Regulatory Reporting Revisions to the Consolidated Reports of Condition and Income (Call Report) and the FFIEC 101 Report

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1 84 FR 3062 (February 8, 2019).

DEPARTMENT OF TREASURY

Office of the Comptroller of the

Currency

12 CFR Parts 1, 3, 5, 6, 23, 24, 32, 34,

160, and 192

[Docket ID OCC–2018–0040]

RIN 1557–AE59

FEDERAL RESERVE SYSTEM

12 CFR Parts 206, 208, 211, 215, 217,

223, 225, 238, and 251

[Regulation Q; Docket No. R–1638]

RIN 7100–AF 29

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Parts 303, 324, 337, 347, 362,

365, and 390

RIN 3064–AE91

Regulatory Capital Rule: Capital

Simplification for Qualifying

Community Banking Organizations

AGENCY: Office of the Comptroller of the

Currency, Treasury; the Board of

Governors of the Federal Reserve

System; and the Federal Deposit

Insurance Corporation.

ACTION: Final rule.

SUMMARY: The Office of the Comptroller

of the Currency, the Board of Governors

of the Federal Reserve System, and the

Federal Deposit Insurance Corporation

(collectively, the agencies) are adopting

a final rule that provides for a simple

measure of capital adequacy for certain

community banking organizations,

consistent with section 201 of the

Economic Growth, Regulatory Relief,

and Consumer Protection Act (final

rule). Under the final rule, depository

institutions and depository institution

holding companies that have less than

$10 billion in total consolidated assets

and meet other qualifying criteria,

including a leverage ratio (equal to tier

1 capital divided by average total

consolidated assets) of greater than 9

percent, will be eligible to opt into the

community bank leverage ratio

framework (qualifying community

banking organizations)

tions and depository institution

holding companies that have less than

$10 billion in total consolidated assets

and meet other qualifying criteria,

including a leverage ratio (equal to tier

1 capital divided by average total

consolidated assets) of greater than 9

percent, will be eligible to opt into the

community bank leverage ratio

framework (qualifying community

banking organizations). Qualifying

community banking organizations that

elect to use the community bank

leverage ratio framework and that

maintain a leverage ratio of greater than

9 percent will be considered to have

satisfied the generally applicable risk-

based and leverage capital requirements

in the agencies’ capital rules (generally

applicable rule) and, if applicable, will

be considered to have met the well-

capitalized ratio requirements for

purposes of section 38 of the Federal

Deposit Insurance Act. The final rule

includes a two-quarter grace period

during which a qualifying community

banking organization that temporarily

fails to meet any of the qualifying

criteria, including the greater than 9

percent leverage ratio requirement,

generally would still be deemed well-

capitalized so long as the banking

organization maintains a leverage ratio

greater than 8 percent. At the end of the

grace period, the banking organization

must meet all qualifying criteria to

remain in the community bank leverage

ratio framework or otherwise must

comply with and report under the

generally applicable rule. Similarly, a

banking organization that fails to

maintain a leverage ratio greater than 8

percent would not be permitted to use

the grace period and must comply with

the capital rule’s generally applicable

requirements and file the appropriate

regulatory reports.

DATES: The final rule is effective on

January 1, 2020

herwise must

comply with and report under the

generally applicable rule. Similarly, a

banking organization that fails to

maintain a leverage ratio greater than 8

percent would not be permitted to use

the grace period and must comply with

the capital rule’s generally applicable

requirements and file the appropriate

regulatory reports.

DATES: The final rule is effective on

January 1, 2020.

FOR FURTHER INFORMATION CONTACT:

OCC: David Elkes, Risk Expert,

Benjamin Pegg, Risk Expert, or Jung Sup

Kim, Risk Specialist, Capital and

Regulatory Policy (202) 649–6370; or

Carl Kaminski, Special Counsel, or

Daniel Perez, Senior Attorney, or Rima

Kundnani, Senior Attorney, Chief

Counsel’s Office, (202) 649–5490, for

persons who are deaf or hearing

impaired, TTY, (202) 649–5597, Office

of the Comptroller of the Currency, 400

7th Street SW, Washington, DC 20219.

Board: Constance M. Horsley, Deputy

Associate Director, (202) 452–5239; Juan

Climent, Manager, (202) 872–7526;

Andrew Willis, Lead Financial

Institutions Policy Analyst, (202) 912–

4323, or Christopher Appel, Senior

Financial Institutions Policy Analyst II,

(202) 973–6862, Division of Supervision

and Regulation; or Mark Buresh, Senior

Counsel, (202) 452–270; or Andrew

Hartlage, Counsel, (202) 452–6483,

Legal Division, Board of Governors of

the Federal Reserve System, 20th and C

Streets NW, Washington, DC 20551. For

the hearing impaired only,

Telecommunication Device for the Deaf

(TDD), (202) 263–4869.

FDIC: Benedetto Bosco, Chief, Capital

Policy Section, bbosco@fdic.gov;

Stephanie Lorek, Senior Capital Markets

Policy Analyst, slorek@fdic.gov; Dushan

Gorechan, Financial Analyst,

dgorechan@fdic.gov; Kyle McCormick,

Financial Analyst, kmccormick@

fdic.gov; Capital Markets Branch,

Division of Risk Management

Supervision, regulatorycapital@fdic.gov,

ice for the Deaf

(TDD), (202) 263–4869.

FDIC: Benedetto Bosco, Chief, Capital

Policy Section, bbosco@fdic.gov;

Stephanie Lorek, Senior Capital Markets

Policy Analyst, slorek@fdic.gov; Dushan

Gorechan, Financial Analyst,

dgorechan@fdic.gov; Kyle McCormick,

Financial Analyst, kmccormick@

fdic.gov; Capital Markets Branch,

Division of Risk Management

Supervision, regulatorycapital@fdic.gov,

(202) 898–6888; or Michael Phillips,

Counsel, mphillips@fdic.gov;

Supervision Branch, Legal Division,

Federal Deposit Insurance Corporation,

550 17th Street NW, Washington, DC

20429.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction

A. Background

B. Summary of the Final Rule

II. Proposed Rule

A. Proposed Community Bank Leverage

Ratio Framework

B. Summary of Comments

III. Final Rule

A. Qualifying Criteria for the Community

Bank Leverage Ratio Framework

1. Leverage Ratio of Greater Than 9 Percent

2. Total Consolidated Assets

3. Total Off-Balance Sheet Exposures

4. Total Trading Assets and Trading

Liabilities

5. Advanced Approaches Banking

Organizations

B. Definition of the Leverage Ratio’s

Numerator and Denominator

1. Numerator

2. Denominator

C. Calibration of the Leverage Ratio in

Order To Qualify for the Community

Bank Leverage Ratio

D. Ability To Opt Into and Out of the

Community Bank Leverage Ratio

Framework

E. Ongoing Compliance With the

Community Bank Leverage Ratio

Framework

1. Meeting the Definition of a Qualifying

Community Banking Organization

2. Treatment of a Community Banking

Organization That Falls Below Certain

Leverage Ratio Levels

F. FDIC Deposit Insurance Assessments

Regulations

G. Other Affected Regulations

H. Effective Date of the Final Rule

IV. Regulatory Analyses

A. Paperwork Reduction Act

B. Regulatory Flexibility Act

C. Plain Language

D. OCC Unfunded Mandates Reform Act of

1995

E. Riegle Community Development and

Regulatory Improvement Act of 1994

F. The Congressional Review Act

I. Introduction

A

evels

F. FDIC Deposit Insurance Assessments

Regulations

G. Other Affected Regulations

H. Effective Date of the Final Rule

IV. Regulatory Analyses

A. Paperwork Reduction Act

B. Regulatory Flexibility Act

C. Plain Language

D. OCC Unfunded Mandates Reform Act of

1995

E. Riegle Community Development and

Regulatory Improvement Act of 1994

F. The Congressional Review Act

I. Introduction

A. Background

On February 8, 2019, 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) published a

notice of proposed rulemaking (the

proposed rule or proposal) 1 to

implement section 201 of the Economic

Growth, Regulatory Relief, and

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2 The agencies note that, under existing PCA

requirements applicable to insured depository

institutions, to be considered ‘‘well capitalized’’ a

banking organization must demonstrate that it is not

subject to any written agreement, order, capital

directive, or as applicable, prompt corrective action

directive, to meet and maintain a specific capital

level for any capital measure. See 12 CFR

6.4(b)(1)(iv) (OCC); 12 CFR 208.43(b)(1)(v) (Board);

12 CFR 324.403(b)(1)(v) (FDIC). The same legal

requirements would continue to apply under the

community bank leverage ratio framework.

3 Under the final rule, a qualifying community

banking organization that elects to use the

community bank leverage ratio framework will

calculate its leverage ratio taking into account the

modifications made in relation to the capital

simplifications rule and current expected credit

losses methodology (CECL) transitions final rule.

See 84 FR 35234 (July 22, 2019) and 84 FR 4222

(February 14, 2019), respectively

, a qualifying community

banking organization that elects to use the

community bank leverage ratio framework will

calculate its leverage ratio taking into account the

modifications made in relation to the capital

simplifications rule and current expected credit

losses methodology (CECL) transitions final rule.

See 84 FR 35234 (July 22, 2019) and 84 FR 4222

(February 14, 2019), respectively. The agencies

anticipate that the tier 1 capital amount used in the

numerator of the calculation will reflect any future

modifications made to the tier 1 capital definition

applicable to non-advanced approaches banking

organizations. See 84 FR 35234 (July 22, 2019).

4 For purposes of the community bank leverage

ratio framework, an electing banking organization is

not required to calculate tier 2 capital and therefore

would not be required to make any deductions that

would be taken from tier 2 capital or potentially tier

1 capital due to insufficient tier 2 capital. As part

of the final rule the agencies are amending 12 CFR

3.22(f) (OCC); 12 CFR 217.22(f) (Board); 12 CFR

324.22(f) (FDIC).

Consumer Protection Act (Act), and

proposed to establish a community bank

leverage ratio for qualifying community

banking organizations as a simple

alternative methodology to measure

capital adequacy. The proposal was

intended to simplify regulatory capital

requirements and provide material

regulatory compliance burden relief to

qualifying community banking

organizations that opt into the

community bank leverage ratio

framework.

Section 201 of the Act directs the

agencies to develop a community bank

leverage ratio for qualifying community

banking organizations of not less than 8

percent and not more than 10 percent

plify regulatory capital

requirements and provide material

regulatory compliance burden relief to

qualifying community banking

organizations that opt into the

community bank leverage ratio

framework.

Section 201 of the Act directs the

agencies to develop a community bank

leverage ratio for qualifying community

banking organizations of not less than 8

percent and not more than 10 percent.

The Act provides that a qualifying

community banking organization is a

depository institution or depository

institution holding company with total

consolidated assets of less than $10

billion that satisfies such other factors,

based on its risk profile, that the

agencies determine are appropriate.

Pursuant to section 201, a qualifying

community banking organization that

exceeds the community bank leverage

ratio level established by the agencies

shall be considered to have met: (i) The

generally applicable risk-based and

leverage capital requirements in the

agencies’ capital rules (generally

applicable rule); (ii) the capital ratio

requirements in order to be considered

well capitalized under the agencies’

prompt corrective action (PCA)

framework (in the case of insured

depository institutions); and (iii) any

other applicable capital or leverage

requirements. In addition, the Act

directs the agencies to establish

procedures for the treatment of

qualifying community banking

organizations that fall below the

community bank leverage ratio level

established by the agencies.2

Section 201 of the Act defines the

community bank leverage ratio as the

ratio of a qualifying community banking

organization’s tangible equity capital to

its average total consolidated assets,

both as reported on the qualifying

community banking organization’s

applicable regulatory filing. In addition,

the Act states that the agencies may

determine that a banking organization is

not a qualifying community banking

organization based on the banking

organization’s risk profile

fying community banking

organization’s tangible equity capital to

its average total consolidated assets,

both as reported on the qualifying

community banking organization’s

applicable regulatory filing. In addition,

the Act states that the agencies may

determine that a banking organization is

not a qualifying community banking

organization based on the banking

organization’s risk profile. This

determination shall be based on

consideration of off-balance sheet

exposures, trading assets and liabilities,

total notional derivatives exposures, and

such other factors as the agencies

determine appropriate. The Act also

specifies that the community bank

leverage ratio framework does not limit

the agencies’ authority in effect as of the

date of enactment of the Act.

The Act directs the agencies to

consult with applicable state bank

supervisors in carrying out section 201

of the Act and to notify the applicable

state bank supervisor of any qualifying

community banking organization that

exceeds, or does not exceed after

previously exceeding, the community

bank leverage ratio. As part of this

consultation process, the agencies had a

series of discussions with state bank

supervisors, before and after publication

of the proposal, that helped shape key

elements of the community bank

leverage ratio framework in the final

rule.

In response to the proposal, the

agencies received approximately 50

public comment letters and

approximately 500 form letters from

depository institutions, depository

institution holding companies, trade

associations, and other interested

parties. Commenters generally

supported the agencies’ efforts to

simplify the regulatory capital

requirements

rage ratio framework in the final

rule.

In response to the proposal, the

agencies received approximately 50

public comment letters and

approximately 500 form letters from

depository institutions, depository

institution holding companies, trade

associations, and other interested

parties. Commenters generally

supported the agencies’ efforts to

simplify the regulatory capital

requirements. However, as discussed in

greater detail below, many commenters

indicated that certain aspects of the

proposal were burdensome or

unnecessarily complex, and some

commenters expressed concern that

banking supervisors would make the

proposed community bank leverage

ratio the de facto minimum capital

requirement for community banking

organizations, irrespective of whether

they have opted into the community

bank leverage ratio framework.

Commenters generally favored greater

simplicity in the community bank

leverage ratio framework, and

recommended the removal of the

proposal’s separate PCA proxy levels.

After reviewing the comments, the

agencies are making several

modifications to address commenters’

concerns and further simplify the

community bank leverage ratio

framework while retaining the quality

and quantity of regulatory capital in the

banking system.

B. Summary of the Final Rule

In response to comments received on

the proposal, the agencies are making a

number of changes in this final rule. In

addition, the final rule clarifies other

important aspects of the community

bank leverage ratio framework

implify the

community bank leverage ratio

framework while retaining the quality

and quantity of regulatory capital in the

banking system.

B. Summary of the Final Rule

In response to comments received on

the proposal, the agencies are making a

number of changes in this final rule. In

addition, the final rule clarifies other

important aspects of the community

bank leverage ratio framework. The key

changes being made to the final rule

include the following:

• Adoption of tier 1 capital, and

therefore the existing leverage ratio, into

the community bank leverage ratio

framework;

• Removal of the qualifying criteria

for mortgage servicing assets and

deferred tax assets arising from

temporary differences;

• Removal of the PCA proxy levels;

and

• Allowing a banking organization

that elects to use the community bank

leverage ratio framework to be

considered well-capitalized during the

two-quarter grace period if its leverage

ratio is 9 percent or less and greater than

8 percent.

Under the final rule, the numerator of

the community bank leverage ratio is

the existing measure of tier 1 capital

used by non-advanced approaches

banking organizations.3 4 Numerous

commenters described complexities that

would be created with the proposed

introduction of a new measure of

capital, tangible equity, in the

community bank leverage ratio

framework and, therefore, the agencies

have adopted the commenters’

recommendation to use tier 1 capital.

The use of tier 1 capital also has the

benefit of including the existing

threshold deduction approaches for

mortgage servicing assets (MSAs) and

deferred tax assets arising from

temporary differences (temporary

difference DTAs) which enabled the

agencies to remove the qualifying

criteria related to these exposures from

the community bank leverage ratio

framework

n to use tier 1 capital.

