Joint Report: Differences in Accounting and Capital Standards Among the Federal Banking Agencies; Report to Congressional Committees, 75259-75263 [2012-30608]
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Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
Issued at Washington, DC, on December 14,
2012.
Craig H. Middlebrook,
Acting Administrator.
[FR Doc. 2012–30580 Filed 12–18–12; 8:45 am]
BILLING CODE 4910–61–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
[Docket ID OCC–2012–0003]
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE
CORPORATION
Joint Report: Differences in
Accounting and Capital Standards
Among the Federal Banking Agencies;
Report to Congressional Committees
Office of the Comptroller of the
Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Report to the Congressional
Committees.
AGENCY:
The OCC, the Board, and the
FDIC (collectively, the agencies) have
prepared this report pursuant to section
37(c) of the Federal Deposit Insurance
Act. Section 37(c) requires the agencies
to jointly submit an annual report to the
Committee on Financial Services of the
U.S. House of Representatives and to the
Committee on Banking, Housing, and
Urban Affairs of the U.S. Senate
describing differences between the
capital and accounting standards used
by the agencies. The report must be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
OCC: David Elkes, Risk Expert,
Capital Policy, (202) 649–6984, Office of
the Comptroller of the Currency, 250 E
Street SW., Washington, DC 20219.
Board: Sviatlana Phelan, Senior
Financial Analyst, Capital and
Regulatory Policy, (202) 912–4306,
Division of Banking Supervision and
Regulation, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
FDIC: David W. Riley, Senior Analyst
(Capital Markets), (202) 898–3728,
Division of Risk Management
Supervision, Federal Deposit Insurance
Corporation, 550 17th Street NW.,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The text of
the report follows:
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SUMMARY:
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Report to the Committee on Financial
Services of the U.S. House of
Representatives and to the Committee
on Banking, Housing, and Urban
Affairs of the U.S. Senate Regarding
Differences in Accounting and Capital
Standards Among the Federal Banking
Agencies
Introduction
The Office of the Comptroller of the
Currency (OCC), the Board of Governors
of the Federal Reserve System (Board),
and the Federal Deposit Insurance
Corporation (FDIC) (collectively, the
agencies) must jointly submit an annual
report to the Committee on Financial
Services of the U.S. House of
Representatives and the Committee on
Banking, Housing, and Urban Affairs of
the U.S. Senate describing differences
between the accounting and capital
standards used by the agencies. The
report must be published in the Federal
Register.
Prior to 2011, the Office of Thrift
Supervision (OTS) joined the agencies
in submitting an annual report to
Congress. Title III of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act, Pub. L. 111–203, 124
Stat. 1376 (2010) (Dodd-Frank Act),
transferred the powers, authorities,
rights and duties of the OTS to other
federal banking agencies on July 21,
2011 (the transfer date), and the OTS
was abolished 90 days later. Under Title
III, the OCC assumed all functions of the
OTS and the Director of the OTS
relating to federal savings associations,
and thus the OCC has responsibility for
the ongoing supervision, examination,
and regulation of federal savings
associations as of the transfer date. Title
III transferred all supervision,
examination, and certain regulatory
functions of the OTS relating to state
savings associations to the FDIC and all
functions relating to the supervision of
any savings and loan holding company
and non-depository institution
subsidiaries of such holding companies
to the Board. Accordingly, this report is
being submitted by the OCC, Board, and
FDIC.
The agencies are submitting this joint
report, which covers differences
between their uses of accounting or
capital standards existing as of
December 31, 2011, pursuant to section
37(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1831n(c)), as amended.
This report covers 2010 and 2011 and
describes capital differences similar to
those presented in previous reports.1
Since the agencies filed their first
reports on accounting and capital
1 See,
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e.g., 75 FR 47900 (August 9, 2010).
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75259
differences in 1990, the agencies have
acted in concert to harmonize their
accounting and capital standards and
eliminate as many differences as
possible. Section 303 of the Riegle
Community Development and
Regulatory Improvement Act of 1994 (12
U.S.C. 4803) also directs the agencies to
work jointly to make uniform all
regulations and guidelines
implementing common statutory or
supervisory policies. The results of
these efforts must be ‘‘consistent with
the principles of safety and soundness,
statutory law and policy, and the public
interest.’’ 2 In recent years, the agencies
have revised their capital standards to
address changes in credit and certain
other risk exposures within the banking
system and align the amount of capital
institutions are required to hold more
closely with the credit risks and certain
other risks to which they are exposed.
These revisions have been made in a
uniform manner whenever possible and
practicable to minimize interagency
differences. Although the differences in
capital standards have diminished over
time, a few differences remain, some of
which are statutorily mandated.
In addition to the specific differences
in capital standards noted below, the
agencies may have differences in how
they apply certain aspects of their rules.
These differences usually arise as a
result of case-specific inquiries that
have been presented to only one agency.
Agency staffs generally seek to
minimize these occurrences by
coordinating responses to the fullest
extent reasonably practicable.
Furthermore, while the agencies work
together to adopt and apply generally
uniform capital standards, there are
wording differences in various
provisions of the agencies’ standards
that largely date back to each agency’s
separate initial adoption of these
standards before 1990.
The federal banking agencies have
substantially similar capital adequacy
standards.3 These standards are based
on a common regulatory framework that
establishes minimum leverage and riskbased capital ratios for depository
institutions 4 (banks and savings
associations). The agencies view the
leverage and risk-based capital
requirements as minimum standards,
and most institutions generally are
expected to operate with capital levels
2 12
U.S.C. 4803(a).
agencies’ general risk-based capital rules are
at 12 CFR part 3 (for national banks) and 12 CFR
part 167.6 (for federal savings associations); 12 CFR
parts 208 and 225, appendix A (Board); 12 CFR part
325, appendix A (FDIC); and 12 CFR part 390,
subpart Z (state savings associations).
4 12 U.S.C. 1813(c).
3 The
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well above the minimums, particularly
those institutions that are expanding or
experiencing unusual or high levels of
risk.
The agencies note that, with respect to
the agencies’ advanced approaches
capital adequacy framework based on
Basel II,5 there are no significant
differences across the agencies’ rules
because the agencies adopted a joint
rule establishing a common advanced
approaches framework in December
2007,6 with subsequent joint revisions.7
Therefore, the risk-based capital
differences described below pertain to
the agencies’ Basel I-based risk-based
capital standards.8
With respect to reporting standards,
the OCC, the Board, and the FDIC,
under the auspices of the Federal
Financial Institutions Examination
Council (FFIEC), have developed the
uniform Consolidated Reports of
Condition and Income (Call Report) for
all insured commercial banks and
certain state-chartered savings banks.
