Federal banking regulators are developing a proposal that would simplify the capital rules to reduce regulatory burden, particularly for community banks.
Following a recent review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act, the agencies — the Federal Reserve Board, Office of the Comptroller of Currency, and the Federal Deposit Insurance Corp. — proposed to simplify the capital rules’ treatment of mortgage servicing assets and other items. However, under the current capital rules, the transitional treatment for those items is scheduled to be replaced with a different treatment on Jan. 1, 2018.
Thus, the agencies are looking to extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights. The extension would apply to banking organizations that are not subject to the agencies’ advanced approaches capital rules.
Banking organizations that are not subject to the advanced approaches capital rules are generally those with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure. Firms that are subject to the advanced approaches rules would not be affected by this proposal and would remain subject to the fully phased-in requirements for these exposures beginning on Jan. 1, 2018.
Comments on this proposal will be accepted for 30 days after publication in the Federal Register. The agencies anticipate proposing the simplified regulatory capital requirements in the coming months.