The use of tier 1 capital also has the

benefit of including the existing

threshold deduction approaches for

mortgage servicing assets (MSAs) and

deferred tax assets arising from

temporary differences (temporary

difference DTAs) which enabled the

agencies to remove the qualifying

criteria related to these exposures from

the community bank leverage ratio

framework. Due to the adoption of tier

1 capital, the community bank leverage

ratio is generally calculated in the same

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5 An advanced approaches banking organization

is generally defined as a firm with at least $250

billion in total consolidated assets or at least $10

billion in total on-balance sheet foreign exposure,

and depository institution subsidiaries of those

firms. Proposed rulemakings to tailor capital and

liquidity requirements applicable to large banking

organizations may result in changing the definition

of advanced approaches banking organization. See

83 FR 66024 (December 21, 2018) and 84 FR 24296

(May 24, 2019).

6 As a result of adopting the grace period

construct, the final rule does not include the

agencies’ proposed PCA proxy levels, which would

have allowed certain banking organizations that fell

to a leverage ratio of 9 percent or lower to remain

in the community bank leverage ratio framework

indefinitely.

7 12 CFR 3.10(a)–(b) (OCC); 12 CFR 217.10(a)–(b)

(Board); 12 CFR 324.10(a)–(b) (FDIC).

manner as the generally applicable

rule’s leverage ratio: Tier 1 capital

divided by average total consolidated

assets minus amounts deducted from

tier 1 capital. As a result, the final rule

incorporates and refers to the generally

applicable rule’s leverage ratio

leverage ratio framework

indefinitely.

7 12 CFR 3.10(a)–(b) (OCC); 12 CFR 217.10(a)–(b)

(Board); 12 CFR 324.10(a)–(b) (FDIC).

manner as the generally applicable

rule’s leverage ratio: Tier 1 capital

divided by average total consolidated

assets minus amounts deducted from

tier 1 capital. As a result, the final rule

incorporates and refers to the generally

applicable rule’s leverage ratio.

Commenters also raised concerns that

the PCA proxy levels included in the

proposal caused unnecessary

complexity in the community bank

leverage ratio framework and requested

that the framework include a grace

period to transition back to the generally

applicable rule if a banking

organization’s community bank leverage

ratio was less than the well-capitalized

threshold. The agencies are

incorporating this feedback into the

final rule by modifying the definition of

a ‘‘qualifying community banking

organization’’ to include the level of the

leverage ratio as a qualifying criterion.

The final rule provides that to be a

‘‘qualifying community banking

organization,’’ a banking organization

must not be an advanced approaches

banking organization 5 and must meet

the following qualifying criteria: (i) A

leverage ratio of greater than 9 percent;

(ii) total consolidated assets of less than

$10 billion; (iii) total off-balance sheet

exposures (excluding derivatives other

than sold credit derivatives and

unconditionally cancelable

commitments) of 25 percent or less of

total consolidated assets; and (iv) the

sum of total trading assets and trading

liabilities of 5 percent or less of total

consolidated assets. Consistent with

section 201, the final rule provides that

qualifying community banking

organizations that opt into the

community bank leverage ratio

framework (electing banking

organization) will be deemed to have

met the ‘‘well capitalized’’ ratio

requirements and be in compliance with

the generally applicable rule

trading

liabilities of 5 percent or less of total

consolidated assets. Consistent with

section 201, the final rule provides that

qualifying community banking

organizations that opt into the

community bank leverage ratio

framework (electing banking

organization) will be deemed to have

met the ‘‘well capitalized’’ ratio

requirements and be in compliance with

the generally applicable rule. Such

banking organizations will not be

required to calculate and report risk-

based capital ratios.

Notably, the agencies have retained

the proposal’s 9 percent calibration for

the leverage ratio in the community

bank leverage ratio framework. The

agencies believe that a 9 percent

calibration, in conjunction with the

final rule’s qualifying criteria, will not

result in a reduction in the aggregate

level of regulatory capital currently held

by electing banking organizations.

Further, incorporating into the

community bank leverage ratio

framework the existing leverage ratio

and the two-quarter grace period will

facilitate the transition to and from the

generally applicable rule. Banking

organizations opt into and out of the

framework through their Consolidated

Reports of Condition and Income (Call

Report) or Form FR–Y9C.

If a qualifying community banking

organization that has opted into the

community bank leverage ratio

framework subsequently fails to satisfy

one or more of the qualifying criteria but

continues to report a leverage ratio of

greater than 8 percent, the banking

organization could continue to use the

community bank leverage ratio

framework and be deemed to meet the

‘‘well capitalized’’ capital ratio

requirements for a grace period of up to

two quarters.6 As long as the banking

organization is able to return to

compliance with all the qualifying

criteria within two quarters, it will

continue to be deemed to meet the ‘‘well

capitalized’’ ratio requirements and be

in compliance with the generally

applicable rule

io

framework and be deemed to meet the

‘‘well capitalized’’ capital ratio

requirements for a grace period of up to

two quarters.6 As long as the banking

organization is able to return to

compliance with all the qualifying

criteria within two quarters, it will

continue to be deemed to meet the ‘‘well

capitalized’’ ratio requirements and be

in compliance with the generally

applicable rule. A banking organization

will be required to comply with the

generally applicable rule and file the

relevant regulatory reports if the

banking organization (i) is unable to

restore compliance with all qualifying

criteria during the two-quarter grace

period (including coming into

compliance with the greater than 9

percent leverage ratio requirement), (ii)

reports a leverage ratio of 8 percent or

less, or (iii) ceases to satisfy the

qualifying criteria due to consummation

of a merger transaction.

The agencies believe that the final

rule provides a simple framework that

simultaneously meets safety and

soundness goals and responds to the

concerns conveyed through comments

received on the proposal. Additionally,

the final rule meets the policy objectives

described in the proposal. First, the

community bank leverage ratio

framework is available to a meaningful

number of well-capitalized banking

organizations with less than $10 billion

in total consolidated assets. Second, the

community bank leverage ratio

requirement is calibrated to maintain

the overall amount of capital currently

held by qualifying community banking

organizations. Third, banking

organizations with higher risk profiles

remain subject to the generally

applicable rule to ensure that such

banking organizations hold capital

commensurate with the risk of their

exposures and activities.7 Fourth, the

agencies maintain the authority to take

supervisory action under the PCA

framework and other statutes and

regulations based on a banking

organization’s capital ratios and risk

profile

s with higher risk profiles

remain subject to the generally

applicable rule to ensure that such

banking organizations hold capital

commensurate with the risk of their

exposures and activities.7 Fourth, the

agencies maintain the authority to take

supervisory action under the PCA

framework and other statutes and

regulations based on a banking

organization’s capital ratios and risk

profile. The final rule also provides

regulatory compliance burden relief as

the community bank leverage ratio is

simple to apply and allows a qualifying

community banking organization to

avoid the burden of calculating and

reporting risk-based capital ratios under

the generally applicable rule.

II. Proposed Rule

A. Proposed Community Bank Leverage

Ratio Framework

The agencies proposed the

community bank leverage ratio

framework as a simple alternative

methodology to measure capital

adequacy for qualifying community

banking organizations, based on the

requirements of section 201 of the Act.

Under the proposal, a qualifying

community banking organization would

have been defined as a depository

institution or depository institution

holding company that was not an

advanced approaches banking

organization and that met the following

criteria (qualifying criteria), each as

described further below:

• Total consolidated assets of less

than $10 billion;

• Total off-balance sheet exposures

(excluding derivatives other than sold

credit derivatives and unconditionally

cancelable commitments) of 25 percent

or less of total consolidated assets;

• Total trading assets plus trading

liabilities of 5 percent or less of total

consolidated assets;

• MSAs of 25 percent or less of

tangible equity (as defined in the

proposal); and

• Temporary difference DTAs of 25

percent or less of tangible equity.

Under the proposal, the community

bank leverage ratio would have been

calculated as the ratio of tangible equity

to average total consolidated assets

ding assets plus trading

liabilities of 5 percent or less of total

consolidated assets;

• MSAs of 25 percent or less of

tangible equity (as defined in the

proposal); and

• Temporary difference DTAs of 25

percent or less of tangible equity.

Under the proposal, the community

bank leverage ratio would have been

calculated as the ratio of tangible equity

to average total consolidated assets.

Tangible equity would have been

defined as total bank equity capital or

total holding company equity capital, as

applicable, prior to including minority

interests, and excluding accumulated

other comprehensive income (AOCI),

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8 See 84 FR 35243 (July 22, 2019). The agencies

also are adopting a final rule that permits banking

organizations not subject to the advanced

approaches capital rule to implement the

simplifications rule in the quarter beginning

January 1, 2020, or wait until the quarter beginning

April 1, 2020.

9 Consistent with the proposal, the agencies have

reserved the authority to disallow the use of the

community bank leverage ratio framework by a

depository institution or depository institution

holding company, based on the risk profile of the

banking organization. This authority is reserved

under the general reservation of authority included

in the capital rule, in which the community bank

leverage ratio framework would be codified. See 12

CFR 3.1(d) (OCC); 12 CFR 217.1(d) (Board); 12 CFR

Continued

deferred tax assets arising from net

operating loss and tax credit carry

forwards, goodwill, and other intangible

assets (other than MSAs), each as of the

most recent calendar quarter and

calculated in accordance with a

qualifying community banking

organization’s regulatory reports

erage ratio framework would be codified. See 12

CFR 3.1(d) (OCC); 12 CFR 217.1(d) (Board); 12 CFR

Continued

deferred tax assets arising from net

operating loss and tax credit carry

forwards, goodwill, and other intangible

assets (other than MSAs), each as of the

most recent calendar quarter and

calculated in accordance with a

qualifying community banking

organization’s regulatory reports.

Average total consolidated assets would

have been calculated in a manner

similar to the generally applicable rule’s

leverage ratio denominator in that

amounts deducted from the numerator

would also have been excluded from the

denominator. Under the proposal, a

qualifying community banking

organization could have elected to use

the community bank leverage ratio

framework if its community bank

leverage ratio was greater than 9

percent.

The proposal would have permitted

an electing banking organization to

remain in the community bank leverage

ratio framework even in cases where

such an institution’s community bank

leverage ratio subsequently fell to 9

percent or less. In this situation, the

proposal would have continued to

provide for the agencies’ supervisory

actions under PCA and other applicable

statutes and regulations. Specifically,

for insured depository institutions, the

proposal would have incorporated

community bank leverage ratio levels as

proxies for the following PCA

categories: Adequately capitalized,

undercapitalized and significantly

undercapitalized. If an electing banking

organization had met certain

community bank leverage ratio levels, it

would have been considered to have

met the capital ratio requirements

within the applicable corresponding

PCA category and been subject to the

same restrictions that currently apply to

any other insured depository institution

in the same PCA category

apitalized and significantly

undercapitalized. If an electing banking

organization had met certain

community bank leverage ratio levels, it

would have been considered to have

met the capital ratio requirements

within the applicable corresponding

PCA category and been subject to the

same restrictions that currently apply to

any other insured depository institution

in the same PCA category.

After issuing the proposal, the

agencies proposed a regulatory capital

schedule that would have been simpler

than Schedules RC–R of the Call Report

and HC–R of Form FR Y–9C for use by

electing banking organizations. On this

proposed reporting schedule, the

community bank leverage ratio

calculation would have required a

banking organization to report

significantly less information than

under the generally applicable rule.

B. Summary of Comments

Collectively, the agencies received

approximately 50 public comment

letters and approximately 500 form

letters on the proposal from depository

institutions, depository institution

holding companies, trade associations,

and other interested parties. As further

detailed in the more comprehensive

discussion of the final rule, commenters

generally supported the agencies’ efforts

to propose a simpler regulatory capital

framework but expressed concerns with

some aspects of the proposal.

Several commenters expressed

concern that calibrating the community

bank leverage ratio at 9 percent is

unnecessarily punitive and would

disqualify too many banking

organizations from being able to use the

community bank leverage ratio

framework. These commenters favored

calibrating the community bank

leverage ratio at 8 percent. One

commenter suggested calibrating the

community bank leverage ratio at 10

percent, the highest permitted by

statute, because higher leverage ratios

may lower the adverse effects of crises

on U.S. GDP, which exceeds the costs

that may arise from lower capital

formation and lower GDP

ge ratio

framework. These commenters favored

calibrating the community bank

leverage ratio at 8 percent. One

commenter suggested calibrating the

community bank leverage ratio at 10

percent, the highest permitted by

statute, because higher leverage ratios

may lower the adverse effects of crises

on U.S. GDP, which exceeds the costs

that may arise from lower capital

formation and lower GDP.

Many commenters also expressed

concern that the proposed PCA proxy

levels would have added unnecessary

complexity to the community bank

leverage ratio framework, and therefore

recommended their elimination in the

final rule. Some commenters expressed

concern that the agencies would not

permit an insured depository institution

with a community bank leverage ratio at

or below 9 percent to demonstrate that

it is well capitalized under the generally

applicable rule before assigning it a PCA

category other than well capitalized.

Other commenters indicated that some

of the qualifying criteria were

unnecessary (such as that for MSAs),

overly complex to calculate (such as the

off-balance sheet exposures criterion), or

did not appropriately reflect the risks of

underlying assets.

Multiple commenters suggested that

the proposed numerator of the

community bank leverage ratio should

be based on tier 1 capital, as defined

under the generally applicable rule,

rather than on a new ‘‘tangible equity’’

measure. Commenters expressed

concern that examiners may penalize

banking organizations for opting into or

out of the framework, and that the

community bank leverage ratio could

become the de facto minimum capital

requirement for all community banking

organizations.

III. Final Rule

A. Qualifying Criteria for the

Community Bank Leverage Ratio

Framework

The agencies received comments

requesting that they eliminate or modify

certain of the qualifying criteria in the

proposal, particularly the MSA and the

temporary difference DTA criteria

bank leverage ratio could

become the de facto minimum capital

requirement for all community banking

organizations.

III. Final Rule

A. Qualifying Criteria for the

Community Bank Leverage Ratio

Framework

The agencies received comments

requesting that they eliminate or modify

certain of the qualifying criteria in the

proposal, particularly the MSA and the

temporary difference DTA criteria.

Many of these commenters also

suggested using tier 1 capital, as

recently modified by the agencies in a

final rule (simplifications rule),8 as the

numerator of the leverage ratio. Several

commenters noted that some of the

qualifying criteria, such as the proposed

limit for MSAs, could prevent many

otherwise qualifying community

banking organizations from opting into

the community bank leverage ratio

framework. Finally, some commenters

suggested that the off-balance sheet

criterion, as proposed, would be overly

burdensome for community banking

organizations to calculate and that

certain elements included in this

criterion should be eliminated as they

do not represent material risk to banking

organizations.

After considering the comments, the

agencies have decided to modify the

definition of ‘‘qualifying community

banking organization’’ by removing the

MSA criterion and the temporary

difference DTA criterion. Exposures to

MSAs and temporary difference DTAs

will be addressed through the use of tier

1 capital as the numerator, which

requires deduction of such assets to the

extent they exceed certain regulatory

thresholds, rather than the proposed use

of ‘‘tangible equity.’’ The use of tier 1

capital as the numerator is discussed in

more detail below in this

SUPPLEMENTARY INFORMATION

criterion. Exposures to

MSAs and temporary difference DTAs

will be addressed through the use of tier

1 capital as the numerator, which

requires deduction of such assets to the

extent they exceed certain regulatory

thresholds, rather than the proposed use

of ‘‘tangible equity.’’ The use of tier 1

capital as the numerator is discussed in

more detail below in this

SUPPLEMENTARY INFORMATION. Under the

final rule, a qualifying banking

organization must not be an advanced

approaches banking organization and

must have:

• A leverage ratio of greater than 9

percent;

• Total consolidated assets of less

than $10 billion;

• Total off-balance sheet exposures

(excluding derivatives other than sold

credit derivatives and unconditionally

cancelable commitments) of 25 percent

or less of total consolidated assets, and

• Total trading assets plus trading

liabilities of 5 percent or less of total

consolidated assets.9

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324.1(d) (FDIC). In addition, for purposes of the

capital rule and section 201 of the Act, the agencies

have reserved the authority to take action under

other provisions of law, including action to address

unsafe or unsound practices or conditions, deficient

capital levels, or violations of law or regulation. See

12 CFR 3.1(b) (OCC); 12 CFR 217.1(b) (Board); 12

CFR 324.1(b) (FDIC).

