative and
Regulatory Activities Division, (202)
649–5490, for persons who are deaf or
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW.,
Washington, DC 20219.
Board: Constance M. Horsley, Deputy
Associate Director, (202) 452–5239; Juan
Climent, Manager, (202) 872–7526;
Elizabeth MacDonald, Manager, (202)
475–6316; Andrew Willis, Supervisory
Financial Analyst, (202) 912–4323; Sean
Healey, Supervisory Financial Analyst,
(202) 912–4611 or Matthew McQueeney,
Senior Financial Analyst, (202) 452–
2942, Division of Supervision and
Regulation; or Benjamin W.
McDonough, Assistant General Counsel,
(202) 452–2036; David W. Alexander,
Counsel (202) 452–2877, or Mark
Buresh, Senior Attorney (202) 452–
5270, Legal Division, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunication
Device for the Deaf (TDD), (202) 263–
4869.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, bbosco@fdic.gov;
Michael Maloney, Capital Markets
Senior Policy Analyst, mmaloney@
fdic.gov, Capital Markets Branch,
Division of Risk Management
Supervision, (202) 898–6888,
regulatorycapital@fdic.gov; or Michael
Phillips, Counsel, mphillips@fdic.gov;
Catherine Wood, Counsel, cawood@
fdic.gov; Rachel Ackermann, Counsel,
rackmann@fdic.gov; Supervision
Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
In 2013, 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) adopted
rules that strengthened the capital
requirements applicable to banking
organizations supervised by the
agencies (capital rules).1 The capital
rules limit the amount of capital that is
eligible for inclusion in regulatory
capital in cases where the capital is
issued by a consolidated subsidiary of a
banking organization and not owned by
the parent banking organization
(minority interest).2 The capital rules
also require amounts of mortgage
servicing assets (MSAs), deferred tax
assets arising from temporary
differences that could not be realized
through net operating loss carrybacks
(temporary difference DTAs), and
certain investments in the capital of
unconsolidated financial institutions
above certain thresholds to be deducted
from a banking organization’s regulatory
capital.3
The capital rules contain transition
provisions that phase in certain
requirements over several years in order
to give banking organizations time to
VerDate Sep<11>2014 17:18 Nov 20, 2017 Jkt 244001 PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
asabaliauskas on DSKBBXCHB2PROD with RULES
55310 Federal Register / Vol. 82, No. 223 / Tuesday, November 21, 2017 / Rules and Regulations
4 12 CFR 217.300 (Board); 12 CFR 3.300 (OCC);
12 CFR 324.300 (FDIC).
5 12 CFR 217.300(b)(4) and (d) (Board); 12 CFR
3.300(b)(4) and (d) (OCC); 12 CFR 324.300(b)(4) and
(d) (FDIC).
6 82 FR 40495 (August 25, 2017).
7 The EGRPRA report stated that such
amendments likely would include simplifying the
current regulatory capital treatment for MSAs,
temporary difference DTAs, holdings of regulatory
capital instruments issued by financial institutions;
and minority interest. See 82 FR 15900 (March 30,
2017).
8 82 FR 49984 (October 27, 2017).
9 The amendatory text of the respective agencies
in this final rule includes the relevant transition
provisions for advanced approaches banking
organizations for convenient reference only. This
final rule does not reflect any change to the
transition schedule for advanced approaches
banking organizations.
10 82 FR 40497 (August 25, 2017). This final rule
would require any banking organization meeting
the capital rules’ definition of an advanced
approaches banking organization to fully phase in
the capital treatment for these items. Banking
organizations that meet the definition of an
advanced approaches banking organization and that
have not exited parallel run, or that do not calculate
risk-weighted assets using the advanced approaches
rule (such as intermediate holding companies of
foreign banking organizations or certain
subsidiaries of advanced approaches banking
organizations), are nonetheless advanced
approaches banking organizations.
adjust and adapt to the new
requirements.4 The transition provisions
in the capital rules provide for full
effectiveness of the minority interest
limitations and for fully phased-in
deductions of investments in the capital
of unconsolidated financial institutions,
MSAs, and temporary difference DTAs
beginning on January 1, 2018.5 The
transition provisions in the capital rules
also provide that the risk weight for
MSAs, temporary difference DTAs, and
significant investments in the capital of
unconsolidated financial institutions in
the form of common stock that are not
deducted from regulatory capital
increase from 100 percent to 250
percent beginning on January 1, 2018.
