[Federal Register Volume 84, Number 219 (Wednesday, November 13, 2019)]
[Rules and Regulations]
[Pages 61804-61808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23467]
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DEPARTMENT OF TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket ID OCC-2017-0018]
RIN 1557-AE70
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R-1576]
RIN 7100-AE74
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AF18
Regulatory Capital Rule: Simplifications to the Capital Rule
Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act
of 1996; Revised Effective Date
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, announcement of effective date, early adoption.
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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 permits insured depository institutions and depository
institution holding companies not subject to the advanced approaches
capital rule to implement certain
[[Page 61805]]
provisions of the final rule titled Regulatory Capital: Simplifications
to the Capital Rule Pursuant to the Economic Growth and Regulatory
Paperwork Reduction Act of 1996, which was issued by the agencies in
July 22, 2019, (Capital Simplifications Final Rule) on January 1, 2020,
rather than April 1, 2020, as initially provided. Consistent with this
approach, the transitions provisions of the regulatory capital rule are
being amended to provide that banking organizations not subject to the
advanced approaches capital rule will be permitted to implement the
Capital Simplifications Final Rule as of its revised effective date in
the quarter beginning January 1, 2020, or to wait until the quarter
beginning April 1, 2020.
DATES: This rule is effective January 1, 2020. The effective date for
the amendments to 12 CFR 3.21, 3.22, 3.300(b) and (d), 217.21, 217.22,
217.300(b) and (d), 324.21, 324.22, and 324.300(b) and (d) published on
July 22, 2019 (84 FR 35234), is changed from April 1, 2020, to January
1, 2020.
FOR FURTHER INFORMATION CONTACT:
OCC: David Elkes, Risk Expert, or JungSup 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; or Andrew Willis, Lead
Financial Institutions Policy Analyst, (202) 912-4323, Division of
Supervision and Regulation; or Jay Schwarz, Special Counsel (202) 452-
2970; Gillian Burgess, Senior Counsel (202) 736-5564, or Mark Buresh,
Senior Counsel (202) 452-5270, 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,
[email protected]; Michael Maloney, Senior Policy Analyst,
[email protected]; [email protected]; Capital Markets Branch,
Division of Risk Management Supervision, (202) 898-6888; or Michael
Phillips, Counsel, [email protected]; Supervision Branch, Legal
Division, Federal Deposit Insurance Corporation, 550 17th Street NW,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION: 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)
adopted the Simplifications to the Capital Rule Pursuant to the
Economic Growth and Regulatory Paperwork Reduction Act of 1996 (Capital
Simplifications Final Rule) to simplify certain aspects of the capital
rule.\1\ The Capital Simplifications Final Rule is responsive to the
agencies' March 2017 report to Congress pursuant to the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), in which the
agencies committed to meaningfully reduce regulatory burden, especially
on community banking organizations. The key elements of the Capital
Simplifications Final Rule apply solely to banking organizations that
are not subject to the advanced approaches capital rule (non-advanced
approaches banking organizations). Under the Capital Simplifications
Final Rule, non-advanced approaches banking organizations will be
subject to simpler regulatory capital requirements for mortgage
servicing assets, certain deferred tax assets arising from temporary
differences, and investments in the capital of unconsolidated financial
institutions than those currently applied. The Capital Simplifications
Final Rule also simplifies, for non-advanced approaches banking
organizations, the calculation for the amount of capital issued by a
consolidated subsidiary of a banking organization and held by third
parties (sometimes referred to as a minority interest) that is
includable in regulatory capital.
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\1\ See 84 FR 35234 (July 22, 2019).
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The simpler capital requirements described above are implemented
through the Capital Simplifications Final Rule via amendments to 12 CFR
3.21, 3.22, 3.300, 217.21, 217.22, 217.300(b) and (d), 324.21, 324.22,
and 324.300 that were originally effective April 1, 2020. The agencies
initially set an effective date of April 1, 2020, for those amendments
to the capital rule, in part, to give institutions sufficient time to
update their recordkeeping and reporting systems. Subsequent to the
publication of the Capital Simplifications Final Rule, the agencies
received letters from the banking industry groups seeking the ability
to adopt the Capital Simplifications Final Rule earlier than April 1,
2020. After considering these requests, the agencies have determined
that allowing non-advanced approaches banking organizations to
implement the Capital Simplifications Final Rule in the first quarter
of 2020 would be appropriate. Allowing non-advanced approaches banking
organizations to implement the Capital Simplifications Final Rule in
the first quarter of 2020 would permit banking organizations that have
updated their reporting systems to implement the simplifications and
obtain regulatory burden relief one quarter earlier than initially
provided in the Capital Simplifications Final Rule.
