FDIC Finalizes Capital Simplification for Community Banks

Jun 12, 2019
The FDIC board on May 28 approved a simpler risk-based capital rule for community banks that hold mortgage-servicing assets, deferred-tax assets, and insignificant investments in the capital of unconsolidated financial institutions, such as trust-preferred securities.

Under the new rule which goes into effect on April 1, 2020, community banks will only have to deduct from their capital MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions like TruPS if they individually exceed 25 percent of common equity tier 1 capital of the bank.

The OCC and Fed are expected to quickly approve the final rule, which is nearly identical to what was originally proposed. This rule is different from the proposed Community Bank Leverage Ratio, which is expected to be approved later this year and would allow certain community banks to opt in to a new, simpler capital framework provided they meet the required CBLR.

Read the Final Rule