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Subject: Permanent Floor for the Advanced Approaches Risk-Based Capital Rule
Date: July 8, 2011
To: Chief Executive Officers of All National Banks, Federal Branches and Agencies, Department and Division Heads, and All Examining Personnel
Description: Final Rule
The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (the federal banking agencies) have published a final rule to establish a permanent floor for the advanced approaches risk-based capital rules (applicable to the largest internationally active banking organizations), which is consistent with section 171(b)(2) of the Dodd-Frank Act.
Section 171(b)(2) of the Dodd-Frank Act states that the agencies shall establish minimum risk-based capital requirements applicable to insured depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Federal Reserve (i.e., systemically important financial institutions, or SIFIs). In particular, section 171(b)(2) specifies that the minimum risk-based capital requirements established under section 171 shall not be less than the "generally applicable" risk-based capital requirements for depository institutions, which shall serve as a floor for any capital requirements the federal banking agencies may require.
SUMMARYThe final rule amends the federal banking agencies' advanced approaches risk-based capital regulations to eliminate the transitional floor provisions and replace them with a permanent floor. Under the final rule, each national bank subject to the advanced approaches risk-based capital rules must calculate its required minimum risk-based capital under both the general risk-based capital rules and the advanced approaches rules. Each quarter, an advanced approaches bank will have to calculate its minimum Tier 1 and total risk-based capital ratios under each set of rules, compare the results, and use the lower of the two Tier 1 risk-based capital ratios and the lower of the two total risk-based capital ratios to determine compliance with its minimum risk-based capital requirements, which are set forth at 12 CFR part 3, appendix C, section 3, for national banks.
The final rule was published in the Federal Register on June 28, 2011.
You may direct questions or comments to Mark Ginsberg, Risk Expert, Capital Policy Division, at (202) 874–5070; or Carl Kaminski, Senior Attorney, Legislative and Regulatory Activities Division, at (202) 874–5090.
Julie L. Williams