Simplifications to the Capital Rule: Notice of Proposed Rulemaking

October 30, 2017

On Monday, October 30, 2017, the OCC, the Board of Governors of the Federal Reserve, and the FDIC issued a bulletin seeking comment on a proposed rule to simplify certain aspects of the capital rule. The majority of the proposed simplifications would apply solely to banking organizations not subject to the advanced approaches capital rule (the advanced approaches capital rule generally applies to banks that are part of banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in total consolidated foreign financial exposure).

 

Specifically, this proposed rule would:

  • Replace the complex treatment of high-volatility commercial real estate (HVCRE) exposures with a more straightforward treatment for most acquisition, development, or construction loans;
  • Simplify the current regulatory capital treatment for mortgage servicing assets (MSA), temporary difference deferred tax assets (DTA), and holdings of regulatory capital instruments issued by other financial institutions; and
  • Simplify the current limitations on minority interest includable in regulatory capital.

 

In addition, the proposed rule would make certain technical amendments that would apply to all banks.