10 See 84 FR 35243 (July 22, 2019).

11 See 83 FR 66024 (December 21, 2018) and 84

FR 24296 (May 24, 2019).

12 See 12 CFR 324.33 (FDIC); 12 CFR 217.33

(Federal Reserve); 12 CFR 3.33 (OCC).

1. Leverage Ratio of Greater Than 9

Percent

Under the proposal, a banking

organization would have been required

to have a community bank leverage ratio

of greater than 9 percent in order to be

eligible to opt into the community bank

leverage ratio framework

December 21, 2018) and 84

FR 24296 (May 24, 2019).

12 See 12 CFR 324.33 (FDIC); 12 CFR 217.33

(Federal Reserve); 12 CFR 3.33 (OCC).

1. Leverage Ratio of Greater Than 9

Percent

Under the proposal, a banking

organization would have been required

to have a community bank leverage ratio

of greater than 9 percent in order to be

eligible to opt into the community bank

leverage ratio framework. The final rule

adopts the 9 percent calibration of the

community bank leverage ratio as

proposed. The proposal also would have

allowed an electing banking

organization to remain in the

community bank leverage ratio

framework despite having a community

bank leverage ratio which subsequently

fell to 9 percent or less. As discussed

above, the final rule eliminates the PCA

proxy levels and, therefore, an electing

banking organization will generally be

required to maintain a leverage ratio of

greater than 9 percent in order to be

eligible to use the community bank

leverage ratio framework. A two-quarter

grace period, as discussed in further

detail below, is available for a banking

organization that ceases to meet any of

the qualifying criteria, including a

banking organization whose leverage

ratio falls to 9 percent or less, but is

greater than 8 percent. During the grace

period, a banking organization may

continue to be treated as a qualifying

community banking organization and is

presumed to satisfy the ‘‘well

capitalized’’ ratio requirements and be

in compliance with the generally

applicable rule without having to

calculate and report risk-based capital

ratios.

2. Total Consolidated Assets

Under the proposal, a qualifying

community banking organization would

be required to have less than $10 billion

in total consolidated assets as of the end

of the most recent calendar quarter, in

accordance with the Act. Total

consolidated assets would be calculated

in accordance with the reporting

instructions to Schedule RC of the Call

Report or Schedule HC of Form FR Y–

9C, as applicable

der the proposal, a qualifying

community banking organization would

be required to have less than $10 billion

in total consolidated assets as of the end

of the most recent calendar quarter, in

accordance with the Act. Total

consolidated assets would be calculated

in accordance with the reporting

instructions to Schedule RC of the Call

Report or Schedule HC of Form FR Y–

9C, as applicable.

A commenter indicated that the Act

places no limit on the ability of the

agencies to apply the community bank

leverage ratio framework to institutions

with $10 billion or more in total assets

and suggested that the agencies should

apply the community bank leverage

ratio framework based on suitability for

relief rather than on size thresholds. The

same commenter urged the agencies to

take into account acquisitions and to

index applicability to incorporate

inflation or other relevant market

measures.

The agencies have considered the

concerns raised with regard to the asset

size threshold. The agencies continue to

believe that the community bank

leverage ratio framework is appropriate

for most banking organizations with

total consolidated assets of less than $10

billion that meet the other qualifying

criteria. The agencies believe that the

generally applicable rule is appropriate

for larger banking organizations and

banking organizations with

concentrations in off-balance sheet

exposures and trading assets and

liabilities because such banking

organizations may present risks that are

not appropriately captured by the

community bank leverage ratio

framework

t meet the other qualifying

criteria. The agencies believe that the

generally applicable rule is appropriate

for larger banking organizations and

banking organizations with

concentrations in off-balance sheet

exposures and trading assets and

liabilities because such banking

organizations may present risks that are

not appropriately captured by the

community bank leverage ratio

framework. The agencies recently

finalized a rule to simplify the generally

applicable rule, and have proposed to

modify and tailor several of the

prudential requirements applicable to

banking organizations with $100 billion

or more in total consolidated assets.10 11

The agencies believe these revisions

reflect an appropriate tailoring of

regulations based on asset size and other

risk characteristics to ensure that the

requirements remain appropriate for the

risk profiles of different banking

organizations while also maintaining

the safety and soundness of the banking

industry. As such, the agencies are

finalizing without modification the $10

billion in total assets size threshold.

3. Total Off-Balance Sheet Exposures

Under the proposal, a qualifying

community banking organization would

have been required to have total off-

balance sheet exposures of 25 percent or

less of its total consolidated assets, as of

the end of the most recent calendar

quarter. The agencies included this

qualifying criterion in the community

bank leverage ratio framework because

the proposed community bank leverage

ratio included only on-balance sheet

assets in its denominator and thus

would not have required a qualifying

community banking organization to

hold capital against its off-balance sheet

exposures. This qualifying criterion was

intended to reduce the likelihood that a

qualifying community banking

organization with significant off-balance

sheet exposures would hold less capital

under the community bank leverage

ratio framework than under the

generally applicable rule

ot have required a qualifying

community banking organization to

hold capital against its off-balance sheet

exposures. This qualifying criterion was

intended to reduce the likelihood that a

qualifying community banking

organization with significant off-balance

sheet exposures would hold less capital

under the community bank leverage

ratio framework than under the

generally applicable rule.

Under the proposal, total off-balance

sheet exposures would have been

calculated as the sum of the notional

amounts of certain off-balance sheet

items against which banking

organizations would hold capital under

the generally applicable rule 12 as of the

end of the most recent calendar quarter.

Total off-balance sheet exposures would

have included:

a. The unused portions of

commitments (except for

unconditionally cancellable

commitments);

b. Self-liquidating, trade-related

contingent items that arise from the

movement of goods;

c. Transaction-related contingent

items (i.e., performance bonds, bid

bonds and warranties);

d. Sold credit protection in the form

of guarantees and credit derivatives;

e. Credit-enhancing representations

and warranties;

f. Off-balance sheet securitization

exposures;

g. Letters of credit;

h. Forward agreements that are not

derivative contracts; and

i. Securities lending and borrowing

transactions.

Total off-balance sheet exposures

would have excluded the notional

amount for all derivative contracts

except credit derivatives for sold credit

protection. As stated in the proposal,

the agencies believe that the notional

amount for derivatives (other than credit

derivatives for sold credit protection) is

not an appropriate indicator of credit

risk and could inadvertently disqualify

a banking organization from using the

community bank leverage ratio

framework if the banking organization is

otherwise appropriately using

derivatives to hedge its risks

in the proposal,

the agencies believe that the notional

amount for derivatives (other than credit

derivatives for sold credit protection) is

not an appropriate indicator of credit

risk and could inadvertently disqualify

a banking organization from using the

community bank leverage ratio

framework if the banking organization is

otherwise appropriately using

derivatives to hedge its risks. The

proposed components of total off-

balance sheet exposures would have

been generally consistent with off-

balance sheet items that are included in

risk-weighted assets in the generally

applicable rule, except for securities

lending and borrowing transactions.

Securities lending and borrowing

transactions would have been assigned

amounts in accordance with the

reporting instructions for these items in

Schedules RC–L of the Call Report or

HC–L of Form FR Y–9C, as applicable.

The proposed calculation of total off-

balance sheet exposures would have

been simpler than under the generally

applicable rule, which requires that off-

balance sheet exposures be converted to

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on-balance sheet equivalents for

purposes of determining capital

requirements.

The agencies received several

comments and requests for clarification

on the proposed limit for off-balance

sheet exposures. One commenter

expressed concern that the process for

categorizing off-balance sheet

exposures, such as off-balance sheet

securitizations, was overly complex,

and the commenter would prefer that

the off-balance sheet filter instead

identify specific transactions and

products routinely used by community

banks that meet the off-balance sheet

exposure definition

off-balance

sheet exposures. One commenter

expressed concern that the process for

categorizing off-balance sheet

exposures, such as off-balance sheet

securitizations, was overly complex,

and the commenter would prefer that

the off-balance sheet filter instead

identify specific transactions and

products routinely used by community

banks that meet the off-balance sheet

exposure definition. Another

commenter found the wording in the

proposed rule unclear and noted that it

would be beneficial for the agencies to

reference the specific Schedule RC–L

line items that would be included in the

25 percent limitation for off-balance

sheet line items.

Several commenters expressed

concern about the inclusion of

residential mortgage-related off-balance

sheet items. One commenter wrote that

the agencies should not exclude banking

organizations from using the community

bank leverage ratio framework due to

any mortgage origination-related

hedging activity. The commenter

expressed concern that as proposed the

criterion may capture certain exposures

related to routine functioning of the

mortgage market. Another commenter

noted that mortgage sales to certain

Federal Home Loan Banks (FHLBs)

through the Mortgage Partnership

Finance Program could be captured by

the off-balance sheet qualifying criteria.

A commenter suggested that FHLB

advances should be eliminated from the

calculation because such advances are

typically secured at a significant

discount relative to underlying loan

collateral. The commenter was

concerned that a banking organization

may be disqualified from the

community bank leverage ratio

framework due to its level of unfunded

commitments and FHLB lines of credit.

Finally, one commenter requested

clarification on whether sales of when-

issued mortgage-backed security

contracts are included in the 25 percent

limitation, stating that these items

should be excluded because, in the

commenter’s view, they are of lower

risk

e disqualified from the

community bank leverage ratio

framework due to its level of unfunded

commitments and FHLB lines of credit.

Finally, one commenter requested

clarification on whether sales of when-

issued mortgage-backed security

contracts are included in the 25 percent

limitation, stating that these items

should be excluded because, in the

commenter’s view, they are of lower

risk.

The agencies considered the

commenters’ concerns and have decided

to finalize the off-balance sheet

qualifying criterion as proposed with

several clarifications. The agencies are

clarifying that the off-balance sheet

qualifying criterion incorporates off-

balance sheet exposures currently

required to be captured and reported by

banking organizations in Schedules RC–

L and RC–R of the Call Report or HC–

L and HC–R of Form FR Y–9C which

thereby permits these firms to leverage

their existing identification,

measurement and reporting

infrastructure for these exposures. The

agencies also are clarifying that banking

organizations are only required to

identify off-balance sheet securitizations

to the extent that they are not already

captured as part of another off-balance

sheet exposure category. For example, if

a banking organization issues a credit

enhancing representation and warranty

that also meets the definition of a

traditional securitization, the final rule

does not require that such an exposure

be separately identified as an off-

balance sheet securitization exposure

because the exposure would already be

captured through the requirement to

include credit enhancing

representations and warranties in the

off-balance sheet qualifying criterion.

The agencies also are clarifying that

hedging techniques related to mortgage

banking activities are generally only

captured in the off-balance sheet

qualifying criterion to the extent such

exposures are treated as off-balance

sheet exposures and subject to credit

conversion factors under the generally

applicable rule

entations and warranties in the

off-balance sheet qualifying criterion.

The agencies also are clarifying that

hedging techniques related to mortgage

banking activities are generally only

captured in the off-balance sheet

qualifying criterion to the extent such

exposures are treated as off-balance

sheet exposures and subject to credit

conversion factors under the generally

applicable rule. For this reason, typical

mortgage banking activities such as

forward loan delivery commitments

between banking organizations and

investors, which typically are derivative

contracts, were excluded from the off-

balance sheet exposure criterion in the

proposal and are excluded under the

final rule. Put and call options on

mortgage-backed securities are also

typically derivatives and excluded from

this criterion under the final rule. A

contractual obligation for the future

purchase of a ‘‘to be announced’’ (i.e.,

when-issued) mortgage securities

contract, that does not meet the

definition of a derivative contract under

the generally applicable rule, would be

captured in the off-balance sheet

qualifying criterion as it would be

considered a forward agreement under

the generally applicable rule. In

contrast, a contractual obligation for the

future sale (rather than purchase) of a

‘‘to be announced’’ mortgage securities

contract, that does not meet the

definition of a derivative contract under

the generally applicable rule, would not

be captured in the off-balance sheet

qualifying criterion as it would not be

considered a forward agreement under

the generally applicable rule.

Banking organizations that sell

mortgages to certain FHLBs through the

Mortgage Partnership Finance Program

may provide a credit enhancement to

the FHLB

meet the

definition of a derivative contract under

the generally applicable rule, would not

be captured in the off-balance sheet

qualifying criterion as it would not be

considered a forward agreement under

the generally applicable rule.

Banking organizations that sell

mortgages to certain FHLBs through the

Mortgage Partnership Finance Program

may provide a credit enhancement to

the FHLB. If these credit enhancements

meet the definition of a credit-

enhancing representation and warranty

or would otherwise be considered an

off-balance sheet securitization under

the generally applicable rule, then the

exposure amount would be included in

the off-balance sheet qualifying

criterion. Because these are credit risk

exposures that would be assigned risk-

based capital under the generally

applicable rule, inclusion in the off-

balance sheet qualifying criterion is

appropriate.

The agencies analyzed average off-

balance sheet exposures for banking

organizations with less than $10 billion

in total consolidated assets and

observed that the vast majority of such

banking organizations report off-balance

sheet exposures totaling less than 25

percent of total consolidated assets, as

of March 31, 2019. Accordingly, the

agencies have determined that both the

definition and calibration of the total

off-balance sheet exposures qualifying

criterion should allow a meaningful

number of banking organizations to use

the community bank leverage ratio

framework without unduly restricting

lending practices. The criterion should

help to prevent banking organizations

from engaging in substantial off-balance

sheet activity without a commensurate

capital requirement.

4. Total Trading Assets and Trading

Liabilities

Under the proposal, a qualifying

community banking organization would

have been required to have total trading

assets and trading liabilities of 5 percent

or less of its total consolidated assets,

each measured as of the end of the most

recent calendar quarter

bstantial off-balance

sheet activity without a commensurate

capital requirement.

4. Total Trading Assets and Trading

Liabilities

Under the proposal, a qualifying

community banking organization would

have been required to have total trading

assets and trading liabilities of 5 percent

or less of its total consolidated assets,

each measured as of the end of the most

recent calendar quarter. Total trading

assets and trading liabilities would have

been calculated as the sum of those

exposures, in accordance with the

reporting instructions for these items on

Schedules RC of the Call Report or HC

of Form FR–Y–9C, as applicable. A

banking organization would divide the

sum of its total trading assets and

trading liabilities by its total

consolidated assets to determine its

percentage of total trading assets and

trading liabilities.

