Comment time closes on pausing capital transition provisions

Comments on a joint proposal by federal banking agencies to pause Basel III capital transition provisions for financial institutions with less than $250 billion in assets were due Monday to the Federal Deposit Insurance Corp. (FDIC), Federal Reserve and Office of the Comptroller of the Currency (OCC).

The proposal, jointly issued by the three agencies Aug. 25, had received about 150 comments (most of them form letters submitted by community bankers, according to regulations.gov) as of Monday morning.

Specifically, the proposal would extend the Basel III transition provisions for treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests by effectively pausing the phase-in of the regulatory capital deductions and risk weights regarding those items.

The proposal applies to banking organizations that are not subject to the “advanced approaches capital rules” (non-advanced approaches banking organizations). The rules are a framework that requires certain banking organizations to use an internal ratings-based approach and other methodologies to calculate risk-based capital requirements for credit risk and advanced measurement approaches to calculate risk-based capital requirements for operational risk.

The framework applies to large, internationally active banking organizations–generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure–and includes the depository institution subsidiaries of those firms.

The phase-in is set to take effect Jan. 1

The proposal would immediately pause the Basel III transition rules that apply to banks with total consolidated assets of under $250 billion regarding the items listed.

In issuing a notice of proposed rulemaking, the agencies pointed out that providing the proposed extension to non-advanced approaches banking organizations for these items would avoid potential burden on banking organizations that may be subject in the near future to a different regulatory capital treatment for these items.

When the agencies released their notice of proposed rulemaking, they stated they expect in the near term to issue a separate NPR seeking public comment on a proposal to simplify the regulatory capital treatment of these items.

Comments: Regulatory Capital Rules: Extension of Existing Transition Levels for Certain Regulatory Capital Adjustments and Deductions

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