[Federal Register Volume 82, Number 164 (Friday, August 25, 2017)]
[Proposed Rules]
[Pages 40495-40503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17822]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 82, No. 164 / Friday, August 25, 2017 / 
Proposed Rules

[[Page 40495]]



DEPARTMENT OF TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID OCC-2017-0012]
RIN 1557-AE 23

FEDERAL RESERVE SYSTEM

12 CFR Part 217

[Regulation Q; Docket No. R-1571]
RIN 7100-AE 83

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3064-AE 63


Regulatory Capital Rules: Retention of Certain Existing 
Transition Provisions for Banking Organizations That Are Not Subject to 
the Advanced Approaches Capital Rules

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: Notice of proposed rulemaking.

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SUMMARY: 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) are 
inviting public comment on a notice of proposed rulemaking (NPR) that 
would extend the current treatment under the regulatory capital rules 
(capital rules) for certain regulatory capital deductions and risk 
weights and certain minority interest requirements, as they apply to 
banking organizations that are not subject to the advanced approaches 
capital rules (non-advanced approaches banking organizations). 
Specifically, for non-advanced approaches banking organizations, the 
agencies propose to extend the current regulatory capital treatment of: 
Mortgage servicing assets; deferred tax assets arising from temporary 
differences that could not be realized through net operating loss 
carrybacks; significant investments in the capital of unconsolidated 
financial institutions in the form of common stock; non-significant 
investments in the capital of unconsolidated financial institutions; 
significant investments in the capital of unconsolidated financial 
institutions that are not in the form of common stock; and common 
equity tier 1 minority interest, tier 1 minority interest, and total 
capital minority interest exceeding the capital rules' minority 
interest limitations. The agencies expect in the near term to issue a 
separate NPR seeking public comment on a proposal to simplify the 
regulatory capital treatment of these items. Providing the proposed 
extension to non-advanced approaches banking organizations for these 
items would avoid potential burden on banking organizations that may be 
subject in the near future to a different regulatory capital treatment 
for these items.

DATES: Comments must be received by September 25, 2017.

ADDRESSES: Comments should be directed to:
    OCC: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments 
through the Federal eRulemaking Portal or email, if possible. Please 
use the title ``Retaining existing transition provisions for certain 
elements of the regulatory capital rules'' to facilitate the 
organization and distribution of the comments. You may submit comments 
by any of the following methods:
    <bullet> Federal eRulemaking Portal--``Regulations.gov'': Go to 
www.regulations.gov. Enter ``Docket ID OCC-2017-0012'' in the Search 
Box and click ``Search.'' Click on ``Comment Now'' to submit public 
comments.
    <bullet> Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#84f6e1e3f7aae7ebe9e9e1eaf0f7c4ebe7e7aaf0f6e1e5f7aae3ebf2"><span class="__cf_email__" data-cfemail="f381969480dd909c9e9e969d8780b39c9090dd8781969280dd949c85">[email protected]</span></a>.
    <bullet> Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
    <bullet> Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Mail Stop 9W-11, Washington, DC 20219.
    <bullet> Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2017-0012'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
    <bullet> Viewing Comments Electronically: Go to 
www.regulations.gov. Enter ``Docket ID OCC-2017-0012'' in the Search 
box and click ``Search.'' Click on ``Open Docket Folder'' on the right 
side of the screen and then ``Comments.'' Comments can be filtered by 
clicking on ``View All'' and then using the filtering tools on the left 
side of the screen.
    <bullet> Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov. Supporting materials may 
be viewed by clicking on ``Open Docket Folder'' and then clicking on 
``Supporting Documents.'' The docket may be viewed after the close of 
the comment period in the same manner as during the comment period.
    <bullet> Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC 
20219. For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700 or, for persons who are deaf or hard of hearing, TTY, (202) 649-
5597. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.
    Board: You may submit comments, identified by Docket No. R-1571 and

[[Page 40496]]

