Banking agencies report ‘no material differences’ in accounting standards; ‘generally increase quantity/quality of capital’

No material differences, as of Sept. 30, have been identified in the accounting standards of regulators applicable to financial institutions, according to the federal banking agencies in a report to congressional committees last week.

The annual report submitted by the Office of the Comptroller of the Currency (OCC), Federal Reserve, and Federal Deposit Insurance Corp. (FDIC) – required under the Federal Deposit Insurance Act – does point out that “a few” differences among the agencies remain in risk-based and leverage capital rules for institutions revised and adopted in 2013. Those differences, the report notes, are statutorily mandated for certain categories of institutions or which reflect certain technical, generally nonmaterial differences among the agencies’ capital rules.

The report notes that the agencies’ capital rules, while all applying to financial institutions and companies, “reflect the scope of each agency’s regulatory jurisdiction.”

For example, the Federal Reserve’s capital rule includes requirements related to bank holding companies, savings and loan holding companies, and state member banks. The FDIC’s capital rule includes provisions for state nonmember banks and state savings associations. The OCC’s capital rule includes provisions for national banks and federal savings associations.

“As revised in 2013, the agencies’ capital rules generally have increased the quantity and quality of regulatory capital,” the report states. “For example, these revised capital rules include a minimum common equity tier 1 capital ratio of 4.5%, raise the minimum tier 1 capital ratio from 4% to 6%, and establish additional capital buffer amounts for institutions: the capital conservation buffer and, for advanced approaches institutions, the countercyclical capital buffer.

“These revised capital rules also require all institutions to meet a 4% minimum leverage ratio measured as an institution’s tier 1 capital to average total consolidated assets (generally applicable leverage ratio) and require advanced approaches institutions to meet a 3% minimum supplementary leverage ratio, measured as an institution’s tier 1 capital to the sum of on- and off-balance sheet exposures (supplementary leverage ratio),” the report adds.

The report is dated Jan. 11; it appeared in the Federal Register Jan. 26.

Joint Report: Differences in Accounting and Capital Standards Among the Federal Banking Agencies as of September 30, 2017; Report to Congressional Committees