FOR IMMEDIATE RELEASE
ICBA Applauds Federal Reserve for Final Rule on Trust Preferred Securities
Washington, D.C. (March 2, 2005) - The Independent Community Bankers of America (ICBA), the nation's largest banking trade organization, applauded the Federal Reserve for adopting a final rule that allows the continued inclusion of trust preferred securities in the tier 1 capital of bank holding companies, subject to certain quantitative limits.
Under the rule, trust preferred securities and other restricted core capital elements will be limited to 25 percent of all core capital elements, net of goodwill less any associated deferred tax liability.
"We commend the Federal Reserve Board for its decision to retain trust preferred securities as tier 1 capital for bank holding companies," said Karen Thomas, ICBA executive vice president. "Issuing trust preferred securities is often the only reasonable way a community bank can access the capital markets. A change in the treatment of trust preferred securities as Tier 1 capital would have meant a curtailment of expansion and lending activities, with less service to customers and communities."
ICBA is also pleased that the Federal Reserve is providing a longer five-year transition period, ending March 31, 2009, for banks to comply with the revised rule. ICBA had urged the Federal Reserve to extend the transition period from three to five years. The extended transition would allow those bank holding companies that have been active acquirers of banks and branches and that have accumulated significant amounts of goodwill adequate time to comply with the new restriction.