The agencies recognize the potential

elevated levels of risk and complexity

that can be associated with certain

trading activities. For this reason,

banking organizations with significant

trading assets and trading liabilities are

subject to a market risk capital

requirement under the generally

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13 12 CFR part 3, subpart F (OCC); 12 CFR part

217, subpart F (Board); 12 CFR part 324, subpart F

(FDIC).

applicable rule.13 In contrast, electing

banking organizations would not be

required to calculate additional market

risk capital requirements and, as a

result, the community bank leverage

ratio framework may not appropriately

capitalize for material amounts of

trading assets and trading liabilities. In

addition, elevated levels of trading

activity can produce a heightened level

of earnings volatility, which has

implications for capital adequacy

ions would not be

required to calculate additional market

risk capital requirements and, as a

result, the community bank leverage

ratio framework may not appropriately

capitalize for material amounts of

trading assets and trading liabilities. In

addition, elevated levels of trading

activity can produce a heightened level

of earnings volatility, which has

implications for capital adequacy.

Therefore, the agencies do not believe it

is appropriate to make the community

bank leverage ratio framework available

to banking organizations with material

market risk exposure. However, the

agencies do not believe that low levels

of trading activity should preclude a

banking organization from using the

community bank leverage ratio

framework.

Based on the agencies’ analysis, the

vast majority of banking organizations

with less than $10 billion in total

consolidated assets have total trading

assets and trading liabilities well below

5 percent of their total consolidated

assets, as of March 31, 2019. The

agencies believe that the proposed 5

percent threshold will help ensure that

banking organizations that engage in

significant trading activity are not

subject to the community bank leverage

ratio framework. Further, this criterion

is generally consistent with section 203

of the Act, which excludes a community

banking organization from proprietary

trading restrictions if its total trading

assets and trading liabilities are 5

percent or less of its total consolidated

assets. The agencies did not receive any

comment with regard to the proposed

qualifying criterion for total trading

assets and trading liabilities and are

finalizing this requirement as proposed.

5. Advanced Approaches Banking

Organizations

Under the proposal, advanced

approaches banking organizations

would not have been eligible to use the

community bank leverage ratio

framework

dated

assets. The agencies did not receive any

comment with regard to the proposed

qualifying criterion for total trading

assets and trading liabilities and are

finalizing this requirement as proposed.

5. Advanced Approaches Banking

Organizations

Under the proposal, advanced

approaches banking organizations

would not have been eligible to use the

community bank leverage ratio

framework. The agencies received no

comment on this requirement and

believe that, in general, section 201 of

the Act is designed to provide

regulatory burden relief for banking

organizations with less than $10 billion

in total consolidated assets and that

have a limited risk profile.

A banking organization with less than

$10 billion in total consolidated assets

may be subject to the advanced

approaches rules if it is a subsidiary of

a much larger banking organization.

While these types of advanced

approaches banking organizations may

be relatively small banking

organizations, the agencies do not

believe they share the same type of risk

characteristics as non-complex

community banking organization for

which the community bank leverage

ratio framework is appropriate.

Consequently, under the final rule, an

advanced approaches banking

organization will not be eligible to use

the community bank leverage ratio

framework, regardless of its size.

B. Definitions of the Leverage Ratio’s

Numerator and Denominator

1. Numerator

Under the proposal, the numerator of

the community bank leverage ratio

would have been tangible equity,

calculated as a banking organization’s

total bank equity capital or total holding

company equity capital, as applicable,

determined in accordance with the

reporting instructions to Schedule RC of

the Call Report or Schedule HC of Form

FR Y–9C, prior to including minority

interests, less: (i) Accumulated other

comprehensive income (AOCI), (ii) all

intangible assets (other than MSAs), and

calculated as a banking organization’s

total bank equity capital or total holding

company equity capital, as applicable,

determined in accordance with the

reporting instructions to Schedule RC of

the Call Report or Schedule HC of Form

FR Y–9C, prior to including minority

interests, less: (i) Accumulated other

comprehensive income (AOCI), (ii) all

intangible assets (other than MSAs), and

(iii) DTAs, net of any related valuation

allowances, that arise from net operating

loss and tax credit carryforwards, each

as of the end of the most recent calendar

quarter. Tangible equity would not have

included minority interests (equity of a

consolidated subsidiary that is not

owned by the qualifying community

banking organization) because minority

interests do not have the same loss

absorption capacity as other

components of tangible equity at the

consolidated banking organization level.

The agencies received numerous

comments in response to the proposed

use of tangible equity as the numerator

of the community bank leverage ratio.

Many commenters noted that banking

organizations are already familiar with

the current tier 1 capital calculation,

and that tier 1 capital, therefore, should

be used to calculate the community

bank leverage ratio instead of tangible

equity. A commenter also argued that

the burden associated with

implementing the community bank

leverage ratio framework would exceed

the reporting relief provided by reduced

complexity. Several commenters

expressed concerns that it would be too

complex for a banking organization to

switch between the calculation of

tangible equity and tier 1 capital as it

either opts into or out of the community

bank leverage ratio framework or no

longer meets the definition of a

qualifying community banking

organization

would exceed

the reporting relief provided by reduced

complexity. Several commenters

expressed concerns that it would be too

complex for a banking organization to

switch between the calculation of

tangible equity and tier 1 capital as it

either opts into or out of the community

bank leverage ratio framework or no

longer meets the definition of a

qualifying community banking

organization. Several commenters

recommended the agencies instead use

tier 1 capital for the numerator,

suggesting that this would not only

simplify the calculation when switching

between frameworks but would also

increase comparability across all

banking organizations. Commenters also

preferred to use tier 1 capital for the

numerator in order to ensure that

certain instruments, such as trust

preferred securities (TruPS) and

common stock issued by bank

subsidiaries, would count as regulatory

capital under the community bank

leverage ratio framework, up to their

current limits. Finally, several

commenters noted that use of tier 1

capital as the numerator would avoid

the need for revisions to state banking

laws that reference tier 1 capital,

including but not limited to state law

lending limits.

Multiple commenters, although not

explicitly expressing a preference for

using tier 1 capital as the numerator, did

request that certain adjustments be

made to the proposed definition of

tangible equity. A commenter

recommended that cumulative preferred

stock with a stated final maturity date

be included as an eligible component of

tangible equity. Several commenters

requested that the agencies allow TruPS

to count as tangible equity. A

commenter recommended that the

agencies include common stock

minority interest of up to 10 percent of

the numerator of the community bank

leverage ratio where the subsidiary

holds risk-weighted assets of at least the

amount of common stock minority

interest being included. Finally, some

commenters expressed concern that the

CECL methodology under U.S

TruPS

to count as tangible equity. A

commenter recommended that the

agencies include common stock

minority interest of up to 10 percent of

the numerator of the community bank

leverage ratio where the subsidiary

holds risk-weighted assets of at least the

amount of common stock minority

interest being included. Finally, some

commenters expressed concern that the

CECL methodology under U.S. generally

accepted accounting principles could

impact eligibility for the community

bank leverage ratio framework and

recommended that the agencies provide

for an ongoing adjustment to the

community bank leverage ratio

numerator that approximates the

incremental regulatory capital impact of

CECL credit loss allowance levels over

levels currently recorded under U.S.

generally accepted accounting

principles.

Taking into account the concerns of

commenters and seeking to balance

burden reduction with safety and

soundness, the agencies have decided to

replace the proposed tangible equity

measure with the current calculation of

tier 1 capital as the numerator of the

community bank leverage ratio. This

change would align the final rule’s

calculation of the leverage ratio with the

generally applicable rule’s leverage

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

14 See 84 FR 35234 (July 22, 2019).

15 See 12 CFR 3.22(c)(2) (OCC); 12 CFR

217.22(c)(2) (Board); 12 CFR 324.22(c)(2) (FDIC).

16 Banking organizations that are currently

grandfathered and eligible to include TruPS in tier

1 capital can continue to include TruPS in tier 1

capital under the community bank leverage ratio

framework, subject to existing limits. See 12 CFR

3.20(c)(3) (OCC); 12 CFR 217.20(c)(3) (Board); 12

CFR 324.20(c)(3) (FDIC). See 12 CFR

3.22(c)(2)(iii)(A) (OCC); 12 CFR 217.22(c)(2)(iii)(A)

(Board); 12 CFR 324.22(c)(2)(iii)(A) (FDIC)

urrently

grandfathered and eligible to include TruPS in tier

1 capital can continue to include TruPS in tier 1

capital under the community bank leverage ratio

framework, subject to existing limits. See 12 CFR

3.20(c)(3) (OCC); 12 CFR 217.20(c)(3) (Board); 12

CFR 324.20(c)(3) (FDIC). See 12 CFR

3.22(c)(2)(iii)(A) (OCC); 12 CFR 217.22(c)(2)(iii)(A)

(Board); 12 CFR 324.22(c)(2)(iii)(A) (FDIC). See 12

CFR 217.300(c) (Board).

ratio, a calculation methodology with

which banking organizations are already

familiar, and therefore would streamline

adoption of the community bank

leverage ratio framework. In addition,

the use of tier 1 capital in the

community bank leverage ratio

framework will enhance comparability

among banking organizations and

remove the need for separate qualifying

criteria for MSAs and temporary

difference DTAs, as discussed

previously. Based on the agencies’

analysis, for the majority of banking

organizations with less than $10 billion

in total consolidated assets, the

proposed tangible equity and the

current tier 1 capital figures result in

nearly the same amount of regulatory

capital. Finally, the use of tier 1 capital

as the numerator of the leverage ratio

allows for the incorporation of changes

from the simplifications rule, which

further simplifies the tier 1 capital

calculation by amending the treatment

of MSAs, temporary difference DTAs,

investments in capital instruments, and

minority interests.14

The agencies note that the generally

applicable rule requires deductions

from tier 2 capital related to investments

in capital instruments of unconsolidated

financial institutions when such

investments exceed certain limits and

that such deductions can affect the

calculation of tier 1 capital.15 This

corresponding deduction approach

requires a banking organization to make

deductions from the same component of

capital for which the underlying

instrument would qualify if it was

issued by the banking organization

itself

ments of unconsolidated

financial institutions when such

investments exceed certain limits and

that such deductions can affect the

calculation of tier 1 capital.15 This

corresponding deduction approach

requires a banking organization to make

deductions from the same component of

capital for which the underlying

instrument would qualify if it was

issued by the banking organization

itself. In addition, if a banking

organization does not have a sufficient

amount of a specific regulatory capital

component against which to effect the

deduction, the shortfall must be

deducted from the next higher (that is,

more subordinated) regulatory capital

component. Without any revision to the

corresponding deduction approach, an

electing banking organization with

investments in tier 2 capital instruments

of other financial institutions could

have been required to apply the

corresponding deduction approach

potentially resulting in deductions from

tier 1 capital. Under the final rule,

however, since the community bank

leverage ratio framework does not have

a total capital requirement, an electing

banking organization is neither required

to calculate tier 2 capital nor make any

deductions that would have been taken

from tier 2 capital under the generally

applicable rule. Therefore, if an electing

banking organization has investments in

the capital instruments of an

unconsolidated financial institution that

would qualify as tier 2 capital of the

electing banking organization under the

generally applicable rule (tier 2

qualifying investments), and the

banking organization’s total investments

in the capital of unconsolidated

financial institutions exceed the

threshold for deduction, the banking

organization is not required to deduct

the tier 2 qualifying investments

financial institution that

would qualify as tier 2 capital of the

electing banking organization under the

generally applicable rule (tier 2

qualifying investments), and the

banking organization’s total investments

in the capital of unconsolidated

financial institutions exceed the

threshold for deduction, the banking

organization is not required to deduct

the tier 2 qualifying investments.

An electing banking organization is

only required to make a deduction from

its common equity tier 1 capital or tier

1 capital if the sum of its investments

in the capital of an unconsolidated

financial institution is in a form that

would qualify as common equity tier 1

capital or tier 1 capital instruments of

the electing banking organization and

exceeds the threshold for deduction.

The agencies do not believe this is a

common occurrence and observed that

as of March 31, 2019, very few

community banking organizations made

a deduction from tier 2 capital.

Therefore, the agencies believe it is

appropriate to clarify this aspect of the

tier 1 calculation for qualifying

community banking organizations to

ensure that it can be made as simply as

possible. Further, although the

community bank leverage ratio

framework will not require qualifying

community banking organizations to

make deductions from their regulatory

capital calculations for investments in

tier 2 capital instruments issued by

other financial institutions, the agencies

will continue to monitor such

investments and will address, on a case-

by-case basis, any instances where such

activity potentially creates an unsafe or

unsound practice or condition

ire qualifying

community banking organizations to

make deductions from their regulatory

capital calculations for investments in

tier 2 capital instruments issued by

other financial institutions, the agencies

will continue to monitor such

investments and will address, on a case-

by-case basis, any instances where such

activity potentially creates an unsafe or

unsound practice or condition.

With respect to a banking

organization that has not elected the

community bank leverage ratio

framework but invests in an instrument

(e.g., subordinated debt instrument)

issued by an electing banking

organization that would qualify as tier 2

capital under the generally applicable

rule, the investing banking organization

would continue to treat the instrument

as tier 2 capital notwithstanding the

electing banking organization’s capital

treatment of the instrument.

The agencies believe adoption of tier

1 capital, including the adjustments

described above, also addresses

commenters’ concerns about the

inclusion of TruPS,16 certain other

preferred stock instruments, and

minority interests includable in the

numerator of the leverage ratio

calculation by maintaining the same

treatment that currently applies under

the generally applicable rule’s

calculation for tier 1 capital for non-

advanced approaches banking

organizations.

2. Denominator

Under the proposal and consistent

with the Act, the community bank

leverage ratio denominator would have

been based on a banking organization’s

average total consolidated assets.

Specifically, average total consolidated

assets for purposes of the denominator

would have been calculated in

accordance with the reporting

instructions to Schedules RC–K on the

Call Report or HC–K on Form FR Y–9C,

as applicable, less the items deducted

from the numerator, other than AOCI.

The proposed denominator therefore

would have been similar, but not

identical, to the denominator of the

generally applicable rule’s leverage

ratio

or purposes of the denominator

would have been calculated in

accordance with the reporting

instructions to Schedules RC–K on the

Call Report or HC–K on Form FR Y–9C,

as applicable, less the items deducted

from the numerator, other than AOCI.

The proposed denominator therefore

would have been similar, but not

identical, to the denominator of the

generally applicable rule’s leverage

ratio.

The agencies received a limited

number of comments on the proposed

denominator for the community bank

leverage ratio. A commenter suggested

the agencies consider seasonality in

total assets and allow for the use of four-

quarter average total consolidated assets

for the denominator. The agencies note

that the denominator as proposed would

be average total consolidated assets as

described above, which would have

substantially maintained consistency

with the current regulatory capital

calculation for average total

consolidated assets. Another commenter

asked that the agencies consider

allowing a deduction from the

denominator for pass-through reserve

balances held with the Federal Reserve

System. The commenter argued that

allowing this deduction would refine

this calculation for correspondent

banking organizations to align more

closely their capital requirements to

their risk and would, in the

commenter’s view, not unduly

discourage correspondent banking

organizations from assisting community

banking organization clients with

holding proper reserve balances with

the Federal Reserve System.

The agencies note that the leverage

ratio in the generally applicable rule is

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ommenter’s view, not unduly

discourage correspondent banking

organizations from assisting community

banking organization clients with

holding proper reserve balances with

the Federal Reserve System.

The agencies note that the leverage

ratio in the generally applicable rule is

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

17 As of March 31, 2019, there are 4,261

depository institution holding companies with less

than $10 billion in total consolidated assets. More

than 95 percent of such holding companies are not

subject to the capital rule because they have less

than $3 billion in total consolidated assets and meet

certain additional criteria to qualify for the Board’s

Small Bank Holding Company and Savings and

Loan Holding Company Policy Statement. See 12

CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225,

appendix C; 12 CFR 238.9.

18 84 FR 4222 (February 14, 2019).

designed to be a simple, non-risk-based

on-balance sheet measure. Adjusting the

leverage ratio denominator as

commenters suggested would add

unnecessary complexity to the measure.