The OTS required OTS-supervised
savings associations and certain statechartered savings banks to file the Thrift
Financial Report (TFR). The reporting
standards for recognition and
measurement of regulatory capital in the
Call Report and the TFR were consistent
with U.S. generally accepted accounting
principles. There were no significant
differences in regulatory accounting
standards for regulatory reports filed
with the federal banking agencies. In
2011, the agencies required changes to
the reporting requirements for savings
associations.9 The changes (which are
described in greater detail below)
include a transition from the quarterly
TFR to the quarterly Call Report.
Differences in Capital Standards
Among the Federal Banking Agencies
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Financial Subsidiaries
The Gramm-Leach-Bliley Act (GLBA),
also known as the Financial Services
Modernization Act of 1999, established
5 The agencies’ advanced approaches rules are at
12 CFR part 3, appendix C (national banks) and 12
CFR part 167, appendix C (federal savings
associations);12 CFR part 208, appendix F, and 12
CFR part 225, appendix G (Board); 12 CFR part 325,
appendix D (FDIC); and 12 CFR part 390, subpart
Z, appendix A (state savings associations).
6 See 72 FR 69288 (December 7, 2007).
7 See 76 FR 37620 (June 28, 2011). Some minor
differences remain in the application of the
advanced approaches rule to savings associations,
as statutorily mandated.
8 On August 30, 2012, the agencies issued three
proposed rules that would revise and replace the
agencies’ current capital rules. See 77 FR 52792, 77
FR 52888, 77 FR52978. If the proposed rules were
adopted as final rules, a majority of the nonstatutory differences described in this report would
be eliminated.
9 See 76 FR 39981 (July 7, 2011).
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the framework for financial subsidiaries
of banks.10 GLBA amended the Revised
Statutes to permit national banks to
conduct certain expanded financial
activities through financial subsidiaries.
Section 5136A of the Revised Statutes
(12 U.S.C. 24a) imposes a number of
conditions and requirements upon
national banks that have financial
subsidiaries, including the regulatory
capital treatment applicable to equity
investments in such subsidiaries. The
statute requires that a national bank
deduct from assets and tangible equity
the aggregate amount of its equity
investments in financial subsidiaries.
The statute further requires that the
financial subsidiary’s assets and
liabilities not be consolidated with
those of the parent national bank for
applicable capital purposes.
State member banks may have
financial subsidiaries subject to the
same restrictions that apply to national
banks.11 State nonmember banks may
also have financial subsidiaries, but
they are subject only to a subset of the
statutory requirements that apply to
national banks and state member
banks.12
The OCC, the FDIC, and the Board
adopted final rules implementing their
respective provisions arising from
10 A national bank that has a financial subsidiary
must satisfy a number of statutory requirements in
addition to the capital deduction and
deconsolidation requirements described in the text.
The bank (and each of its depository institution
affiliates) must be well capitalized and well
managed. Asset size restrictions apply to the
aggregate amount of the assets of the bank’s
financial subsidiaries. Certain debt rating
requirements apply, depending on the size of the
national bank. The national bank is required to
maintain policies and procedures to protect the
bank from financial and operational risks presented
by the financial subsidiary. It is also required to
have policies and procedures to preserve the
corporate separateness of the financial subsidiary
and the bank’s limited liability. Finally,
transactions between the bank and its financial
subsidiary generally must comply with the Federal
Reserve Act (FRA) restrictions on affiliate
transactions, and the financial subsidiary is
considered an affiliate of the bank for purposes of
the anti-tying provisions of the Bank Holding
Company Act. See 12 U.S.C. 5136A.
11 See 12 U.S.C. 335 (state member banks are
subject to the ‘‘same conditions and limitations’’
that apply to national banks that hold financial
subsidiaries).
12 The applicable statutory requirements for state
nonmember banks are as follows: the bank (and
each of its insured depository institution affiliates)
must (1) be well capitalized, (2) comply with the
capital deduction and deconsolidation
requirements, and (3) satisfy the requirements for
policies and procedures to protect the bank from
financial and operational risks and to preserve
corporate separateness and limited liability for the
bank. In addition, the statute requires that any
transaction between the bank and a subsidiary that
would be classified as a financial subsidiary
generally shall be subject to the affiliate
transactions restrictions of the FRA. See 12 U.S.C.
1831w.
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section 121 of the GLBA for national
banks in March 2000, for state
nonmember banks in January 2001, and
for state member banks in August 2001.
The GLBA did not provide new
authority to savings associations to own,
hold, or operate financial subsidiaries,
as defined, and thus the capital rules for
savings associations do not contain
parallel provisions.
Non-Financial Subsidiaries and
Subordinate Organizations of Savings
Associations
Banks supervised by the OCC, the
Board, and the FDIC generally
consolidate all significant majorityowned subsidiaries other than financial
subsidiaries for regulatory capital
purposes. For subsidiaries other than
financial subsidiaries that are not
consolidated on a line-by-line basis for
financial reporting purposes, joint
ventures, and associated companies, the
parent banking organization’s
investment in each such subordinate
organization is, for risk-based capital
purposes, deducted from capital or
assigned to the 100 percent risk-weight
category, depending upon the
circumstances. The Board’s and the
FDIC’s rules also permit banks to
consolidate the investment on a pro rata
basis under appropriate circumstances.
The capital regulations for savings
associations are different in some
respects because of statutory
requirements. A statutorily-mandated
distinction is drawn between
subsidiaries, which generally are
majority-owned, that are engaged in
activities that are permissible for
national banks and those that are
engaged in activities impermissible for
national banks.13 When subsidiaries
engage in activities that are
impermissible for national banks, the
regulations governing savings
associations require deduction of the
parent’s investment in these
subsidiaries from the capital of the
parent organization. If a subsidiary’s
activities are permissible for a national
bank, that subsidiary’s assets are
generally consolidated with those of the
parent organization on a line-by-line
basis. If a subordinate organization,
other than a subsidiary, engages in
impermissible activities, investments in
and loans to that organization generally
are deducted from the savings
association’s capital.14 If a subordinate
organization engages solely in
permissible activities, depending on the
13 See
12 U.S.C. 1464(t)(5).
definitions of subsidiary and subordinate
organization are provided in 12 CFR 159.2 (federal
savings associations) and 12 CFR 390.251 (state
savings associations).
14 The
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nature and risk of the activity,
investments in and loans to that
organization may be assigned either to
the 100 percent risk-weight category or
deducted from capital.
Leverage Ratio Denominator
Banks supervised by the Board, the
OCC, and the FDIC use average total
assets to calculate the denominator of
the leverage ratio. In contrast, savings
associations use quarter-end total assets.
