Banking agencies finalize extension of capital rule transitions

A final rule extending the existing capital requirements for mortgage servicing assets and certain other items for some financial institutions was issued Tuesday by the federal banking agencies, with an effective date of Jan. 1.

In a joint release, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of Comptroller of the Currency (OCC) said the rule was being finalized “to prevent different rules from taking effect while the agencies consider a broader simplification of the capital rules.”

“As part of the recent review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act, the agencies announced that they intended to simplify the capital rules to reduce regulatory burden, particularly for community banks,” the banking regulators said in a release. “Subsequently, in September, the agencies released a proposal that would simplify the capital rules’ treatment of mortgage servicing assets and other items for some banking organizations. However, prior to that rule being finalized, the current transitional treatment for many of these items was scheduled to be replaced with a different treatment on Jan. 1, 2018.”

The three regulators said the final rule from is substantively similar to the proposal issued by the agencies to extend the existing capital requirements for certain banking organizations for a targeted set of items: mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interest.

The final rule would apply only to banking organizations that are not subject to the agencies’ “advanced approaches” capital rules, the agencies’ joint release stated, which are generally firms with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure. Banking organizations that are subject to the advanced approaches rules are not affected by the rule.

Federal Banking Agencies Finalize Extension of Certain Capital Rule Transitions