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Banking regulators approve revised final regulatory capital rule

126px-US-FederalReserveSystem-Seal.svgBanking regulators, including the OCC, Federal Reserve and FDIC, approved a revised final rule on regulatory capital designed to bolster the U.S. financial system and reduce the regulatory burden on community banks.

The rule does not alter the current treatment of residential mortgage exposures, a concern expressed by community banking organizations. Banks not subject to advanced approaches capital rules can choose to omit most amounts reported as AOCI in the calculation of their capital.

Additionally, under the rule, small depository holding companies with less than $15 billion in assets, as well as certain mutual holding firms, will be permitted to continue to count trust-preferred securities issued before May 19, 2010, as Tier 1 capital.

Banking organizations with more than $50 billion in assets have enhanced capital and risk management disclosure requirements. The rule also establishes a new common equity tier 1 requirement and higher minimum tier 1 requirements for all banking firms.

Most banking institutions are required to apply the capital rules on January 1, 2015. The largest international U.S. banks, however, are required to apply the provisions this coming January.

Regulators also introduced a proposal to add a six percent supplementary leverage ratio requirement to the “well-capitalized” capital category. Covered bank holding companies would also be subject to an increased leverage ratio buffer of two percent above the current three percent minimum requirement.

If adopted, the proposal would take effect on January 1, 2018. The OCC will accept public comment on the proposal for 60 days after its publication in the Federal Register.

The OCC plans to publish a quick reference pamphlet and guide to help smaller, less complex banking institutions implement the final rule.

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