Under the rules governing the
reservation of authority for savings
associations, the OCC and the FDIC
reserve the right to require federal and
state savings associations, respectively,
to compute capital ratios on the basis of
average, rather than period-end,
assets.15
Collateralized Transactions
The risk-based capital rules of the
Board assign a zero percent risk weight
to claims collateralized by cash on
deposit in the institution or by
securities issued or guaranteed by U.S.
Government agencies or the central
governments of countries that are
members of the Organization for
Economic Cooperation and
Development (OECD), provided there is
daily mark-to-market of collateral and
maintenance of a positive margin of
collateral. The OCC rules with respect to
national banks incorporate similar
conditions for such collateralized claims
eligible for a zero percent risk weight.
However, while the Board’s rules
require such claims to be fully
collateralized, the OCC’s rules
governing national banks permit partial
collateralization.
Under the FDIC rules for state
nonmember banks and the FDIC and
OCC rules for state and federal savings
associations, respectively, portions of
claims collateralized by cash or by
securities issued or guaranteed by OECD
central governments or U.S.
Government agencies receive a 20
percent risk weight. However, these
institutions may assign a zero percent
risk weight for claims on certain
qualifying securities firms that are
collateralized by cash on deposit in the
institution or by securities issued or
guaranteed by the U.S. Government,
U.S. Government agencies, or other
OECD central governments.
Noncumulative Perpetual Preferred
Stock
Under the agencies’ capital standards,
noncumulative perpetual preferred
stock is a component of tier 1 capital.
The capital standards of the Board, the
FDIC with respect to state nonmember
banks, and the OCC with respect to
national banks, require noncumulative
perpetual preferred stock to give the
issuer the option to waive the payment
of dividends and provide that waived
dividends neither accumulate to future
periods nor represent a contingent claim
on the issuer.
As a result of these requirements,
under the risk-based capital rules of the
OCC (with respect to national banks),
the Board, or the FDIC, if a bank issues
perpetual preferred stock and is
required to pay dividends in a form
other than cash (e.g., dividends in the
form of stock, when cash dividends are
not or cannot be paid and when the
bank does not have the option to waive
Exchange rate
and gold
(percent)
Interest rate
(percent)
Remaining maturity
One year or less ....................................
More than one year to five years ..........
More than five years ..............................
0.0
0.5
1.5
Equity Securities of GovernmentSponsored Enterprises
The risk-based capital rules of the
Board and the FDIC and the capital
regulations governing savings
associations apply a 100 percent risk
weight to equity securities of
government-sponsored enterprises
(GSEs).16 In contrast, the OCC’s
regulation governing national banks
applies a 20 percent risk weight to all
GSE equity securities.
Conversion Factors for Off-Balance
Sheet Contracts
Under the agencies’ general risk-based
capital rules, the credit equivalent
amount of a derivative contract that is
not subject to a qualifying bilateral
netting contract is equal to the sum of
the derivative contract’s current credit
exposure and the potential future credit
exposure. The potential future exposure
is estimated by multiplying the notional
principal amount of the contract by a
credit conversion factor by type of
derivative contract. The regulations of
the Board, the FDIC with respect to state
nonmember banks, and the OCC with
respect to national banks provide a chart
illustrating the applicable credit
conversion factors, as follows:
Precious metals,
except gold
(percent)
Equity
(percent)
1.0
5.0
7.5
6.0
8.0
10.0
In contrast, the regulations governing
savings associations, as currently
incorporated into the FDIC’s and the
OCC’s regulations, provide a table of
conversion factors that is less granular
as to the types of contracts to which it
applies as well as their remaining
maturity.
sroberts on DSK5SPTVN1PROD with
or eliminate dividends), the perpetual
preferred stock would not qualify as
noncumulative. Under the capital
requirements for savings associations, a
savings association may request
supervisory approval to treat perpetual
preferred stock as noncumulative if it
requires the payment of dividends in
the form of stock when cash dividends
are not paid.
One year or less
Over one year ...
15 See 12 CFR 167.11(b) (federal savings
associations) and 12 CFR 390.470(b) (state savings
associations).
7.0
7.0
8.0
16 However, Federal Home Loan Bank stock held
by banking organizations as a condition of
membership receives a 20 percent risk weight.
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Other
commodities
(percent)
10.0
12.0
15.0
Limitation on Subordinated Debt and
Limited-Life Preferred Stock
Interest rate
contracts
(percent)
Remaining
maturity
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0.0
0.5
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Foreign exchange rate
contracts
(percent)
The risk-based capital rules of the
Board, the FDIC with respect to state
nonmember banks, and the OCC with
respect to national banks limit the
1.0 amount of subordinated debt and
5.0 intermediate-term preferred stock that
may be treated as part of tier 2 capital
to 50 percent of tier 1 capital. Such a
restriction is not imposed on savings
associations. However, the agencies
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limit the amount of tier 2 capital to 100
percent of tier 1 capital for all banks and
savings associations.
In addition, under the risk-based
capital rules of the Board, the FDIC with
respect to state nonmember banks, and
the OCC with respect to national banks,
at the beginning of each of the last five
years of the life of a subordinated debt
or limited-life preferred stock
instrument, the amount eligible for
inclusion in tier 2 capital is reduced by
20 percent of the original amount of that
instrument (net of redemptions).
However, the regulations governing
savings associations provide the option
of using either the discounting approach
described above or an approach that,
during the last seven years of the
instrument’s life, allows for the full
inclusion of all such instruments,
provided that the aggregate amount of
such instruments maturing in any one
year does not exceed 20 percent of the
savings association’s total capital.
Tangible Capital Requirement
Unlike banks, savings associations, by
statute, must satisfy a 1.5 percent
minimum tangible capital
requirement.17 However, under the
Prompt Corrective Action framework all
insured depository institutions are
considered critically undercapitalized if
their tangible common equity falls
below 2 percent.18 Therefore, the 1.5
percent minimum tangible capital
requirement for savings associations is
no longer a meaningful limit.
Market Risk Rule
In 1996, the Board, the FDIC with
respect to state nonmember banks, and
the OCC with respect to national banks,
adopted rules requiring banks and bank
holding companies with significant
exposure to market risk to measure and
maintain capital to support that risk.19
However, the rules governing savings
associations do not include a market
risk framework because no savings
association engaged in the threshold
level of trading activity when the market
risk capital rule was adopted.20
17 See
12 U.S.C. 1464(t)(1)(A)(ii) and (t)(2)(B).
12 U.S.C. 1831o(c)(3); see also 12 CFR 6.4,
12 CFR 165.4 (OCC); 12 CFR 208.45 (Board); 12 CFR
325.105, 12 CFR 390.455 (FDIC).