Therefore, the agencies are finalizing the

leverage ratio denominator as proposed,

except that items deducted from the

denominator will align with the

deductions from tier 1 capital as the

numerator rather than from the

proposed tangible equity measure as the

numerator.

C. Calibration of the Leverage Ratio in

Order To Qualify for the Community

Bank Leverage Ratio

The agencies proposed to permit a

qualifying community banking

organization to elect to use the

community bank leverage ratio

framework if the organization’s

community bank leverage ratio was

greater than 9 percent at the time of

election

he

proposed tangible equity measure as the

numerator.

C. Calibration of the Leverage Ratio in

Order To Qualify for the Community

Bank Leverage Ratio

The agencies proposed to permit a

qualifying community banking

organization to elect to use the

community bank leverage ratio

framework if the organization’s

community bank leverage ratio was

greater than 9 percent at the time of

election. A qualifying community

banking organization with a community

bank leverage ratio greater than 9

percent would have been considered to

have met: (i) The requirements of the

generally applicable rule; (ii) the well-

capitalized capital ratio thresholds

under the agencies’ PCA framework for

insured depository institutions or the

well-capitalized standards under the

Board’s regulations for holding

companies, as applicable; and (iii) any

other capital or leverage requirements to

which the banking organization is

subject. Such qualifying community

banking organizations would not have

been required to calculate capital ratios

under the generally applicable rule.

Additionally, to have been considered

well capitalized under the proposed

community bank leverage ratio

framework, and consistent with the

agencies’ PCA framework, a qualifying

community banking organization must

not have been subject to any written

agreement, order, capital directive, or

PCA directive to meet and maintain a

specific capital level for any capital

measure.

In general, commenters stated that the

community bank leverage ratio

requirement should be lowered to 8

percent, citing the lower end of the

range of the requirement under section

201 of the Act. Commenters indicated

that such a calibration would more

closely track the current well

capitalized thresholds under PCA and

would allow more banking

organizations to be eligible to use the

community bank leverage ratio

framework

he

community bank leverage ratio

requirement should be lowered to 8

percent, citing the lower end of the

range of the requirement under section

201 of the Act. Commenters indicated

that such a calibration would more

closely track the current well

capitalized thresholds under PCA and

would allow more banking

organizations to be eligible to use the

community bank leverage ratio

framework. Several commenters wrote

that the proposed community bank

leverage ratio requirement and

qualifying criteria were excessively

conservative, particularly combined

with the assumption that the adoption

of CECL would, in the commenters’

view, reduce firms’ regulatory capital

levels. A commenter suggested a

banking organization should have the

option to phase in the impact of the day-

one CECL adjustment recorded in

retained earnings over a five year period

when it elects to use the community

bank leverage ratio framework to

calculate regulatory capital. A few

commenters indicated that the proposed

community bank leverage ratio

calibration would not factor in the

adjusted allowance for credit loss for up

to 1.25 percent of risk-weighted assets,

which would be permitted under the

generally applicable rule for purposes of

the total capital ratio, but would not be

relevant under the community bank

leverage ratio. Finally, a commenter

recommended a dynamic calibration

that would vary depending on the

business cycle to accommodate recovery

and encourage lending in a stressed

environment.

After considering the comments

received on calibration, the agencies

have decided to adopt a 9 percent

leverage ratio as a qualifying criterion

for the community bank leverage ratio

framework

bank

leverage ratio. Finally, a commenter

recommended a dynamic calibration

that would vary depending on the

business cycle to accommodate recovery

and encourage lending in a stressed

environment.

After considering the comments

received on calibration, the agencies

have decided to adopt a 9 percent

leverage ratio as a qualifying criterion

for the community bank leverage ratio

framework. The agencies believe that a

9 percent calibration, with

complementary qualifying criteria for

asset size, off-balance sheet assets, and

trading assets and trading liabilities,

generally maintains the current level of

regulatory capital held by electing

banking organizations and supports the

agencies’ goals of reducing regulatory

burden for as many community banking

organizations as possible. For example,

even though an 8 percent leverage ratio

would have allowed more banking

organizations to opt into the community

bank leverage ratio framework, the

reduced calibration could create an

inappropriate incentive for some

qualifying community banking

organizations to hold less regulatory

capital than they do today. Rather than

lowering the minimum community bank

leverage ratio from 9 percent to 8

percent, the agencies determined that it

would be more appropriate to alleviate

the potential burden associated with

switching regulatory capital frameworks

as capital levels fall by permitting an

electing banking organization to have its

ratio drop below 9 percent temporarily

(i.e., the two-quarter grace period). This

grace period will provide an electing

banking organization time to either

comply with the qualifying criteria or to

prepare to comply with the generally

applicable rule and file the appropriate

regulatory reports

al frameworks

as capital levels fall by permitting an

electing banking organization to have its

ratio drop below 9 percent temporarily

(i.e., the two-quarter grace period). This

grace period will provide an electing

banking organization time to either

comply with the qualifying criteria or to

prepare to comply with the generally

applicable rule and file the appropriate

regulatory reports.

The agencies estimate that, as of the

first quarter of 2019, the vast majority of

banking organizations with under $10

billion in total consolidated assets

would meet the definition of a

qualifying community banking

organization and have a leverage ratio

above 9 percent. Based on reported data

as of March 31, 2019, there are 5,221

insured depository institutions with less

than $10 billion in total consolidated

assets and 231 depository institution

holding companies with less than $10

billion in total consolidated assets that

file the form FR Y–9C.17 The agencies

estimate that approximately 85 percent

of such insured depository institutions

and approximately 76 percent of such

depository institution holding

companies would qualify to use the

community bank leverage ratio

framework under the 9 percent

calibration and other qualifying criteria.

The agencies believe the community

bank leverage ratio framework in this

final rule, including a 9 percent

calibration, meets the objectives

described above.

In February of 2019, the agencies

issued a final rule to amend the

generally applicable rule in response to

CECL (CECL transitions final rule).18

The CECL transitions final rule provides

for an optional three-year transition

arrangement that will allow a banking

organization to phase in any adverse

day-one regulatory capital effects of

CECL adoption on retained earnings,

deferred tax assets, allowance for credit

losses, and average total consolidated

assets. These day-one regulatory capital

effects will be phased in over the

transition period on a straight line basis

des

for an optional three-year transition

arrangement that will allow a banking

organization to phase in any adverse

day-one regulatory capital effects of

CECL adoption on retained earnings,

deferred tax assets, allowance for credit

losses, and average total consolidated

assets. These day-one regulatory capital

effects will be phased in over the

transition period on a straight line basis.

Under this final rule, the leverage ratio

under the community bank leverage

ratio framework is generally calculated

in the same manner as the generally

applicable rule’s leverage ratio.

Accordingly, an electing banking

organization is also eligible to phase-in

any adverse day-one regulatory capital

effects of CECL adoption on retained

earnings, DTAs, allowance for credit

losses, and average total consolidated

assets. Banking organizations will retain

their three-year transition period

without reset (i.e., the transition period

cannot be extended) upon passage in or

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

19 See section I in this SUPPLEMENTARY

INFORMATION for a discussion on the interaction

between the effective date of the final rule and

when a banking organization elects to use the

community bank leverage ratio framework.

out of the community bank leverage

ratio framework.

D. Ability To Opt Into and Out of the

Community Bank Leverage Ratio

Framework

Under the proposal, a qualifying

community banking organization with a

community bank leverage ratio greater

than 9 percent could have elected to use

the community bank leverage ratio

framework at any time. Such a banking

organization would have indicated its

election by completing a community

bank leverage ratio reporting schedule

in its Call Report or Form FR Y–9C, as

applicable

ework

Under the proposal, a qualifying

community banking organization with a

community bank leverage ratio greater

than 9 percent could have elected to use

the community bank leverage ratio

framework at any time. Such a banking

organization would have indicated its

election by completing a community

bank leverage ratio reporting schedule

in its Call Report or Form FR Y–9C, as

applicable. Also, under the proposal, an

electing banking organization would

have been able to opt out of the

community bank leverage ratio

framework and become subject to the

generally applicable rule by completing

the associated reporting requirements

on Schedules RC–R of the Call Report or

HC–R of Form FR Y–9C, as applicable.

Additionally, the agencies noted in the

proposal that an electing banking

organization would have been able to

opt out of the community bank leverage

ratio framework between reporting

periods by providing the capital ratios

under the generally applicable rule to its

appropriate regulators at the time of

opting out. A banking organization that

opted out of the community bank

leverage ratio framework would have

been required to meet the qualifying

criteria included in the definition of a

qualifying community banking

organization and have a community

bank leverage ratio of greater than 9

percent to be able to opt back into the

community bank leverage ratio

framework.

Several commenters suggested that

the optionality aspect should be further

emphasized to both bankers and agency

examiners. These commenters

expressed concern that banking

organizations that do not opt in could be

seen as outliers and could be pressured

to raise capital and opt into the

community bank leverage ratio

framework, or that procedural issues

would make it too difficult in practice

for banking organizations to opt out.

The agencies have considered the

comments and are finalizing the

election to use the community bank

leverage ratio framework as proposed

ations that do not opt in could be

seen as outliers and could be pressured

to raise capital and opt into the

community bank leverage ratio

framework, or that procedural issues

would make it too difficult in practice

for banking organizations to opt out.

The agencies have considered the

comments and are finalizing the

election to use the community bank

leverage ratio framework as proposed.

Due to the adoption of tier 1 capital and

the leverage ratio into the community

bank leverage ratio framework, the

agencies will update accordingly the

proposed reporting changes to the Call

Report and Form FR Y–9C. The agencies

are further clarifying that the

community bank leverage ratio

framework is an optional framework,

based on section 201 of the Act, which

serves the purpose of removing the

burden of calculating and reporting risk-

based capital ratios for banking

organizations that meet certain criteria.

The agencies are also clarifying that a

banking organization can opt out of the

community bank leverage ratio

framework at any time, without

restriction, by reverting to the generally

applicable rule and providing the

capital ratios under the generally

applicable rule to its appropriate

regulators at the time of opting out.

One commenter requested that the

rule require that banking agencies notify

state bank regulators when a state-

chartered electing banking organization

opts out of the framework between

reporting periods. Under the final rule,

a qualifying community banking

organization may opt into or out of the

community bank leverage ratio

framework at any time and for any

reason. The agencies, therefore, are not

including a mandatory notification

requirement in the final rule, as this

could discourage banking organizations

from electing to apply and report under

the generally applicable rule. The

agencies note that the Call Report and

Form FR Y–9C are available to the

public and therefore additional notice is

not necessary

ramework at any time and for any

reason. The agencies, therefore, are not

including a mandatory notification

requirement in the final rule, as this

could discourage banking organizations

from electing to apply and report under

the generally applicable rule. The

agencies note that the Call Report and

Form FR Y–9C are available to the

public and therefore additional notice is

not necessary.

As described above, a banking

organization generally opts into and out

of the community bank leverage ratio

framework through its Call Report or

Form FR Y–9C. As a result, a banking

organization’s compliance with the

community bank leverage ratio

framework or the generally applicable

rule will be determined based upon the

capital framework it has elected in its

last filed Call Report or Form FR Y–

9C.19

E. Ongoing Compliance With the

Community Bank Leverage Ratio

Framework

1. Meeting the Definition of a Qualifying

Community Banking Organization

Under the proposal, an electing

banking organization that no longer met

the proposed qualifying criteria would

have been required, within two

consecutive calendar quarters, either to

meet the qualifying criteria again or to

demonstrate compliance with the

generally applicable rule. During the

proposed grace period, the banking

organization could have continued to be

treated as a qualifying community

banking organization and could have,

therefore, continued calculating and

reporting a community bank leverage

ratio to determine its compliance with

other statutes and regulations.

The agencies did not receive specific

comments relating to the mechanics of

the proposed grace period. One

commenter argued that a six-month

transition period would be too short for

banking organizations to sell MSAs, if

necessary, or prepare for the different

treatment in the generally applicable

rule. Other commenters noted that the

use of tier 1 capital would ease any

transition back to the risk-based capital

requirements

comments relating to the mechanics of

the proposed grace period. One

commenter argued that a six-month

transition period would be too short for

banking organizations to sell MSAs, if

necessary, or prepare for the different

treatment in the generally applicable

rule. Other commenters noted that the

use of tier 1 capital would ease any

transition back to the risk-based capital

requirements. The agencies continue to

believe that this limited grace period is

appropriate to mitigate potential

volatility in capital and associated

regulatory reporting requirements based

on temporary changes in a banking

organization’s risk profile from quarter

to quarter, while capturing more

permanent changes in risk profile, and

are therefore finalizing the two-quarter

grace period largely as proposed. Under

the final rule, the grace period begins as

of the end of the calendar quarter in

which the electing banking organization

ceases to satisfy any of the qualifying

criteria and will end after two

consecutive calendar quarters. For

example, if the electing banking

organization no longer meets one of the

qualifying criteria as of February 15, and

still does not meet the criteria as of the

end of that quarter, the grace period for

such a banking organization will begin

as of the end of the quarter ending

March 31. The banking organization

may continue to use the community

bank leverage ratio framework as of June

30, but will need to comply fully with

the generally applicable rule (including

the associated reporting requirements)

as of September 30, unless the banking

organization once again meets all

qualifying criteria of the community

bank leverage ratio framework,

including a leverage ratio of greater than

9 percent, by that date.

Under the proposal, an electing

banking organization that ceased to

meet the qualifying criteria as a result of

a business combination would have

received no grace period and

immediately would have been required

to revert to the generally applicable rule

qualifying criteria of the community

bank leverage ratio framework,

including a leverage ratio of greater than

9 percent, by that date.

Under the proposal, an electing

banking organization that ceased to

meet the qualifying criteria as a result of

a business combination would have

received no grace period and

immediately would have been required

to revert to the generally applicable rule.

The agencies continue to believe this

approach is appropriate, as banking

organizations would need to consider

the regulatory capital implications of a

planned business combination and be

prepared to comply with the applicable

requirements. An electing banking

organization that expects that it would

not meet the qualifying criteria as a

result of a business combination would

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

20 Under the proposal, an electing banking

organization that is a depository institution holding

company would no longer be considered well

capitalized if the holding company had a

community bank leverage ratio of 9 percent or less.

21 See, e.g., 12 U.S.C. 5371 (establishing a capital

floor for insured depository institutions and

depository institution holding companies); section

201 of the Act (requiring development of a

community bank leverage ratio for which a

depository institution exceeding that ratio would be

considered to meet the requirements to be treated

as well capitalized under PCA); 12 U.S.C. 1831o

(PCA).

need to provide its pro forma capital

ratios under the generally applicable

rule to its appropriate regulator as part

of its merger application, if applicable,

and fully comply with the generally

applicable rule for the regulatory

reporting period during which the

transaction is completed.

2

ed to meet the requirements to be treated

as well capitalized under PCA); 12 U.S.C. 1831o

(PCA).

need to provide its pro forma capital

ratios under the generally applicable

rule to its appropriate regulator as part

of its merger application, if applicable,

and fully comply with the generally

applicable rule for the regulatory

reporting period during which the

transaction is completed.