The agencies are adopting this direct final rule to permit non-
advanced approaches banking organizations to implement the sections of
the Capital Simplifications Final Rule that were originally effective
on April 1, 2020, beginning on January 1, 2020. Specifically, the
sections in the Capital Simplifications Final Rule that were effective
April 1, 2020, under that rule are now effective January 1, 2020. Non-
advanced approaches banking organizations can elect whether to
implement the changes in the quarter beginning January 1, 2020, or to
implement them in the quarter beginning April 1, 2020. The affected
sections are those related to mortgage servicing assets, certain
deferred tax assets arising from temporary differences, investments in
the capital of unconsolidated financial institutions, and the
calculation of minority interest and will become mandatory as of April
1, 2020. If a non-advanced approaches banking organization elects to
adopt these revisions for the quarter beginning January 1, 2020, it
must adopt all of these revisions for that quarter and thereafter.
Consistent with the Capital Simplifications Final Rule, the transition
provisions adopted by the agencies in November 2017 will cease to apply
to non-advanced approaches banking organizations in the quarter in
which the firm elects to adopt the these portions of the Capital
Simplifications Final Rule.\2\ As a result, non-advanced approaches
banking organizations may choose to begin implementing the capital
treatment under the Capital Simplifications Final Rule for the
reporting period ending on March 31, 2020. All non-advanced approaches
banking organizations must implement the capital treatment under the
Capital Simplifications Final Rule for the reporting period ending on
June 30, 2020.
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\2\ 82 FR 55309 (Nov. 21, 2017).
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[[Page 61806]]
Administrative Law Matters
A. Administrative Procedure Act
The agencies are issuing this direct final rule without prior
notice and the opportunity for public comment and without the 30-day
delayed effective date ordinarily prescribed by the Administrative
Procedure Act (APA).\3\ Pursuant to section 553(b)(B) of the APA,
general notice and the opportunity for public comment are not required
with respect to a rulemaking when an ``agency for good cause finds (and
incorporates the finding and a brief statement of reasons therefor in
the rules issued) that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.'' \4\
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\3\ 5 U.S.C. 553.
\4\ 5 U.S.C. 553(b)(B).
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As discussed above, this direct final rule addresses requests from
banking industry groups to be allowed to comply starting on January 1,
2020, with certain requirements of the Capital Simplifications Final
Rule that otherwise were subject to an effective date of April 1, 2020.
This direct final rule will allow banking organizations to begin
implementing the revised requirements either on January 1, 2020 or
April 1, 2020. Non-advanced approaches banking organizations that
choose not to implement the revised requirements on January 1, 2020,
still will be required to do so beginning April 1, 2020. The agencies
initially set an effective date of April 1, 2020, for those amendments
to the capital rule, in part, to give institutions sufficient time to
update their systems and reporting systems. After the rule was
finalized, the agencies received requests to allow banking
organizations the option to adopt the rule on January 1, 2020, rather
than April 1, 2020, on grounds that early adoption would simplify the
reporting requirements for banking organizations whose systems will be
in place by January 1, 2020, thereby reducing regulatory burden.
The agencies believe that there is good cause to issue this direct
final rule without notice and public procedure because that process
would be unnecessary as the agencies recently issued a final rule after
providing notice and receiving comment from the public. Specifically,
the original administrative record that supports the Capital
Simplifications Final Rule is still pertinent and, as a result, a new
round of notice and comment on the Capital Simplifications Final Rule
is unnecessary. The agencies could have issued the Capital
Simplifications Final Rule with the provisions now being issued in the
current direct final rule. The agencies believe that the implementation
provisions of the current direct final rule are appropriate now given
the feedback from the public since issuance of the Capital
Simplifications Final Rule. In particular, the public feedback has
indicated that many banking organizations would be prepared to
implement the Capital Simplifications Final Rule for the quarter
beginning January 1, 2020. Further, this final rule (1) relieves
burden; (2) does not change any substantive requirements of the Capital
Simplifications Final Rule or impose any new mandates on any banking
organization; and (3) allows, but does not require, banking
organizations to implement the revised requirements in the Capital
Simplifications Final Rule earlier than initially provided.