19 See 61 FR 47358 (September 6, 1996).
20 On August 30, 2012, the agencies published a
revised market risk final rule that: (1) enhances the
market risk rule’s sensitivity to risks that are not
adequately captured under the prior market risk
rule, (2) increases transparency through enhanced
disclosures, and (3) does not rely on credit ratings,
consistent with section 939A of the Dodd-Frank
Act. See 77 FR 53060. On the same day, the
agencies also issued a proposed rule that would
subject federal and state savings associations to the
market risk rule. See 77 FR 52978 (August 30,
2012). Thus, if the proposed rule is adopted as a
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18 See
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Pledged Deposits, Nonwithdrawable
Accounts, and Certain Certificates
associations) may similarly receive a 20
percent risk weight.
The capital regulations governing
mutual savings associations permit such
institutions to include in tier 1 capital
pledged deposits and nonwithdrawable
accounts to the extent that such
accounts or deposits have no fixed
maturity date, cannot be withdrawn at
the option of the accountholder, and do
not earn interest that carries over to
subsequent periods. The regulations
also permit the inclusion of net worth
certificates, mutual capital certificates,
and income capital certificates
complying with applicable regulations
in savings associations’ tier 2 capital.
The risk-based capital rules of the
Board, the FDIC with respect to state
nonmember banks, and the OCC with
respect to national banks do not
expressly address these instruments.
Differences in Accounting Standards
Among the Federal Banking Agencies
Assets Subject to FDIC or Federal
Savings and Loan Insurance
Corporation Agreements
The risk-based capital rules of the
Board, the OCC for national banks, and
the FDIC for state nonmember banks
generally place assets subject to
guarantee arrangements by the FDIC or
the former Federal Savings and Loan
Insurance Corporation (FSLIC) in the 20
percent risk-weight category. The
regulations governing savings
associations place certain assets in the
zero percent risk-weight category,
provided the assets are fully covered
against capital loss and/or by yield
maintenance agreements initiated by the
FSLIC, regardless of any later successor
agency such as the FDIC.
The federal banking agencies issued a
joint statement, Clarification of the Risk
Weight for Claims on or Guaranteed by
the FDIC, on February 26, 2010, that
clarifies the risk weights for claims on
or guaranteed by the FDIC for purposes
of banking organizations’ risk-based
capital requirements. Recent losssharing agreements entered into by the
FDIC with acquirers of assets from failed
institutions are considered conditional
guarantees for risk-based capital
purposes due to contractual conditions
imposed on the acquiring institution.
The guaranteed portion of assets subject
to an FDIC loss-sharing agreement may
be assigned a 20 percent risk weight.
Any such assets reported by a savings
association, other than those meeting
the requirements provided in 12 CFR
167.6(a)(1)(i)(F) (federal savings
associations) and 12 CFR
390.466(a)(1)(i)(F) (state savings
final rule, the difference described above would be
eliminated.
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Specific Valuation Allowances
There was a difference in regulatory
reporting of ‘‘specific valuation
allowance’’ between Call Report and
TFR filers.21 Under the TFR, if a savings
association determined that it was likely
the amount of a loan loss classification
would change due to market conditions,
it could record the loss associated with
the loan by either (1) creating a specific
valuation allowance or (2) recognizing a
charge-off.22 In contrast, Call Report
instructions require a charge-off for all
confirmed losses and do not provide for
this use of specific valuation
allowances.
Regulatory Reporting
In 2011, subsequent to the DoddFrank Act, the agencies changed
regulatory reporting requirements,
including requiring savings associations
to file the quarterly Call Report rather
than the TFR.23 As a result, institutions
supervised by the agencies are subject to
uniform regulatory reporting
requirements.
Savings associations continued their
existing reporting processes until the
effective dates cited below, but they
were permitted to convert early to the
Call Report for report dates after July 21,
2011. Savings associations that elected
to early adopt the Call Report were still
required to submit other applicable
reports (Cost of Funds, Holding
Company, and Consolidated Maturity/
Rate Schedule) through the December
31, 2011, reporting period.
Specific changes to reporting
requirements for savings associations
include:
• A requirement to file the quarterly
Call Report, beginning with the March
31, 2012, report date. Effective on that
date, all required schedules of the TFR
(including Schedules CMR—
Consolidated Maturity Rate and HC—
Thrift Holding Company) were
eliminated;
• A requirement to file data through
the Summary of Deposits with the FDIC,
21 Effective March 30, 2012, this difference was
eliminated when savings associations began to file
the Call Report.
22 A savings association is not permitted to use a
specific valuation allowance in lieu of a charge-off
when it classifies certain credits as a loss, such as
unsecured loans, consumer loans, and credit cards,
and in instances where the collateral underlying a
secured loan would likely be acquired through
foreclosure or repossession. In those cases, only a
charge-off is permitted.
23 See 76 FR 39981 (July 7, 2011).
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beginning with the June 30, 2011, report
date. Effective on that date, the OTS
Branch Office Survey was eliminated;
and
• Ending collection of monthly
median cost-of-funds data from savings
associations, effective January 31, 2012.
The last cost-of-funds indices were
published as of December 31, 2011.
Fiscal Service
ULLICO Casualty Company (NAIC#
37893) under 31 U.S.C. 9305 to qualify
as an acceptable surety on Federal
bonds is terminated immediately.
Federal bond-approving officials should
annotate their reference copies of the
Treasury Department Circular 570
(‘‘Circular’’), 2012 Revision, to reflect
this change.
With respect to any bonds, including
continuous bonds, currently in force
with above listed Company, bondapproving officers should secure new
bonds with acceptable sureties in those
instances where a significant amount of
liability remains outstanding. In
addition, in no event, should bonds that
are continuous in nature be renewed.
The Circular may be viewed and
downloaded through the Internet at
www.fms.treas.gov/c570.
Questions concerning this notice may
be directed to the U.S. Department of
the Treasury, Financial Management
Service, Financial Accounting and
Services Division, Surety Bond Branch,
3700 EastMest Highway, Room 6F01,
Hyattsville, MD 20782.
Surety Companies Acceptable on
Federal Bonds: Termination; ULLICO
Casualty Company
Dated: December 11, 2012.
Kevin McIntyre,
Acting Director, Financial Accounting and
Services Division.
Dated: December 13, 2012.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, December 10, 2012.
Robert deV. Frierson,
Secretary of the Board.
Dated: December 11, 2012.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2012–30608 Filed 12–18–12; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P
DEPARTMENT OF THE TREASURY
Financial Management Service,
Fiscal Service, Department of the
Treasury.
ACTION: Notice.
AGENCY:
This is Supplement No. 3 to
the Treasury Department Circular 570;
2012 Revision, published July 2, 2012,
at 77 FR 39322.
