Regulators Adopt New Capital Rules

Community banks will need to evaluate capital requirements after regulators adopted new capital rules recently. The Federal Reserve Board approved on July 2 a final rule that implements the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. On July 9, the Federal Deposit Insurance Corporation (FDIC) Board of Directors approved a Regulatory Capital Interim Final Rule, and the Office of the Comptroller of the Currency approved a final capital rule identical in substance to the final rules issued by the Federal Reserve Board. The final rules were revised with selected changes from the original June 2012 proposals.

Community banks will begin the transition to the new rules on Jan. 1, 2015. Some of the rules will phase in over time. The FDIC did include a "New Capital Rule Community Bank Guide" with its rule changes. The guide discusses the changes related to the June 2012 proposal's treatment of residential mortgage exposures, accumulated other comprehensive income and non-qualifying capital instruments and Tier 1 Capital. It also provides a summary of the major changes from the current general risk-based capital rules. The guide, along with the regulatory capital interim final rule, can be found on the FDIC website at www.fdic.gov/regulations/capital/index.html. The Federal Reserve Board's final rule can be found at www.federalreserve.gov/newsevents/press/bcreg/20130702a.htm.

Community banks will need to evaluate these future changes and their impact on their financial institution.

If you have any questions on the new rules, please contact your local Eide Bailly professional.