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OCC Revises Regulations To Meet Standards of Basel III Capital Framework





The Office of the Comptroller of the Currency issued an interim final rule amending regulations to be more consistent with the recently adopted Basel III Capital Framework, earlier this month.

The interim final rule is meant to clarify requirements across the board by revising the OCC’s regulatory capital rules to provide cross-references to new capital rules and deleting obsolete references.

These changes, issued in conjunction with the Federal Deposit Insurance Corporation and the Board of the Governors of the Federal Reserve System, will be effective March 31, 2014. Advanced approaches institutions were required to comply with Basel III Capital Framework starting Jan. 1, 2014, while advanced non-approaches banks must comply beginning Jan. 1, 2015.

However, any current cross-references to the pre-Basel III capital rules will be retained until Jan. 1 2015 in order to allow banks time for compliance. Here’s what is included in the regulation amendments:

  • Adding a new common equity tier 1 requirement; revising the definitions of tier 1 and tier 2 capital.

  • Integrating federal savings associations into 12 CFR part 3 and 12 CFR part 6. Essentially, various rules that cross-reference12 CFR part 165, the Prompt Corrective Action rule formerly applicable to federal savings associations, will be changed to 12 CFR part 6, which applies to both national banks and federal savings associations.

  • Changing subordinated debt rules to clarify the requirements subordinated debt must meet, as well as procedures required in order to issue and redeem the debt. This means:The final rule clarifies the list of requirements applicable to all subordinated debt issued by national banks that is not included in tier 2 capital.

  • The final rule maintains separate rules for both national banks and federal savings associations; an advanced approaches federal savings association would be required to comply with new requirements beginning March 31, 2014, but a non-advanced approaches federal savings association would not have to before Jan. 1, 2015.

The office issued the interim final rule with request for comments. The amendments apply to all banks, including community banks, which must comply with the framework, as well as statutory limitations cross-referencing the regulatory capital rules, beginning Jan. 1, 2015.

You can read the full text of the interim final rule here