FOR FURTHER INFORMATION CONTACT:
Surety Bond Branch at (202) 874–6850.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that the Certificate of
Authority issued by the Treasury to
[FR Doc. 2012–30422 Filed 12–18–12; 8:45 am]
BILLING CODE 4810–35–M
DEPARTMENT OF THE TREASURY
sroberts on DSK5SPTVN1PROD with
SUMMARY:
VerDate Mar<15>2010
16:35 Dec 18, 2012
Jkt 229001
Fiscal Service
Surety Companies Acceptable on
Federal Bonds: Termination; Universal
Insurance Company
Financial Management Service,
Fiscal Service, Department of the
Treasury.
AGENCY:
PO 00000
Frm 00159
Fmt 4703
Sfmt 9990
ACTION:
75263
Notice.
This is Supplement No. 2 to
the Treasury Department Circular 570;
2012 Revision, published July 2, 2012,
at 77 FR 39322.
FOR FURTHER INFORMATION CONTACT:
Surety Bond Branch at (202) 874–6850.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that the Certificate of
Authority issued by the Treasury to
Universal Insurance Company (NAIC#
31704) under 31 U.S.C. 9305 to qualify
as an acceptable surety on Federal
bonds is terminated immediately.
Federal bond-approving officials should
annotate their reference copies of the
Treasury Department Circular 570
(‘‘Circular’’), 2012 Revision, to reflect
this change.
With respect to any bonds, including
continuous bonds, currently in force
with above listed Company, bondapproving officers should secure new
bonds with acceptable sureties in those
instances where a significant amount of
liability remains outstanding. In
addition, in no event, should bonds that
are continuous in nature be renewed.
The Circular may be viewed and
downloaded through the Internet at
www.fms.treas.gov/c570.
Questions concerning this notice may
be directed to the U.S. Department of
the Treasury, Financial Management
Service, Financial Accounting and
Services Division, Surety Bond Branch,
3700 East-West Highway, Room 6F01,
Hyattsville, MD 20782.
SUMMARY:
Dated: December 11, 2012.
Kevin McIntyre,
Acting Director, Financial Accounting and
Services Division.
[FR Doc. 2012–30421 Filed 12–18–12; 8:45 am]
BILLING CODE 4810–35–M
E:\FR\FM\19DEN1.SGM
19DEN1
]]>Agencies
[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75259-75263]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30608]
=======================================================================
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2012-0003]
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
Joint Report: Differences in Accounting and Capital Standards
Among the Federal Banking Agencies; Report to Congressional Committees
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); and Federal
Deposit Insurance Corporation (FDIC).
ACTION: Report to the Congressional Committees.
-----------------------------------------------------------------------
SUMMARY: The OCC, the Board, and the FDIC (collectively, the agencies)
have prepared this report pursuant to section 37(c) of the Federal
Deposit Insurance Act. Section 37(c) requires the agencies to jointly
submit an annual report to the Committee on Financial Services of the
U.S. House of Representatives and to the Committee on Banking, Housing,
and Urban Affairs of the U.S. Senate describing differences between the
capital and accounting standards used by the agencies. The report must
be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
OCC: David Elkes, Risk Expert, Capital Policy, (202) 649-6984,
Office of the Comptroller of the Currency, 250 E Street SW.,
Washington, DC 20219.
Board: Sviatlana Phelan, Senior Financial Analyst, Capital and
Regulatory Policy, (202) 912-4306, Division of Banking Supervision and
Regulation, Board of Governors of the Federal Reserve System, 20th
Street and Constitution Avenue NW., Washington, DC 20551.
FDIC: David W. Riley, Senior Analyst (Capital Markets), (202) 898-
3728, Division of Risk Management Supervision, Federal Deposit
Insurance Corporation, 550 17th Street NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION: The text of the report follows:
Report to the Committee on Financial Services of the U.S. House of
Representatives and to the Committee on Banking, Housing, and Urban
Affairs of the U.S. Senate Regarding Differences in Accounting and
Capital Standards Among the Federal Banking Agencies
Introduction
The Office of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System (Board), and the Federal
Deposit Insurance Corporation (FDIC) (collectively, the agencies) must
jointly submit an annual report to the Committee on Financial Services
of the U.S. House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the U.S. Senate describing differences
between the accounting and capital standards used by the agencies. The
report must be published in the Federal Register.
Prior to 2011, the Office of Thrift Supervision (OTS) joined the
agencies in submitting an annual report to Congress. Title III of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-
203, 124 Stat. 1376 (2010) (Dodd-Frank Act), transferred the powers,
authorities, rights and duties of the OTS to other federal banking
agencies on July 21, 2011 (the transfer date), and the OTS was
abolished 90 days later. Under Title III, the OCC assumed all functions
of the OTS and the Director of the OTS relating to federal savings
associations, and thus the OCC has responsibility for the ongoing
supervision, examination, and regulation of federal savings
associations as of the transfer date. Title III transferred all
supervision, examination, and certain regulatory functions of the OTS
relating to state savings associations to the FDIC and all functions
relating to the supervision of any savings and loan holding company and
non-depository institution subsidiaries of such holding companies to
the Board. Accordingly, this report is being submitted by the OCC,
Board, and FDIC.
The agencies are submitting this joint report, which covers
differences between their uses of accounting or capital standards
existing as of December 31, 2011, pursuant to section 37(c) of the
Federal Deposit Insurance Act (12 U.S.C. 1831n(c)), as amended. This
report covers 2010 and 2011 and describes capital differences similar
to those presented in previous reports.\1\
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\1\ See, e.g., 75 FR 47900 (August 9, 2010).
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Since the agencies filed their first reports on accounting and
capital differences in 1990, the agencies have acted in concert to
harmonize their accounting and capital standards and eliminate as many
differences as possible. Section 303 of the Riegle Community
Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4803)
also directs the agencies to work jointly to make uniform all
regulations and guidelines implementing common statutory or supervisory
policies. The results of these efforts must be ``consistent with the
principles of safety and soundness, statutory law and policy, and the
public interest.'' \2\ In recent years, the agencies have revised their
capital standards to address changes in credit and certain other risk
exposures within the banking system and align the amount of capital
institutions are required to hold more closely with the credit risks
and certain other risks to which they are exposed. These revisions have
been made in a uniform manner whenever possible and practicable to
minimize interagency differences. Although the differences in capital
standards have diminished over time, a few differences remain, some of
which are statutorily mandated.
---------------------------------------------------------------------------
\2\ 12 U.S.C. 4803(a).
---------------------------------------------------------------------------
In addition to the specific differences in capital standards noted
below, the agencies may have differences in how they apply certain
aspects of their rules. These differences usually arise as a result of
case-specific inquiries that have been presented to only one agency.
Agency staffs generally seek to minimize these occurrences by
coordinating responses to the fullest extent reasonably practicable.