In addition, the agencies believe that there is good cause
consistent with the public interest to issue this direct final rule
without notice and public procedure. This direct final rule benefits
banking organizations subject to the Capital Simplifications Final Rule
by allowing them to begin complying with the new requirements in the
Capital Simplifications Final Rule one quarter before they become
mandatory, thereby simplifying the reporting requirements for those
banking organizations whose systems will be in place by January 1,
2020. Notably, this direct final rule does not impose any new
requirements or mandatory burdens on any banking organization. Finally,
the agencies believe that there is good cause to issue this direct
final rule without notice and public procedure since it would be
impracticable to request comment given the request for relief is to
begin on January 1, 2020.
The APA also requires a 30-day delayed effective date, except for
(1) substantive rules which grant or recognize an exemption or relieve
a restriction; (2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause.\5\ The agencies
find good cause to publish the direct final rule with an immediate
effective date because the rule grants relief to banking organizations
and because there is good cause for the same reasons set forth above
under the discussion of section 553(b)(B) of the APA. Delaying the
implementation date would deprive banking organizations that are
considering adopting the requirements of the Capital Simplification
Final Rule earlier of the ability to make modifications to their
reporting prior on their preferred effective date.
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\5\ 5 U.S.C. 553(d).
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B. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \6\ requires Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The agencies have sought to present
this direct final rule in a simple and straightforward manner.
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\6\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999).
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C. Paperwork Reduction Act Analysis
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA), 44 U.S.C. 3501-3521, the agencies may not conduct or
sponsor, and a 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 OCC, Board, and FDIC have reviewed
this direct final rule and determined that it does not introduce a new
collection of information pursuant to the PRA.
D. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) does not apply to a rulemaking
when a general notice of proposed rulemaking is not required.\7\ As
noted previously, the agencies are issuing this direct final rule
without notice and public procedure. Accordingly, the RFA's
requirements relating to an initial and final regulatory flexibility
analysis do not apply. Nonetheless, the agencies believe that, with
respect to the entities subject to the direct final rule and within
each agency's respective jurisdiction, the direct final rule would not
have a significant economic impact on a substantial number of small
entities.\8\
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\7\ 5 U.S.C. 603 and 604.
\8\ Under regulations issued by the Small Business
Administration, a small entity includes a depository institution,
bank holding company, or savings and loan holding company with total
assets of $600 million or less and trust companies with total assets
of $41.5 million or less.
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E. 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 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). The OCC has
determined that this rule will not result
[[Page 61807]]
in expenditures by State, local, and Tribal governments, or the private
sector, of $100 million or more in any one year. Accordingly, the OCC
has not prepared a written statement to accompany this rule.
F. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\9\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
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.\10\
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\9\ 12 U.S.C. 4802(a).
\10\ 12 U.S.C. 4802.
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Because the direct final rule would not impose additional
reporting, disclosure, or other requirements on IDIs, section 302 of
the RCDRIA does not apply. In any event, the direct final rule will
take effect on January 1, 2020.
G. 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.\11\ If a rule is deemed a ``major rule'' by the OMB, the
Congressional Review Act generally provides that the rule may not take
effect until at least 60 days following its publication.\12\
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\11\ 5 U.S.C. 801 et seq.
\12\ 5 U.S.C. 801(a)(3).
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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.\13\ As required by the Congressional Review Act, the
agencies will submit the direct final rule and other appropriate
reports to Congress and the Government Accountability Office for
review.
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\13\ 5 U.S.C. 804(2).
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The OMB has determined that the direct final ruleis not a ``major
rule'' within the meaning of the Congressional Review Act.\14\ As
required by the Congressional Review Act, the agencies will submit the
direct final rule and other appropriate reports to Congress and the
Government Accountability Office for review.
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\14\ 5 U.S.C. 801 et seq.
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List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, National banks,
Risk.
12 CFR Part 217
Administrative practice and procedure, Banks, Banking, Capital,
Federal Reserve System, Holding companies.
12 CFR Part 324
Administrative practice and procedure, Banks, Banking, Capital
adequacy, Savings associations, State non-member banks.
Office of the Comptroller of the Currency
For the reasons set out in the joint preamble, 12 CFR part 3 is
amended as follows.
PART 3--CAPITAL ADEQUACY STANDARDS
0
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818,
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
0
2. Section 3.300 is amended by adding paragraph (f) to read as follows:
Sec. 3.300 Transitions.
