Banking Organization Capital Requirements: Federal Banking Agencies Propose Extension of Certain Transitional Provisions for Non-Advanced Approaches Banking Organizations

Sullivan & Cromwell LLP - August 25, 2017

On August 22, the Federal banking agencies published a proposed rule  that would extend the existing 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 affected existing transitional provisions are those for mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests.  The agencies indicated that their proposal to freeze in place the current treatment of these items for non-advanced approaches banking organizations, without requiring those organizations to apply the more stringent standards that otherwise come into effect after December 31, 2017 as the capital rules are fully phased-in, is a temporary step pending the agencies’ preparation of a forthcoming proposal to simplify the regulatory capital treatment of these items for non-advanced approaches banking organizations.