Furthermore, while the agencies work together to adopt and apply
generally uniform capital standards, there are wording differences in
various provisions of the agencies' standards that largely date back to
each agency's separate initial adoption of these standards before 1990.
The federal banking agencies have substantially similar capital
adequacy standards.\3\ These standards are based on a common regulatory
framework that establishes minimum leverage and risk-based capital
ratios for depository institutions \4\ (banks and savings
associations). The agencies view the leverage and risk-based capital
requirements as minimum standards, and most institutions generally are
expected to operate with capital levels
[[Page 75260]]
well above the minimums, particularly those institutions that are
expanding or experiencing unusual or high levels of risk.
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\3\ The agencies' general risk-based capital rules are at 12 CFR
part 3 (for national banks) and 12 CFR part 167.6 (for federal
savings associations); 12 CFR parts 208 and 225, appendix A (Board);
12 CFR part 325, appendix A (FDIC); and 12 CFR part 390, subpart Z
(state savings associations).
\4\ 12 U.S.C. 1813(c).
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The agencies note that, with respect to the agencies' advanced
approaches capital adequacy framework based on Basel II,\5\ there are
no significant differences across the agencies' rules because the
agencies adopted a joint rule establishing a common advanced approaches
framework in December 2007,\6\ with subsequent joint revisions.\7\
Therefore, the risk-based capital differences described below pertain
to the agencies' Basel I-based risk-based capital standards.\8\
---------------------------------------------------------------------------
\5\ The agencies' advanced approaches rules are at 12 CFR part
3, appendix C (national banks) and 12 CFR part 167, appendix C
(federal savings associations);12 CFR part 208, appendix F, and 12
CFR part 225, appendix G (Board); 12 CFR part 325, appendix D
(FDIC); and 12 CFR part 390, subpart Z, appendix A (state savings
associations).
\6\ See 72 FR 69288 (December 7, 2007).
\7\ See 76 FR 37620 (June 28, 2011). Some minor differences
remain in the application of the advanced approaches rule to savings
associations, as statutorily mandated.
\8\ On August 30, 2012, the agencies issued three proposed rules
that would revise and replace the agencies' current capital rules.
See 77 FR 52792, 77 FR 52888, 77 FR52978. If the proposed rules were
adopted as final rules, a majority of the non-statutory differences
described in this report would be eliminated.
---------------------------------------------------------------------------
With respect to reporting standards, the OCC, the Board, and the
FDIC, under the auspices of the Federal Financial Institutions
Examination Council (FFIEC), have developed the uniform Consolidated
Reports of Condition and Income (Call Report) for all insured
commercial banks and certain state-chartered savings banks. The OTS
required OTS-supervised savings associations and certain state-
chartered savings banks to file the Thrift Financial Report (TFR). The
reporting standards for recognition and measurement of regulatory
capital in the Call Report and the TFR were consistent with U.S.
generally accepted accounting principles. There were no significant
differences in regulatory accounting standards for regulatory reports
filed with the federal banking agencies. In 2011, the agencies required
changes to the reporting requirements for savings associations.\9\ The
changes (which are described in greater detail below) include a
transition from the quarterly TFR to the quarterly Call Report.
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\9\ See 76 FR 39981 (July 7, 2011).
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Differences in Capital Standards Among the Federal Banking Agencies
Financial Subsidiaries
The Gramm-Leach-Bliley Act (GLBA), also known as the Financial
Services Modernization Act of 1999, established the framework for
financial subsidiaries of banks.\10\ GLBA amended the Revised Statutes
to permit national banks to conduct certain expanded financial
activities through financial subsidiaries. Section 5136A of the Revised
Statutes (12 U.S.C. 24a) imposes a number of conditions and
requirements upon national banks that have financial subsidiaries,
including the regulatory capital treatment applicable to equity
investments in such subsidiaries. The statute requires that a national
bank deduct from assets and tangible equity the aggregate amount of its
equity investments in financial subsidiaries. The statute further
requires that the financial subsidiary's assets and liabilities not be
consolidated with those of the parent national bank for applicable
capital purposes.
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\10\ A national bank that has a financial subsidiary must
satisfy a number of statutory requirements in addition to the
capital deduction and deconsolidation requirements described in the
text. The bank (and each of its depository institution affiliates)
must be well capitalized and well managed. Asset size restrictions
apply to the aggregate amount of the assets of the bank's financial
subsidiaries. Certain debt rating requirements apply, depending on
the size of the national bank. The national bank is required to
maintain policies and procedures to protect the bank from financial
and operational risks presented by the financial subsidiary. It is
also required to have policies and procedures to preserve the
corporate separateness of the financial subsidiary and the bank's
limited liability. Finally, transactions between the bank and its
financial subsidiary generally must comply with the Federal Reserve
Act (FRA) restrictions on affiliate transactions, and the financial
subsidiary is considered an affiliate of the bank for purposes of
the anti-tying provisions of the Bank Holding Company Act. See 12
U.S.C. 5136A.
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State member banks may have financial subsidiaries subject to the
same restrictions that apply to national banks.\11\ State nonmember
banks may also have financial subsidiaries, but they are subject only
to a subset of the statutory requirements that apply to national banks
and state member banks.\12\
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\11\ See 12 U.S.C. 335 (state member banks are subject to the
``same conditions and limitations'' that apply to national banks
that hold financial subsidiaries).
\12\ The applicable statutory requirements for state nonmember
banks are as follows: the bank (and each of its insured depository
institution affiliates) must (1) be well capitalized, (2) comply
with the capital deduction and deconsolidation requirements, and (3)
satisfy the requirements for policies and procedures to protect the
bank from financial and operational risks and to preserve corporate
separateness and limited liability for the bank. In addition, the
statute requires that any transaction between the bank and a
subsidiary that would be classified as a financial subsidiary
generally shall be subject to the affiliate transactions
restrictions of the FRA. See 12 U.S.C. 1831w.
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The OCC, the FDIC, and the Board adopted final rules implementing
their respective provisions arising from section 121 of the GLBA for
national banks in March 2000, for state nonmember banks in January
2001, and for state member banks in August 2001. The GLBA did not
provide new authority to savings associations to own, hold, or operate
financial subsidiaries, as defined, and thus the capital rules for
savings associations do not contain parallel provisions.
Non-Financial Subsidiaries and Subordinate Organizations of Savings
Associations
Banks supervised by the OCC, the Board, and the FDIC generally
consolidate all significant majority-owned subsidiaries other than
financial subsidiaries for regulatory capital purposes. For
subsidiaries other than financial subsidiaries that are not
consolidated on a line-by-line basis for financial reporting purposes,
joint ventures, and associated companies, the parent banking
organization's investment in each such subordinate organization is, for
risk-based capital purposes, deducted from capital or assigned to the
100 percent risk-weight category, depending upon the circumstances. The
Board's and the FDIC's rules also permit banks to consolidate the
investment on a pro rata basis under appropriate circumstances.
