Under joint proposals by the Federal Reserve, FDIC and OCC, banks will soon be subject to new regulatory capital requirements. Originally, the proposed rules were intended to take effect as of January 2013, but on Nov. 9, 2012, the agencies issued a joint statement advising bankers that the effective date would likely be delayed. This will give banks and thrifts more time to integrate the new requirements.
The proposals generally follow the Basel III International Accord, which established global regulatory standards for capital adequacy and liquidity. Although they were designed for “internationally active” banks, many of the proposed requirements apply to all banks, including community banks.
The proposed rules are complex and may be revised before they’re finalized. In general, however, they’ll increase the quality and minimum quantity of capital for most banks, and include a requirement that more capital be held in the form of common stock or other common equity.
According to the Federal Reserve, most community bank holding companies that meet current regulatory capital requirements would also meet the new requirements. And for those that don’t, the proposed rules include a transition period that would phase in the new requirements over six years.
For community banks that want to get a sense of the potential impact, federal regulators have created a Basel III “calculator,” available at http://www.fdic.gov/index.html. Although banks can’t rely on the calculator as an indicator of their actual regulatory capital ratios, it will give them a general idea of what to plan for.
Guidance on hard-to-value assets
Recently, the OCC published a handbook on managing unique and hard-to-value assets held in fiduciary or custody accounts. These assets may include real estate, closely held businesses, mineral interests, loans and notes, life insurance, tangible assets and collectibles. They can increase a bank’s risk because they often require special management expertise, present valuation challenges and are subject to special ownership rules.
The handbook reviews the various operational, compliance, strategic and reputation risks associated with these assets, and describes techniques banks can use to mitigate these risks. You can find it here.
Regulatory calendar available
To help community banks keep abreast of changes in federal banking laws, regulations and supervisory guidance, the FDIC has developed a regulatory calendar. It includes notices of proposed, interim and final rulemakings, along with key dates, such as comment periods for proposed rules and effective dates for final rules.
You can view the calendar at:
For more information contact Scott Deters at [email protected].