Agencies Finalize Capital Simplification

Jul 10, 2019
Federal regulators issued a final rule simplifying risk-based capital rules 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 taking effect 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 the bank's common equity tier 1 capital.

The FDIC board approved the rule in May, with the OCC and Fed now on board with 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.

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