The capital regulations for savings associations are different in
some respects because of statutory requirements. A statutorily-mandated
distinction is drawn between subsidiaries, which generally are
majority-owned, that are engaged in activities that are permissible for
national banks and those that are engaged in activities impermissible
for national banks.\13\ When subsidiaries engage in activities that are
impermissible for national banks, the regulations governing savings
associations require deduction of the parent's investment in these
subsidiaries from the capital of the parent organization. If a
subsidiary's activities are permissible for a national bank, that
subsidiary's assets are generally consolidated with those of the parent
organization on a line-by-line basis. If a subordinate organization,
other than a subsidiary, engages in impermissible activities,
investments in and loans to that organization generally are deducted
from the savings association's capital.\14\ If a subordinate
organization engages solely in permissible activities, depending on the
[[Page 75261]]
nature and risk of the activity, investments in and loans to that
organization may be assigned either to the 100 percent risk-weight
category or deducted from capital.
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\13\ See 12 U.S.C. 1464(t)(5).
\14\ The definitions of subsidiary and subordinate organization
are provided in 12 CFR 159.2 (federal savings associations) and 12
CFR 390.251 (state savings associations).
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Leverage Ratio Denominator
Banks supervised by the Board, the OCC, and the FDIC use average
total assets to calculate the denominator of the leverage ratio. In
contrast, savings associations use quarter-end total assets. Under the
rules governing the reservation of authority for savings associations,
the OCC and the FDIC reserve the right to require federal and state
savings associations, respectively, to compute capital ratios on the
basis of average, rather than period-end, assets.\15\
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\15\ See 12 CFR 167.11(b) (federal savings associations) and 12
CFR 390.470(b) (state savings associations).
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Collateralized Transactions
The risk-based capital rules of the Board assign a zero percent
risk weight to claims collateralized by cash on deposit in the
institution or by securities issued or guaranteed by U.S. Government
agencies or the central governments of countries that are members of
the Organization for Economic Cooperation and Development (OECD),
provided there is daily mark-to-market of collateral and maintenance of
a positive margin of collateral. The OCC rules with respect to national
banks incorporate similar conditions for such collateralized claims
eligible for a zero percent risk weight. However, while the Board's
rules require such claims to be fully collateralized, the OCC's rules
governing national banks permit partial collateralization.
Under the FDIC rules for state nonmember banks and the FDIC and OCC
rules for state and federal savings associations, respectively,
portions of claims collateralized by cash or by securities issued or
guaranteed by OECD central governments or U.S. Government agencies
receive a 20 percent risk weight. However, these institutions may
assign a zero percent risk weight for claims on certain qualifying
securities firms that are collateralized by cash on deposit in the
institution or by securities issued or guaranteed by the U.S.
Government, U.S. Government agencies, or other OECD central
governments.
Noncumulative Perpetual Preferred Stock
Under the agencies' capital standards, noncumulative perpetual
preferred stock is a component of tier 1 capital. The capital standards
of the Board, the FDIC with respect to state nonmember banks, and the
OCC with respect to national banks, require noncumulative perpetual
preferred stock to give the issuer the option to waive the payment of
dividends and provide that waived dividends neither accumulate to
future periods nor represent a contingent claim on the issuer.
As a result of these requirements, under the risk-based capital
rules of the OCC (with respect to national banks), the Board, or the
FDIC, if a bank issues perpetual preferred stock and is required to pay
dividends in a form other than cash (e.g., dividends in the form of
stock, when cash dividends are not or cannot be paid and when the bank
does not have the option to waive or eliminate dividends), the
perpetual preferred stock would not qualify as noncumulative. Under the
capital requirements for savings associations, a savings association
may request supervisory approval to treat perpetual preferred stock as
noncumulative if it requires the payment of dividends in the form of
stock when cash dividends are not paid.
Equity Securities of Government-Sponsored Enterprises
The risk-based capital rules of the Board and the FDIC and the
capital regulations governing savings associations apply a 100 percent
risk weight to equity securities of government-sponsored enterprises
(GSEs).\16\ In contrast, the OCC's regulation governing national banks
applies a 20 percent risk weight to all GSE equity securities.
---------------------------------------------------------------------------
\16\ However, Federal Home Loan Bank stock held by banking
organizations as a condition of membership receives a 20 percent
risk weight.
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Conversion Factors for Off-Balance Sheet Contracts
Under the agencies' general risk-based capital rules, the credit
equivalent amount of a derivative contract that is not subject to a
qualifying bilateral netting contract is equal to the sum of the
derivative contract's current credit exposure and the potential future
credit exposure. The potential future exposure is estimated by
multiplying the notional principal amount of the contract by a credit
conversion factor by type of derivative contract. The regulations of
the Board, the FDIC with respect to state nonmember banks, and the OCC
with respect to national banks provide a chart illustrating the
applicable credit conversion factors, as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Precious metals, Other
Remaining maturity Interest rate Exchange rate and Equity (percent) except gold commodities
(percent) gold (percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One year or less......................................... 0.0 1.0 6.0 7.0 10.0
More than one year to five years......................... 0.5 5.0 8.0 7.0 12.0
More than five years..................................... 1.5 7.5 10.0 8.0 15.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
In contrast, the regulations governing savings associations, as
currently incorporated into the FDIC's and the OCC's regulations,
provide a table of conversion factors that is less granular as to the
types of contracts to which it applies as well as their remaining
maturity.
------------------------------------------------------------------------
Foreign
Interest exchange
Remaining maturity rate rate
contracts contracts
(percent) (percent)
------------------------------------------------------------------------
One year or less.............................. 0.0 1.0
Over one year................................. 0.5 5.0
------------------------------------------------------------------------
Limitation on Subordinated Debt and Limited-Life Preferred Stock
The risk-based capital rules of the Board, the FDIC with respect to
state nonmember banks, and the OCC with respect to national banks limit
the amount of subordinated debt and intermediate-term preferred stock
that may be treated as part of tier 2 capital to 50 percent of tier 1
capital. Such a restriction is not imposed on savings associations.
However, the agencies
[[Page 75262]]
limit the amount of tier 2 capital to 100 percent of tier 1 capital for
all banks and savings associations.
In addition, under the risk-based capital rules of the Board, the
FDIC with respect to state nonmember banks, and the OCC with respect to
national banks, at the beginning of each of the last five years of the
life of a subordinated debt or limited-life preferred stock instrument,
the amount eligible for inclusion in tier 2 capital is reduced by 20
percent of the original amount of that instrument (net of redemptions).