2. Treatment of a Community Banking

Organization That Falls Below Certain

Leverage Ratio Levels

Under the proposal, an electing

banking organization that had a

community bank leverage ratio greater

than 9 percent would have been

considered well capitalized. In addition,

an electing banking organization would

have been considered to have met the

minimum capital requirements under

the generally applicable rule if its

community bank leverage ratio was 7.5

percent or greater.20 Under the proposal,

an electing banking organization could

have chosen to stop using the

community bank leverage ratio

framework and instead become subject

to the generally applicable rule. The

proposal also provided an electing

banking organization with a declining

community bank leverage ratio (e.g.,

below 9 percent) with the option to

remain in the community bank leverage

ratio framework indefinitely, rather than

requiring the firm to revert to the

generally applicable rule. Under the

proposal, an electing banking

organization that was an insured

depository institution and no longer

exceeded the 9 percent community bank

leverage ratio would have been subject

to community bank leverage ratio levels

that would serve as proxies for the

adequately capitalized,

undercapitalized, and significantly

undercapitalized PCA capital

categories.21

The agencies received comments and

requests for clarification regarding both

the proposed PCA proxy levels and the

grace period for a banking organization

that has a community bank leverage

ratio at or below 9 percent

unity bank leverage ratio levels

that would serve as proxies for the

adequately capitalized,

undercapitalized, and significantly

undercapitalized PCA capital

categories.21

The agencies received comments and

requests for clarification regarding both

the proposed PCA proxy levels and the

grace period for a banking organization

that has a community bank leverage

ratio at or below 9 percent. One

commenter requested that the agencies

clarify when PCA consequences begin to

apply. Another commenter indicated

that the framework should require a

banking organization that falls below

the well-capitalized level to

immediately begin reporting capital

ratios under the generally applicable

rule. Another commenter proposed that,

instead of instituting the PCA proxy

levels, the agencies should give

qualifying banking organizations with a

community bank leverage ratio between

8 percent and 9 percent a two-quarter

grace period after which they would

either need to restore their community

bank leverage ratio to greater than 9

percent or revert to the generally

applicable rule.

The agencies also received comments

in response to the proposal’s

incorporation of community bank

leverage ratio levels as proxies for the

adequately capitalized,

undercapitalized, and significantly

undercapitalized PCA categories. In

general, commenters noted that the

establishment of a new, separate PCA

framework within the community bank

leverage ratio framework is not

necessary or required under section 201

of the Act, expressing concern that the

community bank leverage ratio

framework could, in the future, function

as the new, de facto minimum capital

requirement, particularly if it is difficult

for a banking organization to switch

back to the generally applicable rule

, separate PCA

framework within the community bank

leverage ratio framework is not

necessary or required under section 201

of the Act, expressing concern that the

community bank leverage ratio

framework could, in the future, function

as the new, de facto minimum capital

requirement, particularly if it is difficult

for a banking organization to switch

back to the generally applicable rule.

Commenters also noted community

banking organizations’ sensitivity to

several restrictions that could arise if

the community banking organization is

determined to be less than well

capitalized, including restrictions on

funding sources such as limits on

brokered deposits, and the inability to

open branches or make acquisitions.

Some commenters suggested alternative

calibration levels for the PCA proxy

levels.

In response to commenter concerns

regarding the proposed PCA proxy

levels for electing banking organizations

that no longer exceed a 9 percent

leverage ratio, the agencies decided not

to incorporate the proposed PCA proxy

levels in the final rule. Therefore, under

the final rule, banking organizations that

are insured depository institutions and

that have a leverage ratio of greater than

9 percent are deemed to have met the

well capitalized capital ratio

requirements for PCA purposes. Further,

the agencies included the requirement

to have a leverage ratio greater than 9

percent as a qualifying criterion in the

definition of a qualifying community

banking organization. Consequently, the

two-quarter grace period described

above also applies depending on the

level of an electing banking

organization’s leverage ratio. Under the

final rule, an electing banking

organization that has a leverage ratio

that is greater than 8 percent and equal

to or less than 9 percent is allowed a

two-quarter grace period after which it

must either (i) again meet all qualifying

criteria or (ii) apply and report the

generally applicable rule

pplies depending on the

level of an electing banking

organization’s leverage ratio. Under the

final rule, an electing banking

organization that has a leverage ratio

that is greater than 8 percent and equal

to or less than 9 percent is allowed a

two-quarter grace period after which it

must either (i) again meet all qualifying

criteria or (ii) apply and report the

generally applicable rule. During this

two-quarter period, a banking

organization that is an insured

depository institution and that has a

leverage ratio that is greater than 8

percent would be considered to have

met the well-capitalized capital ratio

requirements for PCA purposes. An

electing banking organization with a

leverage ratio of 8 percent or less is not

eligible for the grace period and must

comply with the generally applicable

rule, i.e., for the quarter in which the

banking organization reports a leverage

ratio of 8 percent or less. An electing

banking organization experiencing or

anticipating such an event would be

expected to notify its primary federal

supervisory agency, which would

respond as appropriate to the

circumstances of the banking

organization.

A commenter asked that the proposed

rule be revised to provide expressly that

for an otherwise qualifying community

bank that is state chartered to be

disqualified from using the community

bank leverage ratio framework based on

criteria other than the enumerated

qualifying criteria, such a determination

must be made jointly by (1) the bank’s

primary federal banking supervisory

agency (either the FDIC or the Board)

and (2) the appropriate state bank

supervisor. The agencies expect to

continue to work closely with the state

bank supervisors, particularly with

respect to institutions that are

supervised jointly

n

criteria other than the enumerated

qualifying criteria, such a determination

must be made jointly by (1) the bank’s

primary federal banking supervisory

agency (either the FDIC or the Board)

and (2) the appropriate state bank

supervisor. The agencies expect to

continue to work closely with the state

bank supervisors, particularly with

respect to institutions that are

supervised jointly. However, the

agencies are not revising the rule to

require a joint determination of the

federal supervisor and the state

supervisor because such a requirement

could prevent the federal supervisor

from applying the capital standards it

believes to be appropriate.

Finally, a commenter requested

clarification that a bank that is a

qualifying community bank may elect to

use the community banking

organization leverage ratio framework

even if its parent holding company is

not a qualifying community banking

organization, or vice versa. Consistent

with the proposal, a non-advanced

approaches subsidiary insured

depository institution may opt into the

community bank leverage ratio

framework even if its parent holding

company is not a qualifying banking

organization, and vice versa. The

agencies do not have safety and

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22 The OCC and FDIC submitted their information

collections to OMB at the proposed rule stage.

However, these submissions were done solely in an

effort to apply a conforming methodology for

calculating the burden estimates and not due to the

proposed rule. OMB filed comments requesting that

the agencies examine public comment in response

to the proposed rule and describe in the supporting

statement of its next collection any public

comments received regarding the collection as well

as why (or why it did not) incorporate the

commenter’s recommendation

onforming methodology for

calculating the burden estimates and not due to the

proposed rule. OMB filed comments requesting that

the agencies examine public comment in response

to the proposed rule and describe in the supporting

statement of its next collection any public

comments received regarding the collection as well

as why (or why it did not) incorporate the

commenter’s recommendation. In addition, OMB

requested that the OCC and the FDIC note the

convergence of the agencies on the single

methodology. The agencies received no comments

on the information collection requirements. Since

the proposed rule stage, the agencies have

conformed their respective methodologies in a

separate final rulemaking titled, Regulatory Capital

Rule: Implementation and Transition of the Current

Expected Credit Losses Methodology for Allowances

and Related Adjustments to the Regulatory Capital

Rule and Conforming Amendments to Other

Regulations, 84 FR 4222 (February 14, 2019), and

the FDIC and OCC have had their submissions

approved through OMB. As a result, the agencies’

information collections related to the regulatory

capital rules are currently aligned and therefore no

submission will be made to OMB.

23 U.S. SBA, Table of Small Business Size

Standards Matched to North American Industry

Classification System Codes, available at https://

Continued

soundness concerns with these

scenarios and the agencies intended to

allow such elections in the proposal.

F. FDIC Deposit Insurance Assessments

Regulations

The FDIC’s deposit insurance

assessments regulations also would be

affected by the finalized community

bank leverage ratio framework. The

FDIC is considering, and is expected to

adopt, a separate final rule to apply the

community bank leverage ratio

framework to the deposit insurance

assessment system

llow such elections in the proposal.

F. FDIC Deposit Insurance Assessments

Regulations

The FDIC’s deposit insurance

assessments regulations also would be

affected by the finalized community

bank leverage ratio framework. The

FDIC is considering, and is expected to

adopt, a separate final rule to apply the

community bank leverage ratio

framework to the deposit insurance

assessment system. The separate final

rule amends the FDIC’s assessment

regulations to price all qualifying

community banks that elect to use the

community bank leverage ratio

framework as small banks, and

continues to use the leverage ratio to

determine assessment rates for

established small banks. The separate

final rule additionally clarifies that an

electing bank that meets the definition

of a custodial bank will have no change

to its custodial bank deduction or

reporting items required to calculate the

deduction, and makes technical

amendments to ensure that the

assessment regulations continue to

reference the PCA regulations for the

definitions of capital categories used in

the deposit insurance assessment

system. Because the leverage ratio in

this final rule is the same leverage ratio

currently being used for assessment

purposes, the separate final rule does

not modify the FDIC’s assessment

methodology. The FDIC does not expect

that any changes to its deposit insurance

assessment regulations pursuant to this

separate final rule will have a material

impact on aggregate assessment revenue

or on rates paid by individual

institutions.

G. Other Affected Regulations

Under the final rule, the community

bank leverage ratio framework

incorporates tier 1 capital. Therefore,

Federal banking regulations outside of

the regulatory capital rule (non-capital

rules) can continue to reference tier 1

capital. The final rule amends standards

referencing total capital so that an

electing banking organization uses tier 1

capital instead of total capital

Regulations

Under the final rule, the community

bank leverage ratio framework

incorporates tier 1 capital. Therefore,

Federal banking regulations outside of

the regulatory capital rule (non-capital

rules) can continue to reference tier 1

capital. The final rule amends standards

referencing total capital so that an

electing banking organization uses tier 1

capital instead of total capital. The final

rule amends standards referencing risk-

weighted assets so that an electing

banking organization uses average total

consolidated assets (i.e., the

denominator of the leverage ratio)

instead of risk-weighted assets.

In addition, certain of the agencies’

non-capital rules refer to ‘‘capital stock

and surplus’’ (or similar items) which is

generally defined as tier 1 capital and

tier 2 capital plus the amount of

allowances for loan and lease losses not

included in tier 2 capital. The final rule

amends standards referencing ‘‘capital

stock and surplus’’ (or similar items) so

that an electing banking organization

uses tier 1 capital plus allowances for

loan and lease losses (or adjusted

allowance for credit losses, as

applicable). Thus, for example, for

purposes of compliance with section

23A of the Federal Reserve Act, the

Board’s Regulation W should provide

that for an electing banking organization

‘‘capital stock and surplus’’ means tier

1 capital plus allowances for loan and

lease losses (or adjusted allowance for

credit losses, as applicable).

H. Effective Date of the Final Rule

The final rule will be effective as of

January 1, 2020, and banking

organizations can utilize the community

bank leverage ratio framework for

purposes of filing their Call Report or

Form FR Y–9C, as applicable, for the

first quarter for 2020 (i.e., as of March

31, 2020)

or loan and

lease losses (or adjusted allowance for

credit losses, as applicable).

H. Effective Date of the Final Rule

The final rule will be effective as of

January 1, 2020, and banking

organizations can utilize the community

bank leverage ratio framework for

purposes of filing their Call Report or

Form FR Y–9C, as applicable, for the

first quarter for 2020 (i.e., as of March

31, 2020). A banking organization’s

compliance with capital requirements

for a quarter prior to the final rule’s

effective date shall be determined

according to the agencies’ generally

applicable rule until the institution has

filed their Call Report Form or FR Y–9C,

as applicable, for the first quarter of

2020 and has indicated whether or not

it has elected the community bank

leverage ratio framework.

IV. Regulatory Analyses

A. Paperwork Reduction Act

The agencies’ capital rule contains

‘‘collections of information’’ within the

meaning of the Paperwork Reduction

Act (PRA) of 1995 (44 U.S.C. 3501–

3521). In accordance with the

requirements of the PRA, the agencies

may not conduct or sponsor, and the

respondent is not required to respond

to, an information collection unless it

displays a currently-valid Office of

Management and Budget (OMB) control

number. The OMB control number for

the OCC is 1557–0318, Board is 7100–

0313, and FDIC is 3064–0153. The

information collections that are part of

the agencies’ capital rule will not be

affected by this final rule and therefore

no final submissions will be made by

the FDIC or OCC to OMB under section

3507(d) of the PRA (44 U.S.C. 3507(d))

and section 1320.11 of the OMB’s

implementing regulations (5 CFR 1320)

in connection with this rulemaking.22

The agencies note that firms that elect

to be subject to the community bank

leverage ratio framework will become

exempt from certain collections of

information that are part of the agencies’

regulatory capital rule

or OCC to OMB under section

3507(d) of the PRA (44 U.S.C. 3507(d))

and section 1320.11 of the OMB’s

implementing regulations (5 CFR 1320)

in connection with this rulemaking.22

The agencies note that firms that elect

to be subject to the community bank

leverage ratio framework will become

exempt from certain collections of

information that are part of the agencies’

regulatory capital rule. Because of

uncertainty regarding the number of

firms that will elect to use the

community bank leverage ratio

framework, the agencies have not

revised their estimates regarding the

annual burden hours associated with

such collections of information to

account for elections to use the

community bank leverage ratio

framework. The agencies will reassess

the annual burden hours associated

with these information collections once

there is more certainty regarding

community bank leverage ratio

elections.

The final rule will also require

changes to the Consolidated Reports of

Condition and Income (Call Reports)

(FFIEC 031, FFIEC 041, and FFIEC 051)

and the Consolidated Financial

Statements for Holding Companies (FR

Y–9C; OMB No. 7100–0128 (Board)),

which will be addressed in one or more

separate Federal Register notices.

B. Regulatory Flexibility Act

OCC: The Regulatory Flexibility Act

(RFA), 5 U.S.C. 601 et seq., requires an

agency either to provide a final

regulatory flexibility analysis with a

final rule for which a general notice of

proposed rulemaking is required or to

certify that the final rule will not have

a significant economic impact on a

substantial number of small entities.

The U.S. Small Business Administration

(SBA) establishes size standards that

define which entities are small

businesses for purposes of the RFA.23

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required or to

certify that the final rule will not have

a significant economic impact on a

substantial number of small entities.

The U.S. Small Business Administration

(SBA) establishes size standards that

define which entities are small

businesses for purposes of the RFA.23

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www.sba.gov/sites/default/files/files/Size_

Standards_Table.pdf.

24 See 13 CFR 121.201.

25 See ‘‘A Guide for Government Agencies; How

to Comply with the Regulatory Flexibility Act,’’ pp.

18–20 (Aug. 2017), available at https://

www.sba.gov/sites/default/files/advocacy/How-to-

Comply-with-the-RFA-WEB.pdf.

26 The OCC bases its estimate of the number of

small entities on the SBA’s size thresholds for

commercial banks and savings institutions, and

trust companies, which are $600 million and $41.5

million, respectively. Consistent with the General

Principles of Affiliation 13 CFR 121.103(a), the OCC

counts the assets of affiliated financial institutions

when determining if the OCC should classify an

OCC-supervised institution a small entity. The OCC

uses December 31, 2017, to determine size because

a ‘‘financial institution’s assets are determined by

averaging the assets reported on its four quarterly

financial statements for the preceding year.’’ See

footnote 8 of the U.S. Small Business

Administration’s Table of Size Standards.

27 The agencies intend to separately seek

comment on the proposed changes to regulatory

filings for qualifying community banking

organizations that elect to use the community bank

leverage ratio framework.

28 To estimate wages, the OCC reviewed May

2018 data for wages (by industry and occupation)

from the U.S. Bureau of Labor Statistics (BLS) for

credit intermediation and related activities

excluding non-depository credit intermediaries

(NAICS 5220A1)

d changes to regulatory

filings for qualifying community banking

organizations that elect to use the community bank

leverage ratio framework.