In anticipation of issuing a separate
notice of proposed rulemaking that
would include changes to the regulatory
capital treatment of MSAs, temporary
difference DTAs, investments in the
capital of unconsolidated financial
institutions, and minority interest, in
August 2017, the agencies issued a
notice of proposed rulemaking
(transitions NPR) that would extend the
current transition provisions for these
items (i.e., non-advanced approaches
banking organizations would continue
to apply the transition provisions
applicable for calendar year 2017 for
these items).6
II. Summary of the Transitions NPR
Since the issuance of the capital rules
in 2013, banking organizations and
other members of the public have raised
concerns regarding the regulatory
burden, complexity, and costs
associated with certain provisions in the
capital rules, particularly for
community banking organizations. As
explained in the Federal Financial
Institutions Examination Council’s
March 2017 Joint Report to Congress:
Economic Growth and Regulatory
Paperwork Reduction Act (EGRPRA
report), the agencies planned to develop
a proposal to simplify certain aspects of
the capital rules with the goal of
meaningfully reducing regulatory
burden on community banking
organizations while at the same time
maintaining safety and soundness and
the quality and quantity of regulatory
capital in the banking system.7
Consistent with the agencies’ statements
in the EGRPRA report, in September
2017, the agencies approved a proposed
rule to simplify certain aspects of the
capital rules with the goal of
meaningfully reducing regulatory
burden on community banking
organizations while at the same time
maintaining safety and soundness and
the quality and quantity of regulatory
capital in the banking system
(simplifications NPR).8
In preparation for the issuance of the
simplifications NPR, the agencies issued
the transitions NPR in August 2017 to
extend certain transition provisions in
the capital rules for non-advanced
approaches banking organizations.
Specifically, the transitions NPR would
extend the current treatment under the
capital rules for MSAs, temporary
difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, non-
significant investments in the capital of
unconsolidated financial institutions,
significant investments in the capital of
unconsolidated financial institutions
that are not in the form of common
stock, and minority interest. The
transitions NPR would extend this
treatment only for non-advanced
approaches banking organizations. As
noted, the agencies proposed additional
modifications to the treatment of these
items in the simplifications NPR.
Under the transitions NPR, non-
advanced approaches banking
organizations would continue to:
• Deduct from regulatory capital 80
percent of the amount of MSAs,
temporary difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, 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 that are not includable in
regulatory capital;
• Apply a 100 percent risk weight to
any amounts of MSAs, temporary
difference DTAs, and significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock that are not
deducted from capital; and
• Include 20 percent of any common
equity tier 1 minority interest, tier 1
minority interest, and total capital
minority interest exceeding the capital
rules’ minority interest limitations
(surplus minority interest) in regulatory
capital.
For example, the transitions NPR
would require a non-advanced
approaches banking organization with
an amount of MSAs above the 10
percent common equity tier 1 capital
deduction threshold in the capital rules
to deduct from common equity tier 1
capital 80 percent of the amount of
MSAs above this threshold, and to
apply a 100 percent risk weight to the
MSAs that are not deducted from
common equity tier 1 capital, including
the MSAs that otherwise would be
deducted but for the transition
provisions.
The transitions NPR did not propose
to modify the transition provisions
applicable to advanced approaches
banking organizations. Accordingly,
under the proposal, beginning on
January 1, 2018, advanced approaches
banking organizations would be
required to apply the fully phased-in
regulatory capital treatment for MSAs,
temporary difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, non-
significant investments in the capital of
unconsolidated financial institutions,
significant investments in the capital of
unconsolidated financial institutions
that are not in the form of common
stock, and minority interest.9 The
transitions NPR stated that the current
regulatory capital treatment for items
covered by the proposal strikes an
appropriate balance between complexity
and risk sensitivity for the largest and
most complex banking organizations.10
III. Summary of Comments on the
Transitions NPR
The agencies received 36 unique
comment letters from banking
organizations, trade associations, public
interest groups, and private individuals,
and nearly 200 uniform letters signed by
different banking organizations and
VerDate Sep<11>2014 17:18 Nov 20, 2017 Jkt 244001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
asabaliauskas on DSKBBXCHB2PROD with RULES
4 12 CFR 217.300 (Board); 12 CFR 3.300 (OCC);
12 CFR 324.300 (FDIC).
5 12 CFR 217.300(b)(4) and (d) (Board); 12 CFR
3.300(b)(4) and (d) (OCC); 12 CFR 324.300(b)(4) and
(d) (FDIC).
6 82 FR 40495 (August 25, 2017).
7 The EGRPRA report stated that such
amendments likely would include simplifying the
current regulatory capital treatment for MSAs,
temporary difference DTAs, holdings of regulatory
capital instruments issued by financial institutions;
and minority interest. See 82 FR 15900 (March 30,
2017).
8 82 FR 49984 (October 27, 2017).
9 The amendatory text of the respective agencies
in this final rule includes the relevant transition
provisions for advanced approaches banking
organizations for convenient reference only. This
final rule does not reflect any change to the
transition schedule for advanced approaches
banking organizations.
