Bank Capital Requirements: Federal Banking Agencies Extend Certain Transition Provisions for Non-Advanced Approaches Banking Organizations

Sullivan & Cromwell LLP - November 22, 2017

Yesterday, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation published a final rule to extend the current transitional regulatory capital treatment for certain capital deductions, risk weightings, and minority interest requirements for banking organizations that are not subject to the agencies’ advanced approaches capital rules. The agencies did not change their August 2017 proposal, which is described in our prior Memorandum to Clients. The affected transition provisions are those for mortgage servicing assets (“MSAs”), certain deferred tax assets (“DTAs”), investments in the capital instruments of unconsolidated financial institutions, and minority interests. Non-advanced approaches banking organizations will continue to apply the transition provisions applicable for calendar year 2017 for these items. The final rule does not modify the transition provisions applicable to advanced approaches banking organizations, which will be required to apply the fully phased-in regulatory capital treatment for the items noted above beginning on January 1, 2018.