28 To estimate wages, the OCC reviewed May

2018 data for wages (by industry and occupation)

from the U.S. Bureau of Labor Statistics (BLS) for

credit intermediation and related activities

excluding non-depository credit intermediaries

(NAICS 5220A1). To estimate compensation costs

associated with the rule, the OCC uses $114 per

hour, which is based on the average of the 90th

percentile for nine occupations adjusted for

inflation (2.8 percent as of Q1 2019, according to

the BLS), plus an additional 33.2 percent for

benefits (based on the percent of total compensation

allocated to benefits as of Q4 2018 for NAICS 522:

Credit intermediation and related activities).

29 See 13 CFR 121.201. Effective August 19, 2019,

the Small Business Administration revised the size

standards for banking organizations to $600 million

in assets from $550 million in assets. 84 FR 34261

(July 18, 2019).

30 In general, the Board’s capital rule only applies

to bank holding companies and savings and loan

holding companies that are not subject to the

Board’s Small Bank Holding Company and Savings

and Loan Holding Company Policy Statement,

which applies to bank holding companies and

savings and loan holding companies with less than

$3 billion in total assets that also meet certain

additional criteria. Very few bank holding

companies and savings and loan holding companies

that are small entities would be impacted by the

final rule because very few such entities are subject

to the Board’s capital rule.

Under regulations issued by the SBA,

the size standard to be considered a

small business for banking entities

subject to the proposed rule is $600

million or less in consolidated assets.24

Under 5 U.S.C

olding

companies and savings and loan holding companies

that are small entities would be impacted by the

final rule because very few such entities are subject

to the Board’s capital rule.

Under regulations issued by the SBA,

the size standard to be considered a

small business for banking entities

subject to the proposed rule is $600

million or less in consolidated assets.24

Under 5 U.S.C. 605(b), this analysis is

not required if an agency certifies that

the rule will not have a significant

economic impact on a substantial

number of small entities and publishes

its certification and a brief explanatory

statement in the Federal Register along

with its rule.

Pursuant to the RFA, the OCC

specifically considers (a) whether the

final rule is likely to impact a

substantial number of small entities;

and (b) whether the economic impact on

a substantial number of small entities is

significant. To measure whether a rule

would have a ‘‘significant economic

impact,’’ the OCC focuses on the

potential costs of the rule on OCC-

supervised small entities, consistent

with guidance on the RFA published by

the Office of Advocacy of the SBA.25 As

of December 31, 2017, the OCC

supervised approximately 898 small

entities.26

Although the minimum required

capital under the community bank

leverage ratio framework will, in most

cases, be greater than that required for

the generally applicable risk-based and

leverage capital requirements, banks are

not required to opt into the community

bank leverage ratio framework. In

addition, banks that do elect to use the

community bank leverage ratio

framework may, at any time, stop using

the community bank leverage ratio

framework

k

leverage ratio framework will, in most

cases, be greater than that required for

the generally applicable risk-based and

leverage capital requirements, banks are

not required to opt into the community

bank leverage ratio framework. In

addition, banks that do elect to use the

community bank leverage ratio

framework may, at any time, stop using

the community bank leverage ratio

framework. Accordingly, the final rule

does not represent a regulatory increase

in minimum regulatory capital

requirements, and the primary cost to

institutions for implementing the final

rule will be administrative costs

associated with required updates to

their capital reporting procedures and

reports.27

Banks that elect to use the community

bank leverage ratio framework will have

to make updates to their capital

reporting procedures and reports. Banks

will also have to make updates to

existing policies and procedures to

ensure compliance with regulations that

will be affected by the final rule (e.g.,

lending limits). The total impact

associated with the final rule is the

estimated annual tax benefit minus the

compliance costs of modifying policies

and procedures. The OCC estimates that

each institution will spend no more

than 160 hours to modify their policies

and procedures. To estimate costs, the

OCC uses a compensation rate of $114

per hour.28 Therefore, the OCC

estimates the cost per institution will

not exceed $18,240 (160 hours × $114

per hour).

In general, the OCC classifies the

economic impact of expected cost (to

comply with a rule) on an individual

bank as significant if the total estimated

monetized costs in one year are greater

than (1) 5 percent of the bank’s total

annual salaries and benefits or (2) 2.5

percent of the bank’s total annual non-

interest expense. Based on the above

criteria, the estimated cost of the rule

could impose a significant economic

impact at 19 of the 898 small entities if

they all elected to opt into the

community bank leverage ratio

framework

d

monetized costs in one year are greater

than (1) 5 percent of the bank’s total

annual salaries and benefits or (2) 2.5

percent of the bank’s total annual non-

interest expense. Based on the above

criteria, the estimated cost of the rule

could impose a significant economic

impact at 19 of the 898 small entities if

they all elected to opt into the

community bank leverage ratio

framework. The OCC uses 5 percent to

determine a substantial number of small

entities. Approximately 2 percent (19/

898 = 2.1%) of small entities could be

significantly impacted by the rule,

which is not a substantial number of

small entities.

Therefore, the OCC certifies that the

final rule will not have a significant

economic impact on a substantial

number of OCC-supervised small

entities.

Board: An initial regulatory flexibility

analysis (IRFA) was included in the

proposal in accordance with section 3(a)

of the Regulatory Flexibility Act (RFA),

5 U.S.C. 601 et seq. (RFA). In the IRFA,

the Board requested comment on the

effect of the proposed rule on small

entities and on any significant

alternatives that would reduce the

regulatory burden on small entities. The

Board did not receive any comments on

the IRFA. The RFA requires an agency

to prepare a final regulatory flexibility

analysis (FRFA) unless the agency

certifies that the rule will not, if

promulgated, have a significant

economic impact on a substantial

number of small entities. In accordance

with section 3(a) of the RFA, the Board

has reviewed the final regulation. Based

on its analysis, and for the reasons

stated below, the Board certifies that the

rule will not have a significant

economic impact on a substantial

number of small entities

tifies that the rule will not, if

promulgated, have a significant

economic impact on a substantial

number of small entities. In accordance

with section 3(a) of the RFA, the Board

has reviewed the final regulation. Based

on its analysis, and for the reasons

stated below, the Board certifies that the

rule will not have a significant

economic impact on a substantial

number of small entities.

Under regulations issued by the Small

Business Administration, a small entity

includes a bank, bank holding company,

or savings and loan holding company

with assets of $600 million or less and

trust companies with total assets of

$41.5 million or less (small banking

organization).29 On average since the

second quarter of 2018, there were

approximately 2,976 small bank holding

companies, 133 small savings and loan

holding companies, and 555 small state

member banks.

As discussed, the Board is issuing this

final rule to provide a simple measure

of capital adequacy for certain

community banking organizations.

Under the final rule, depository

institutions and depository institution

holding companies that have less than

$10 billion in total consolidated assets

and meet other qualifying criteria,

including a leverage ratio (equal to tier

1 capital divided by average total

consolidated assets) of greater than 9

percent, will be eligible to opt into the

community bank leverage ratio

framework and, as a result, will not be

required to calculate the risk-based

capital ratios under the generally

applicable capital rule.30

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l divided by average total

consolidated assets) of greater than 9

percent, will be eligible to opt into the

community bank leverage ratio

framework and, as a result, will not be

required to calculate the risk-based

capital ratios under the generally

applicable capital rule.30

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31 5 U.S.C. 601 et seq.

32 The SBA defines a small banking organization

as having $600 million or less in assets, where an

organization’s ‘‘assets are determined by averaging

the assets reported on its four quarterly financial

statements for the preceding year.’’ See 13 CFR

121.201 (as amended, by 84 FR 34261, effective

August 19, 2019). In its determination, the ‘‘SBA

counts the receipts, employees, or other measure of

size of the concern whose size is at issue and all

of its domestic and foreign affiliates.’’ See 13 CFR

121.103. Following these regulations, the FDIC uses

a covered entity’s affiliated and acquired assets,

averaged over the preceding four quarters, to

determine whether the covered entity is ‘‘small’’ for

the purposes of RFA.

33 Public Law 111–203, 124 Stat. 1376.

34 Public Law 115–174, 132 Stat. 1296.

35 Consolidated Reports of Condition and Income

for the quarter ending March 31, 2019.

36 With the additional capital conservation buffer

requirements, the pre-statute baseline risk-based

capital thresholds are 7 percent for common equity

tier 1 capital, 8.5 percent for tier 1 capital, and 10.5

percent for total capital.

Although the final rule would provide

some direct reduction in compliance

burden associated with the capital rule,

much of that reduction of compliance

burden would be achieved through a

separate notice to amend the regulatory

reports associated with the capital rule

esholds are 7 percent for common equity

tier 1 capital, 8.5 percent for tier 1 capital, and 10.5

percent for total capital.

Although the final rule would provide

some direct reduction in compliance

burden associated with the capital rule,

much of that reduction of compliance

burden would be achieved through a

separate notice to amend the regulatory

reports associated with the capital rule.

The Board does not expect that the final

rule will result in a material change in

the level of capital maintained by small

banking organizations because (i) the

framework is optional and (ii) a

substantial majority of small banking

organizations maintain capital in excess

of both the generally applicable capital

rule and the threshold established under

the final rule. A small number of firms

may face reduced capital requirements

due to electing to use the community

bank leverage ratio framework rather

than the existing risk-based and leverage

capital ratio framework. For example,

the Board estimates that 454 small state

member banks would be eligible for the

community bank leverage ratio

framework and that 4 of these small

state member may face less stringent

capital requirements as a result. The

Board does not expect the rule to have

a significant economic impact on a

substantial number of small entities.

FDIC: The RFA generally requires

that, in connection with a final

rulemaking, an agency prepare and

make available for public comment a

final regulatory flexibility analysis

describing the impact of the proposed

rule on small entities.31 However, a

regulatory flexibility analysis is not

required if the agency certifies that the

final rule will not have a significant

economic impact on a substantial

number of small entities

t, in connection with a final

rulemaking, an agency prepare and

make available for public comment a

final regulatory flexibility analysis

describing the impact of the proposed

rule on small entities.31 However, a

regulatory flexibility analysis is not

required if the agency certifies that the

final rule will not have a significant

economic impact on a substantial

number of small entities. The SBA has

defined ‘‘small entities’’ to include

banking organizations with total assets

of less than or equal to $600 million that

are independently owned and operated

or owned by a holding company with

less than or equal to $600 million in

total assets.32 Generally, the FDIC

considers a significant effect to be a

quantified effect in excess of 5 percent

of total annual salaries and benefits per

institution, or 2.5 percent of total non-

interest expenses. The FDIC believes

that effects in excess of these thresholds

typically represent significant effects for

FDIC-supervised institutions.

For the reasons described below, the

FDIC believes that the final rule will not

have a significant economic impact on

a substantial number of small entities.

Nevertheless, the FDIC has conducted

and is providing a final regulatory

flexibility analysis.

1. The Need for, and Objectives of, the

Rule

The policy objective of the proposed

rule is to conform the FDIC’s regulations

to the statutory language established by

the Act. On May 24, 2018, the Act

amended provisions in the Dodd-Frank

Wall Street Reform and Consumer

Protection Act 33 as well as certain other

statutes administered by the agencies.34

Section 201 of the Act, titled ‘‘Capital

Simplification for Qualifying

Community Banks,’’ directs the agencies

to develop a community bank leverage

ratio (community bank leverage ratio) of

not less than 8 percent and not more

than 10 percent for qualifying

community banks

Wall Street Reform and Consumer

Protection Act 33 as well as certain other

statutes administered by the agencies.34

Section 201 of the Act, titled ‘‘Capital

Simplification for Qualifying

Community Banks,’’ directs the agencies

to develop a community bank leverage

ratio (community bank leverage ratio) of

not less than 8 percent and not more

than 10 percent for qualifying

community banks. The Act defines a

qualifying community banking

organization as a depository institution

or depository institution holding

company with total consolidated assets

of less than $10 billion.

2. The Significant Issues Raised by the

Public Comments in Response to the

Initial Regulatory Flexibility Analysis

No significant issues were raised by

the public comments in response to the

initial regulatory flexibility analysis.

3. Response of the Agency to Any

Comments Filed by the Chief Counsel

for Advocacy of the Small Business

Administration in Response to the

Proposed Rule

No comments were filed by the Chief

Counsel for Advocacy of the Small

Business Administration in response to

the proposed rule.

4. A Description of and an Estimate of

the Number of Small Entities to Which

the Rule Will Apply or an Explanation

of Why No Such Estimate Is Available

As of March 31, 2019, the FDIC

supervised 3,465 institutions, of which

2,705 are considered small entities for

the purposes of RFA. Of these FDIC-

supervised small entities, 2,297 (85

percent) meet or exceed the

qualifications for adopting the

community bank leverage ratio

framework, as delineated above in

Section III.A.35

Adoption of the community bank

leverage ratio framework is voluntary so

it is uncertain how many small, FDIC-

supervised entities that qualify will

choose to adopt. Each qualifying entity

must weigh the benefits of not being

subject to risk-based capital

requirements against the costs of

adhering to the higher leverage ratio

requirements under the community

bank leverage ratio framework

Adoption of the community bank

leverage ratio framework is voluntary so

it is uncertain how many small, FDIC-

supervised entities that qualify will

choose to adopt. Each qualifying entity

must weigh the benefits of not being

subject to risk-based capital

requirements against the costs of

adhering to the higher leverage ratio

requirements under the community

bank leverage ratio framework. As of

March 2019, 237 (9 percent of) small,

FDIC-supervised institutions would

experience a net decrease in required

capital holdings as a result of qualifying

for and adopting the community bank

leverage ratio framework. For purposes

of this analysis, the FDIC assumes that

these 237 small, FDIC-supervised

institutions would adopt the community

bank leverage ratio framework and

therefore be affected by the final rule. In

order to assess the maximum potential

effects of the proposed rule, this

analysis also calculates the expected

effects assuming that all 2,297 small,

FDIC-supervised institutions that

qualify would adopt the community

bank leverage ratio framework.

5. A Description of the Projected

Reporting, Recordkeeping and Other

Compliance Requirements of the Rule

This analysis considers benefits and

costs relative to a pre-statutory baseline

in which qualifying institutions must

maintain a tier 1 leverage ratio of five

percent, a tier 1 risk-based capital ratio

of eight percent, a common equity tier

1 ratio of 6.5 percent and a total capital

ratio of 10 percent in order to be

deemed well capitalized for purposes of

Prompt Corrective Action

e Rule

This analysis considers benefits and

costs relative to a pre-statutory baseline

in which qualifying institutions must

maintain a tier 1 leverage ratio of five

percent, a tier 1 risk-based capital ratio

of eight percent, a common equity tier

1 ratio of 6.5 percent and a total capital

ratio of 10 percent in order to be

deemed well capitalized for purposes of

Prompt Corrective Action. Pursuant to

the capital conservation buffer that is

part of the Basel III rule, institutions

must also maintain an additional 0.5

percentage points of risk-weighted

assets above the risk-based well-

capitalized thresholds to avoid potential

limitations on dividends and other

capital distributions.36 Under the final

rule, in contrast, qualifying institutions

would have the option to operate under

a 9 percent community bank leverage

ratio framework and not be subject to

risk-based capital requirements.

As previously discussed, 241 (9

percent of) small, FDIC-supervised

institutions would experience a net

decrease in required capital holdings as

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

37 Defined as the annualized net interest income

as a percent of average earning assets, as reported

on schedule RI. For reference, the average net

interest margin was 3.9 percent for small, FDIC-

insured institutions, for the quarter ending March

31, 2019.