* * * * *
(f) A national bank or Federal savings association that is not an
advanced approaches national bank or Federal savings association may
apply the treatment under Sec. Sec. 3.21 and 3.22(c)(2), (5), (6), and
(d)(2) applicable to an advanced approaches national bank or Federal
savings association during the calendar quarter beginning January 1,
2020. During the quarter beginning January 1, 2020, a national bank or
Federal savings association that makes such an election must deduct 80
percent of the amount otherwise required to be deducted under Sec.
3.22(d)(2) and must apply a 100 percent risk weight to assets not
deducted under Sec. 3.22(d)(2). In addition, during the quarter
beginning January 1, 2020, a national bank or Federal savings
association that makes such an election must include in its regulatory
capital 20 percent of any minority interest that exceeds the amount of
minority interest includable in regulatory capital under Sec. 3.21 as
it applies to an advanced approaches national bank or Federal savings
association. A national bank or Federal savings association that is not
an advanced approaches national bank or Federal savings association
must apply the treatment under Sec. Sec. 3.21 and 3.22 applicable to a
national bank or Federal savings association that is not an advanced
approaches national bank or Federal savings association beginning April
1, 2020, and thereafter.
* * * * *
Board of Governors of the Federal Reserve System
For the reasons set out in the joint preamble, the Board of
Governors of the Federal Reserve System amends 12 CFR part 217 as
follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
3. The authority citation for part 217 continues to read as follows:
Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a,
1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904,
3906-3909, 4808, 5365, 5368, 5371.
0
4. Section 217.300 is amended by adding paragraph (g) to read as
follows:
Sec. 217.300 Transitions.
* * * * *
(g) A Board-regulated institution that is not an advanced
approaches Board-regulated institution may apply the treatment under
Sec. Sec. 217.21 and 217.22(c)(2), (5), (6), and (d)(2) applicable to
an advanced approaches Board-regulated institution during the calendar
quarter beginning January 1, 2020. During the quarter beginning January
1, 2020, a Board-regulated institution that makes such an election must
deduct 80 percent of the amount otherwise required to be deducted under
Sec. 217.22(d)(2) and must apply a
[[Page 61808]]
100 percent risk weight to assets not deducted under Sec.
217.22(d)(2). In addition, during the quarter beginning January 1,
2020, a Board-regulated institution that makes such an election must
include in its regulatory capital 20 percent of any minority interest
that exceeds the amount of minority interest includable in regulatory
capital under Sec. 217.21 as it applies to an advanced approaches
Board-regulated institution. A Board-regulated institution that is not
an advanced approaches Board-regulated institution must apply the
treatment under Sec. Sec. 217.21 and 217.22 applicable to a Board-
regulated institution that is not an advanced approaches Board-
regulated institution beginning April 1, 2020, and thereafter.
* * * * *
12 CFR Part 324
FEDERAL DEPOSIT INSURANCE CORPORATION
For the reasons set out in the joint preamble, 12 CFR part 324 is
amended as follows.
PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS
0
5. The authority citation for part 324 continues to read as follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233,
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242,
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160,
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386,
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note).
0
6. Effective January 1, 2020, Sec. 324.300 is amended by adding
paragraph (f) to read as follows:
Sec. 324.300 Transitions.
* * * * *
(f) An FDIC-supervised institution that is not an advanced
approaches FDIC-supervised institution may apply the treatment under
Sec. Sec. 324.21 and 324.22(c)(2), (5), (6), and (d)(2) applicable to
an advanced approaches FDIC-supervised institution during the calendar
quarter beginning January 1, 2020. During the quarter beginning January
1, 2020, an FDIC-supervised institution that makes such an election
must deduct 80 percent of the amount otherwise required to be deducted
under Sec. 324.22(d)(2) and must apply a 100 percent risk weight to
assets not deducted under Sec. 324.22(d)(2). In addition, during the
quarter beginning January 1, 2020, an FDIC-supervised institution that
makes such an election must include in its regulatory capital 20
percent of any minority interest that exceeds the amount of minority
interest includable in regulatory capital under Sec. 324.21 as it
applies to an advanced approaches FDIC-supervised institution. An FDIC-
supervised institution that is not an advanced approaches institution
must apply the treatment under Sec. Sec. 324.21 and 324.22 applicable
to an FDIC-supervised institution that is a non-advanced approaches
institution beginning April 1, 2020, and thereafter.
* * * * *
Dated: September 17, 2019.
Joseph M. Otting,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, October 16, 2019
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on September 17, 2019.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2019-23467 Filed 11-12-19; 8:45 am]
BILLING CODE 6210-01-P