However, the regulations governing savings associations provide the
option of using either the discounting approach described above or an
approach that, during the last seven years of the instrument's life,
allows for the full inclusion of all such instruments, provided that
the aggregate amount of such instruments maturing in any one year does
not exceed 20 percent of the savings association's total capital.
Tangible Capital Requirement
Unlike banks, savings associations, by statute, must satisfy a 1.5
percent minimum tangible capital requirement.\17\ However, under the
Prompt Corrective Action framework all insured depository institutions
are considered critically undercapitalized if their tangible common
equity falls below 2 percent.\18\ Therefore, the 1.5 percent minimum
tangible capital requirement for savings associations is no longer a
meaningful limit.
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\17\ See 12 U.S.C. 1464(t)(1)(A)(ii) and (t)(2)(B).
\18\ See 12 U.S.C. 1831o(c)(3); see also 12 CFR 6.4, 12 CFR
165.4 (OCC); 12 CFR 208.45 (Board); 12 CFR 325.105, 12 CFR 390.455
(FDIC).
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Market Risk Rule
In 1996, the Board, the FDIC with respect to state nonmember banks,
and the OCC with respect to national banks, adopted rules requiring
banks and bank holding companies with significant exposure to market
risk to measure and maintain capital to support that risk.\19\ However,
the rules governing savings associations do not include a market risk
framework because no savings association engaged in the threshold level
of trading activity when the market risk capital rule was adopted.\20\
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\19\ See 61 FR 47358 (September 6, 1996).
\20\ On August 30, 2012, the agencies published a revised market
risk final rule that: (1) enhances the market risk rule's
sensitivity to risks that are not adequately captured under the
prior market risk rule, (2) increases transparency through enhanced
disclosures, and (3) does not rely on credit ratings, consistent
with section 939A of the Dodd-Frank Act. See 77 FR 53060. On the
same day, the agencies also issued a proposed rule that would
subject federal and state savings associations to the market risk
rule. See 77 FR 52978 (August 30, 2012). Thus, if the proposed rule
is adopted as a final rule, the difference described above would be
eliminated.
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Pledged Deposits, Nonwithdrawable Accounts, and Certain Certificates
The capital regulations governing mutual savings associations
permit such institutions to include in tier 1 capital pledged deposits
and nonwithdrawable accounts to the extent that such accounts or
deposits have no fixed maturity date, cannot be withdrawn at the option
of the accountholder, and do not earn interest that carries over to
subsequent periods. The regulations also permit the inclusion of net
worth certificates, mutual capital certificates, and income capital
certificates complying with applicable regulations in savings
associations' tier 2 capital. The risk-based capital rules of the
Board, the FDIC with respect to state nonmember banks, and the OCC with
respect to national banks do not expressly address these instruments.
Assets Subject to FDIC or Federal Savings and Loan Insurance
Corporation Agreements
The risk-based capital rules of the Board, the OCC for national
banks, and the FDIC for state nonmember banks generally place assets
subject to guarantee arrangements by the FDIC or the former Federal
Savings and Loan Insurance Corporation (FSLIC) in the 20 percent risk-
weight category. The regulations governing savings associations place
certain assets in the zero percent risk-weight category, provided the
assets are fully covered against capital loss and/or by yield
maintenance agreements initiated by the FSLIC, regardless of any later
successor agency such as the FDIC.
The federal banking agencies issued a joint statement,
Clarification of the Risk Weight for Claims on or Guaranteed by the
FDIC, on February 26, 2010, that clarifies the risk weights for claims
on or guaranteed by the FDIC for purposes of banking organizations'
risk-based capital requirements. Recent loss-sharing agreements entered
into by the FDIC with acquirers of assets from failed institutions are
considered conditional guarantees for risk-based capital purposes due
to contractual conditions imposed on the acquiring institution. The
guaranteed portion of assets subject to an FDIC loss-sharing agreement
may be assigned a 20 percent risk weight. Any such assets reported by a
savings association, other than those meeting the requirements provided
in 12 CFR 167.6(a)(1)(i)(F) (federal savings associations) and 12 CFR
390.466(a)(1)(i)(F) (state savings associations) may similarly receive
a 20 percent risk weight.
Differences in Accounting Standards Among the Federal Banking Agencies
Specific Valuation Allowances
There was a difference in regulatory reporting of ``specific
valuation allowance'' between Call Report and TFR filers.\21\ Under the
TFR, if a savings association determined that it was likely the amount
of a loan loss classification would change due to market conditions, it
could record the loss associated with the loan by either (1) creating a
specific valuation allowance or (2) recognizing a charge-off.\22\ In
contrast, Call Report instructions require a charge-off for all
confirmed losses and do not provide for this use of specific valuation
allowances.
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\21\ Effective March 30, 2012, this difference was eliminated
when savings associations began to file the Call Report.
\22\ A savings association is not permitted to use a specific
valuation allowance in lieu of a charge-off when it classifies
certain credits as a loss, such as unsecured loans, consumer loans,
and credit cards, and in instances where the collateral underlying a
secured loan would likely be acquired through foreclosure or
repossession. In those cases, only a charge-off is permitted.
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Regulatory Reporting
In 2011, subsequent to the Dodd-Frank Act, the agencies changed
regulatory reporting requirements, including requiring savings
associations to file the quarterly Call Report rather than the TFR.\23\
As a result, institutions supervised by the agencies are subject to
uniform regulatory reporting requirements.
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\23\ See 76 FR 39981 (July 7, 2011).
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Savings associations continued their existing reporting processes
until the effective dates cited below, but they were permitted to
convert early to the Call Report for report dates after July 21, 2011.
Savings associations that elected to early adopt the Call Report were
still required to submit other applicable reports (Cost of Funds,
Holding Company, and Consolidated Maturity/Rate Schedule) through the
December 31, 2011, reporting period.
Specific changes to reporting requirements for savings associations
include:
A requirement to file the quarterly Call Report, beginning
with the March 31, 2012, report date. Effective on that date, all
required schedules of the TFR (including Schedules CMR--Consolidated
Maturity Rate and HC--Thrift Holding Company) were eliminated;
A requirement to file data through the Summary of Deposits
with the FDIC,
[[Page 75263]]
beginning with the June 30, 2011, report date. Effective on that date,
the OTS Branch Office Survey was eliminated; and
Ending collection of monthly median cost-of-funds data
from savings associations, effective January 31, 2012. The last cost-
of-funds indices were published as of December 31, 2011.
Dated: December 13, 2012.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, December 10, 2012.
Robert deV. Frierson,
Secretary of the Board.
Dated: December 11, 2012.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2012-30608 Filed 12-18-12; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P
