Banking agencies propose extending capital rule transitions

Extending existing transitional capital treatment for certain capital deductions and risk weights for banking organizations that are not subject to federal banking agencies’ advanced approaches capital rules was proposed today by the FDIC, OCC and Federal Reserve.

The proposed rule – issued for a 30-day comment period (with comments due Sept. 25) — is being issued by the agencies in preparation for a forthcoming proposal designed to simplify regulatory capital requirements. That proposal, according to the agencies (outlined in a joint press release) would simplify the capital rules’ treatment, particularly for community banks, of mortgage servicing assets and other items, the agencies said.

Under current capital rules, the transitional treatment for those items is scheduled to be replaced with a different treatment on January 1, 2018.

“As a result, the agencies are proposing to extend the existing transition provisions for a targeted set of items: mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests,” the agencies stated. “This proposal would prevent the implementation of the fully phased-in requirements for these items by banking organizations that are not subject to the advanced approaches capital rules prior to the agencies’ consideration of simplification to the capital rules.”

Federal Banking Agencies Propose Extension of Certain Capital Rule Transitions