38 Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999).

a result of qualifying for and adopting

the community bank leverage ratio

framework. For purposes of this

analysis, the FDIC assumes that these

241 small, FDIC-supervised institutions

would adopt the community bank

leverage ratio framework and therefore

be affected by the final rule

, for the quarter ending March

31, 2019.

38 Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999).

a result of qualifying for and adopting

the community bank leverage ratio

framework. For purposes of this

analysis, the FDIC assumes that these

241 small, FDIC-supervised institutions

would adopt the community bank

leverage ratio framework and therefore

be affected by the final rule. In order to

assess the maximum potential effects of

the proposed rule, this analysis also

calculates the expected effects assuming

that all 2,277 small, FDIC-supervised

institutions that qualify would adopt the

community bank leverage ratio

framework.

No bank will be compelled to raise

capital under the community bank

leverage ratio framework since the

framework is optional. Moreover, as of

March 2019, the 2,277 qualifying small,

FDIC-supervised institutions held

aggregate tier 1 capital in excess of 12

percent of their average assets—well in

excess of both the 5 percent required by

the generally applicable leverage ratio

rules and the 9 percent threshold in the

community bank leverage ratio

framework. Some of the 241 small,

FDIC-supervised banks whose capital

requirements would be reduced under

the community bank leverage ratio

framework might choose to reduce their

capital. However, these 241 banks also

held aggregate tier 1 capital in excess of

12 percent of their average assets,

suggesting that most of them already

have the ability to operate with less

capital but have chosen not to. Given

these facts, the FDIC does not believe

that adopting banks will change their

leverage capital ratios significantly in

response to this rule.

It is possible that the elimination of

risk-based capital requirements by

banks that choose to adopt the rule

would increase their incentives to hold

higher-weighted assets, such as loans

ty to operate with less

capital but have chosen not to. Given

these facts, the FDIC does not believe

that adopting banks will change their

leverage capital ratios significantly in

response to this rule.

It is possible that the elimination of

risk-based capital requirements by

banks that choose to adopt the rule

would increase their incentives to hold

higher-weighted assets, such as loans.

To provide a high-end estimate of the

economic effect for RFA purposes, this

analysis will assume that every adopting

bank responds to the rule by

permanently increasing its loan

balances by 1 percent.

The analysis estimates the annual

economic effect of a 1 percent

permanent increase in loan balances at

adopting banks by multiplying the

increase by the net interest margin

currently being earned by each bank.37

For each of the 237 banks that would

experience a reduction in capital

requirements under the community

bank leverage ratio framework, this

analysis calculates the expected

economic effect to each bank by

multiplying 1 percent of the bank’s loan

balances by its net interest margin.

Under these assumptions, as of March

2019, only six banks would experience

an annual increase in net interest

income that is significant (i.e., greater

than 2.5 percent of their total

noninterest income over the previous

four quarters or 5 percent of their total

salaries and benefits paid over the

previous four quarters). The estimated

aggregate increase in net interest income

totals approximately $600,000. The six

banks would comprise only less than

0.3 percent of the 2,705 small entities

covered by this rule. These effects are

not significant for a substantial number

of small entities

over the previous

four quarters or 5 percent of their total

salaries and benefits paid over the

previous four quarters). The estimated

aggregate increase in net interest income

totals approximately $600,000. The six

banks would comprise only less than

0.3 percent of the 2,705 small entities

covered by this rule. These effects are

not significant for a substantial number

of small entities.

As an estimate of the maximum

potential effects of the rule, the analysis

alternately assumes that all of the 2,297

qualifying small FDIC-supervised banks

that could adopt the framework choose

to do so, and that all increase their loan

balances by 1 percent and earn their

current net interest margin on the new

loans. This analysis results in twelve

banks experiencing an annual increase

in net interest income that is significant

(i.e., greater than 2.5 percent of their

total noninterest income over the

previous four quarters or 5 percent of

their total salaries and benefits paid

over the previous four quarters). The

twelve banks comprise less than 0.54

percent of the 2,705 small entities

covered by this rule. Thus, the plausible

high-end effects are still not significant

for a substantial number of small

entities.

Although the preceding assumptions

and analysis indicate that the rule is

unlikely to have significant economic

effects on a substantial number of small,

FDIC-supervised institutions, the extent

of the rule’s effects on capital and assets

are uncertain. Therefore, the FDIC

believes, but does not certify, that the

final rule will not have a significant

economic impact on a substantial

number of small entities.

There are other non-quantified

economic effects resulting from the

adoption of the community bank

leverage ratio framework, such as

simplicity benefits and compliance cost-

savings from not having to comply with

risk-based capital requirements going

forward

s, but does not certify, that the

final rule will not have a significant

economic impact on a substantial

number of small entities.

There are other non-quantified

economic effects resulting from the

adoption of the community bank

leverage ratio framework, such as

simplicity benefits and compliance cost-

savings from not having to comply with

risk-based capital requirements going

forward. Utilizing the community bank

leverage ratio framework is expected to

reduce reporting costs for small entities.

Opting into the community bank

leverage ratio framework would enable

institutions to eliminate the reporting of

many line items in schedule RC–R of

their Call Reports, resulting in a

reduction in reporting costs for

institutions. Depository institutions also

may benefit from reduced reporting

costs because by being able to employ

those resources in ways the institution

believes is more beneficial. The FDIC

does not have a reasonable basis for

quantifying the compliance cost savings

associated with the rule, but does not

believe they will be significant for a

substantial number of small entities.

The quantified economic effects are

expected to be significant for less than

half of a percent of small, FDIC-

supervised institutions covered by this

rule. Even assuming broad adoption

rates and an increase in lending by all

adopting institutions, the quantified

economic effects are only significant for

less than half of a percent of small,

FDIC-supervised institutions.

6. A Description of the Steps the Agency

Has Taken To Minimize the Significant

Economic Impact on Small Entities

As described above, the FDIC does not

believe this rule will have a significant

economic impact on a substantial

number of small entities. Further, since

the election of the community bank

leverage ratio is voluntary, the impacts

are expected to be beneficial for

institutions that adopt it.

The agencies considered alternative

calibrations, such as 8 percent

nomic Impact on Small Entities

As described above, the FDIC does not

believe this rule will have a significant

economic impact on a substantial

number of small entities. Further, since

the election of the community bank

leverage ratio is voluntary, the impacts

are expected to be beneficial for

institutions that adopt it.

The agencies considered alternative

calibrations, such as 8 percent. As

discussed in Section III.C however, the

agencies believe that a 9 percent

calibration, with complementary

qualifying criteria for asset size, off-

balance sheet assets, and trading assets

and liabilities, should generally

maintain the current level of regulatory

capital held by electing banking

organizations while maintaining the

quality and quantity of regulatory

capital in the banking system consistent

with the agencies’ safety-and-soundness

goals, while also supporting the

agencies’ goals of reducing regulatory

burden for as many community banking

organizations as possible. For example,

even though an 8 percent leverage ratio

would allow more banking

organizations to opt into the community

bank leverage ratio framework it could

incentivize a large number of qualifying

community banking organizations to

hold less regulatory capital than they do

today.

C. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 38 requires the Federal

banking agencies to use plain language

in all proposed and final rules

published after January 1, 2000. The

agencies have sought to present the final

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s regulatory capital than they do

today.

C. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 38 requires the Federal

banking agencies to use plain language

in all proposed and final rules

published after January 1, 2000. The

agencies have sought to present the final

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

39 12 U.S.C. 4802(a).

40 12 U.S.C. 4802.

41 5 U.S.C. 801 et seq.

42 5 U.S.C. 801(a)(3).

43 5 U.S.C. 804(2).

rule in a simple and straightforward

manner, and did not receive any

comments on the use of plain language.

D. OCC Unfunded Mandates Reform Act

of 1995

The OCC analyzed the final rule

under the factors set forth in the

Unfunded Mandates Reform Act of 1995

(UMRA) (2 U.S.C. 1532). Under this

analysis, the OCC considered whether

the proposed rule includes a Federal

mandate that may result in the

expenditure by State, local, and Tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year (adjusted for inflation).

Because the rule does not specifically

require banks to modify their policies

and procedures, the OCC has

determined that there are no

expenditures for the purposes of UMRA.

Therefore, the OCC concludes that the

final rule will not result in an

expenditure of $100 million or more

annually by state, local, and tribal

governments, or by the private sector.

E

year (adjusted for inflation).

Because the rule does not specifically

require banks to modify their policies

and procedures, the OCC has

determined that there are no

expenditures for the purposes of UMRA.

Therefore, the OCC concludes that the

final rule will not result in an

expenditure of $100 million or more

annually by state, local, and tribal

governments, or by the private sector.

E. Riegle Community Development and

Regulatory Improvement Act of 1994

Pursuant to section 302(a) of the

Riegle Community Development and

Regulatory Improvement Act

(RCDRIA),39 in determining the effective

date and administrative compliance

requirements for new regulations that

impose additional reporting, disclosure,

or other requirements on insured

depository institutions (IDIs), each

Federal banking agency must consider,

consistent with principles of safety and

soundness and the public interest, any

administrative burdens that such

regulations would place on depository

institutions, including small depository

institutions, and customers of

depository institutions, as well as the

benefits of such regulations. In addition,

section 302(b) of RCDRIA requires new

regulations and amendments to

regulations that impose additional

reporting, disclosures, or other new

requirements on IDIs generally to take

effect on the first day of a calendar

quarter that begins on or after the date

on which the regulations are published

in final form.40

The Federal banking agencies

considered the administrative burdens

and benefits of the rule and its elective

framework in determining its effective

date and administrative compliance

requirements. As such, the final rule

will be effective on January 1, 2020.

F

on the first day of a calendar

quarter that begins on or after the date

on which the regulations are published

in final form.40

The Federal banking agencies

considered the administrative burdens

and benefits of the rule and its elective

framework in determining its effective

date and administrative compliance

requirements. As such, the final rule

will be effective on January 1, 2020.

F. The Congressional Review Act

For purposes of Congressional Review

Act, the OMB makes a determination as

to whether a final rule constitutes a

‘‘major’’ rule.41 If a rule is deemed a

‘‘major rule’’ by the Office of

Management and Budget (OMB), the

Congressional Review Act generally

provides that the rule may not take

effect until at least 60 days following its

publication.42

The Congressional Review Act defines

a ‘‘major rule’’ as any rule that the

Administrator of the Office of

Information and Regulatory Affairs of

the OMB finds has resulted in or is

likely to result in (A) an annual effect

on the economy of $100,000,000 or

more; (B) a major increase in costs or

prices for consumers, individual

industries, Federal, State, or local

government agencies or geographic

regions, or (C) significant adverse effects

on competition, employment,

investment, productivity, innovation, or

on the ability of United States-based

enterprises to compete with foreign-

based enterprises in domestic and

export markets.43 The OMB has

determined that the final rule is not a

‘‘major rule’’ within the meaning of the

Congressional Review Act. As required

by the Congressional Review Act, the

agencies will submit the final rule and

other appropriate reports to Congress

and the Government Accountability

Office for review.

List of Subjects

12 CFR Part 1

Banks, Banking, National banks,

Reporting and recordkeeping

requirements, Securities.

12 CFR Part 3

Administrative practice and

procedure, Federal Reserve System,

National banks, Reporting and

recordkeeping requirements

the

agencies will submit the final rule and

other appropriate reports to Congress

and the Government Accountability

Office for review.

List of Subjects

12 CFR Part 1

Banks, Banking, National banks,

Reporting and recordkeeping

requirements, Securities.

12 CFR Part 3

Administrative practice and

procedure, Federal Reserve System,

National banks, Reporting and

recordkeeping requirements.

12 CFR Part 5

Administrative practice and

procedure, National banks, Reporting

and recordkeeping requirements,

Securities.

12 CFR Part 6

Federal Reserve System, National

banks.

12 CFR Part 23

National banks.

12 CFR Part 24

Community development, Credit,

Investments, Low and moderate income

housing, National banks, Reporting and

recordkeeping requirements, Rural

areas, Small businesses.

12 CFR Part 32

National banks, Reporting and

recordkeeping requirements.

12 CFR Part 34

Mortgages, National banks, Reporting

and recordkeeping requirements.

12 CFR Part 160

Consumer protection, Investments,

Manufactured homes, Mortgages,

Reporting and recordkeeping

requirements, Savings associations,

Securities.

12 CFR Part 192

Reporting and recordkeeping

requirements, Savings associations,

Securities.

12 CFR Part 206

Banks, Banking, Interbank liability,

Lending limits, Savings associations.

12 CFR Part 208

Confidential business information,

Crime, Currency, Federal Reserve

System, Mortgages, Reporting and

recordkeeping requirements, Securities.

12 CFR Part 211

Exports, Federal Reserve System,

Foreign banking, Holding companies,

Investments, Reporting and

recordkeeping requirements.

12 CFR Part 215

Credit, Penalties, Reporting and

recordkeeping requirements.

12 CFR Part 217

Administrative practice and

procedure, Banks, Banking, Holding

companies, Reporting and

recordkeeping requirements, Securities.

12 CFR Part 223

Banks, Banking, Federal Reserve

System

ral Reserve System,

Foreign banking, Holding companies,

Investments, Reporting and

recordkeeping requirements.

12 CFR Part 215

Credit, Penalties, Reporting and

recordkeeping requirements.

12 CFR Part 217

Administrative practice and

procedure, Banks, Banking, Holding

companies, Reporting and

recordkeeping requirements, Securities.

12 CFR Part 223

Banks, Banking, Federal Reserve

System.

12 CFR Part 225

Administrative practice and

procedure, Banks, Banking, Federal

Reserve System, Holding companies,

Reporting and recordkeeping

requirements, Securities.

12 CFR Part 238

Savings and loan holding companies

(Regulation LL).

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Federal Register / Vol. 84, No. 219 / Wednesday, November 13, 2019 / Rules and Regulations

12 CFR Part 251

Administrative practice and

procedure, Banks, Banking,

Concentration limit, Federal Reserve

System, Holding companies, Reporting

and recordkeeping requirements,

Securities.

12 CFR Part 303

Administrative practice and

procedure, Bank deposit insurance,

Banks, Banking, Reporting and

recordkeeping requirements, State non-

member banks, Savings associations.

12 CFR Part 324

Administrative practice and

procedure, Banks, Banking, Capital

adequacy, Reporting and recordkeeping

requirements, State non-member banks,

Savings associations.

12 CFR Part 337

Banks, Banking, Reporting and

recordkeeping requirements, Securities.

12 CFR Part 347

Authority delegations (Government

agencies), Bank deposit insurance,

Banks, Banking, Credit, Foreign

banking, Investments, Reporting and

recordkeeping requirements, U.S.

Investments abroad.

12 CFR Part 362

Administrative practice and

procedure, Authority delegations

(Government agencies), Bank deposit

insurance, Banks, Banking, Investments,

Reporting and recordkeeping

requirements.

12 CFR Part 365

Banks, Banking, Mortgages

ies), Bank deposit insurance,

Banks, Banking, Credit, Foreign

banking, Investments, Reporting and

recordkeeping requirements, U.S.

Investments abroad.

12 CFR Part 362

Administrative practice and

procedure, Authority delegations

(Government agencies), Bank deposit

insurance, Banks, Banking, Investments,

Reporting and recordkeeping

requirements.

12 CFR Part 365

Banks, Banking, Mortgages.

12 CFR Part 390

Administrative practice and

procedure, Advertising, Aged, Civil

rights, Conflict of interests, Credit,

Crime, Equal employment opportunity,

Fair housing, Government employees,

Individuals with disabilities, Reporting

and recordkeeping requirements,

Savings associations.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Chapter I

Author

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