10 82 FR 40497 (August 25, 2017). This final rule
would require any banking organization meeting
the capital rules’ definition of an advanced
approaches banking organization to fully phase in
the capital treatment for these items. Banking
organizations that meet the definition of an
advanced approaches banking organization and that
have not exited parallel run, or that do not calculate
risk-weighted assets using the advanced approaches
rule (such as intermediate holding companies of
foreign banking organizations or certain
subsidiaries of advanced approaches banking
organizations), are nonetheless advanced
approaches banking organizations.
adjust and adapt to the new
requirements.4 The transition provisions
in the capital rules provide for full
effectiveness of the minority interest
limitations and for fully phased-in
deductions of investments in the capital
of unconsolidated financial institutions,
MSAs, and temporary difference DTAs
beginning on January 1, 2018.5 The
transition provisions in the capital rules
also provide that the risk weight for
MSAs, temporary difference DTAs, and
significant investments in the capital of
unconsolidated financial institutions in
the form of common stock that are not
deducted from regulatory capital
increase from 100 percent to 250
percent beginning on January 1, 2018.
In anticipation of issuing a separate
notice of proposed rulemaking that
would include changes to the regulatory
capital treatment of MSAs, temporary
difference DTAs, investments in the
capital of unconsolidated financial
institutions, and minority interest, in
August 2017, the agencies issued a
notice of proposed rulemaking
(transitions NPR) that would extend the
current transition provisions for these
items (i.e., non-advanced approaches
banking organizations would continue
to apply the transition provisions
applicable for calendar year 2017 for
these items).6
II. Summary of the Transitions NPR
Since the issuance of the capital rules
in 2013, banking organizations and
other members of the public have raised
concerns regarding the regulatory
burden, complexity, and costs
associated with certain provisions in the
capital rules, particularly for
community banking organizations. As
explained in the Federal Financial
Institutions Examination Council’s
March 2017 Joint Report to Congress:
Economic Growth and Regulatory
Paperwork Reduction Act (EGRPRA
report), the agencies planned to develop
a proposal to simplify certain aspects of
the capital rules with the goal of
meaningfully reducing regulatory
burden on community banking
organizations while at the same time
maintaining safety and soundness and
the quality and quantity of regulatory
capital in the banking system.7
Consistent with the agencies’ statements
in the EGRPRA report, in September
2017, the agencies approved a proposed
rule to simplify certain aspects of the
capital rules with the goal of
meaningfully reducing regulatory
burden on community banking
organizations while at the same time
maintaining safety and soundness and
the quality and quantity of regulatory
capital in the banking system
(simplifications NPR).8
In preparation for the issuance of the
simplifications NPR, the agencies issued
the transitions NPR in August 2017 to
extend certain transition provisions in
the capital rules for non-advanced
approaches banking organizations.
Specifically, the transitions NPR would
extend the current treatment under the
capital rules for MSAs, temporary
difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, non-
significant investments in the capital of
unconsolidated financial institutions,
significant investments in the capital of
unconsolidated financial institutions
that are not in the form of common
stock, and minority interest. The
transitions NPR would extend this
treatment only for non-advanced
approaches banking organizations. As
noted, the agencies proposed additional
modifications to the treatment of these
items in the simplifications NPR.
Under the transitions NPR, non-
advanced approaches banking
organizations would continue to:
• Deduct from regulatory capital 80
percent of the amount of MSAs,
temporary difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, 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 that are not includable in
regulatory capital;
• Apply a 100 percent risk weight to
any amounts of MSAs, temporary
difference DTAs, and significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock that are not
deducted from capital; and
• Include 20 percent of any common
equity tier 1 minority interest, tier 1
minority interest, and total capital
minority interest exceeding the capital
rules’ minority interest limitations
(surplus minority interest) in regulatory
capital.
For example, the transitions NPR
would require a non-advanced
approaches banking organization with
an amount of MSAs above the 10
percent common equity tier 1 capital
deduction threshold in the capital rules
to deduct from common equity tier 1
capital 80 percent of the amount of
MSAs above this threshold, and to
apply a 100 percent risk weight to the
MSAs that are not deducted from
common equity tier 1 capital, including
the MSAs that otherwise would be
deducted but for the transition
provisions.
The transitions NPR did not propose
to modify the transition provisions
applicable to advanced approaches
banking organizations. Accordingly,
under the proposal, beginning on
January 1, 2018, advanced approaches
banking organizations would be
required to apply the fully phased-in
regulatory capital treatment for MSAs,
temporary difference DTAs, significant
investments in the capital of
unconsolidated financial institutions in
the form of common stock, non-
significant investments in the capital of
unconsolidated financial institutions,
significant investments in the capital of
unconsolidated financial institutions
that are not in the form of common
stock, and minority interest.9 The
transitions NPR stated that the current
regulatory capital treatment for items
covered by the proposal strikes an
appropriate balance between complexity
and risk sensitivity for the largest and
most complex banking organizations.10
III. Summary of Comments on the
Transitions NPR
The agencies received 36 unique
comment letters from banking
organizations, trade associations, public
interest groups, and private individuals,
and nearly 200 uniform letters signed by
different banking organizations and
VerDate Sep<11>2014 17:18 Nov 20, 2017 Jkt 244001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\21NOR1.SGM 21NOR1
asabaliauskas on DSKBBXCHB2PROD with RULES