RIN 7100 AE 83, by any of the following methods:
    <bullet> Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#33415654401d505c5e5e565d4740735556575641525f415640564145561d545c45"><span class="__cf_email__" data-cfemail="b7c5d2d0c499d4d8dadad2d9c3c4f7d1d2d3d2c5d6dbc5d2c4d2c5c1d299d0d8c1">[email protected]</span></a>. Include docket 
number and RIN in the subject line of the message.
    <bullet> Fax: (202) 452-3819 or (202) 452-3102.
    <bullet> Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551. All public comments are available from the 
Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons. 
Accordingly, comments will not be edited to remove any identifying or 
contact information. Public comments may also be viewed electronically 
or in paper form in Room 3515, 1801 K Street NW. (between 18th and 19th 
Streets NW.), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on 
weekdays.
    FDIC: You may submit comments, identified by RIN 3064-AE 63 by any 
of the following methods:
    <bullet> Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on 
the Agency Web site.
    <bullet> Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.
    <bullet> Hand Delivered/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street Building (located 
on F Street) on business days between 7:00 a.m. and 5:00 p.m.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#73101c1e1e161d07003335373a305d141c05"><span class="__cf_email__" data-cfemail="d7b4b8babab2b9a3a49791939e94f9b0b8a1">[email protected]</span></a>. Include the RIN 3064-AE 63 on 
the subject line of the message.
    <bullet> Public Inspection: All comments received must include the 
agency name and RIN 3064-AE 63 for this rulemaking. All comments 
received will be posted without change to http://www.fdic.gov/regulations/laws/federal/, including any personal information provided. 
Paper copies of public comments may be ordered from the FDIC Public 
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, 
VA 22226 by telephone at (877) 275-3342 or (703) 562-2200.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Mark Ginsberg, Senior Risk Expert (202) 649-6983; or Benjamin 
Pegg, Risk Expert (202) 649-7146, Capital and Regulatory Policy; or 
Carl Kaminski, Special Counsel (202) 649-5869; or Rima Kundnani, 
Attorney (202) 649-5545, Legislative and Regulatory Activities 
Division, (202) 649-5490, for persons who are deaf or hard of hearing, 
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; Elizabeth MacDonald, 
Manager, (202) 475-6316; Andrew Willis, Supervisory Financial Analyst, 
(202) 912-4323; Sean Healey, Supervisory Financial Analyst, (202) 912-
4611 or Matthew McQueeney, Senior Financial Analyst, (202) 425-2942, 
Division of Supervision and Regulation; or Benjamin McDonough, 
Assistant General Counsel, (202) 452-2036; David W. Alexander, Counsel 
(202) 452-2877, or Mark Buresh, Senior Attorney (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, 
<a href="/cdn-cgi/l/email-protection#c0a2a2afb3a3af80a6a4a9a3eea7afb6"><span class="__cf_email__" data-cfemail="97f5f5f8e4f4f8d7f1f3fef4b9f0f8e1">[email protected]</span></a>; Michael Maloney, Capital Markets Senior Policy 
Analyst, <a href="/cdn-cgi/l/email-protection#214c4c404d4e4f445861474548420f464e57"><span class="__cf_email__" data-cfemail="630e0e020f0c0d061a2305070a004d040c15">[email protected]</span></a>, Capital Markets Branch, Division of Risk 
Management Supervision, (202) 898-6888; or Michael Phillips, Counsel, 
<a href="/cdn-cgi/l/email-protection#7419041c1d18181d04073412101d175a131b02"><span class="__cf_email__" data-cfemail="7b160b13121717120b083b1d1f1218551c140d">[email protected]</span></a>; Catherine Wood, Counsel, <a href="/cdn-cgi/l/email-protection#d2b1b3a5bdbdb692b4b6bbb1fcb5bda4"><span class="__cf_email__" data-cfemail="492a283e26262d092f2d202a672e263f">[email protected]</span></a>; Rachel 
Ackmann, Counsel, <a href="/cdn-cgi/l/email-protection#196b787a7274787777597f7d707a377e766f"><span class="__cf_email__" data-cfemail="502231333b3d313e3e10363439337e373f26">[email protected]</span></a>; Supervision Branch, Legal 
Division, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    In 2013, 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) adopted rules that strengthened the capital requirements 
applicable to banking organizations supervised by the agencies (capital 
rules).\1\ The capital rules include limits on the amount of capital 
that would count toward these regulatory requirements in cases where 
the capital is issued by a consolidated subsidiary of a banking 
organization and not owned by the banking organization (minority 
interest).\2\ Because capital issued at the subsidiary level is not 
always available to absorb losses at the consolidated level, these 
limits prevent highly-capitalized subsidiaries from overstating the 
amount of capital available to absorb losses at the consolidated 
level.\3\ With the goal of strengthening the resiliency of banking 
organizations, the capital rules also require that amounts of mortgage 
servicing assets (MSAs), deferred tax assets arising from temporary 
differences that could not be realized through net operating loss 
carrybacks (temporary difference DTAs), and certain investments in the 
capital of unconsolidated financial institutions above certain 
thresholds be deducted from a banking organization's regulatory 
capital.\4\
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    \1\ Banking organizations covered by the agencies' capital rules 
include national banks, state member banks, state nonmember banks, 
savings associations, and top-tier bank holding companies and 
savings and loan holding companies domiciled in the United States 
not subject to the Board's Small Bank Holding Company Policy 
Statement (12 CFR part 225, appendix C), but excluding certain 
savings and loan holding companies that are substantially engaged in 
insurance underwriting or commercial activities or that are estate 
trusts, or bank holding companies and savings and loan holding 
companies that are employee stock ownership plans. The Board and the 
OCC issued a joint final rule on October 11, 2013 (78 FR 62018) and 
the FDIC issued a substantially identical interim final rule on 
September 10, 2013 (78 FR 55340). In April 2014, the FDIC adopted 
the interim final rule as a final rule with no substantive changes. 
79 FR 20754 (April 14, 2014).
    \2\ See 12 CFR 217.21 (Board); 12 CFR 3.21 (OCC); 12 CFR 324.21 
(FDIC).
    \3\ 12 CFR 217.21 (Board); 12 CFR 3.21 (OCC); 12 CFR 324.21 
(FDIC).
    \4\ See 12 CFR 217.22(c)(4), (c)(5), and (d)(1) (Board); 12 CFR 
3.22(c)(4), (c)(5), and (d)(1) (OCC); 12 CFR 324.22(c)(4), (c)(5), 
and (d)(1) (FDIC). Banking organizations are permitted to net 
associated deferred tax liabilities against assets subject to 
deduction.
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    The capital rules contain transition provisions that phase in 
certain requirements over several years in order to give banking 
organizations sufficient time to adjust and adapt to such 
requirements.\5\ The minority interest limitations in the capital rules 
will become fully effective on January 1, 2018. The deduction 
treatments for investments in the capital of unconsolidated financial 
institutions, MSAs, and temporary difference DTAs are subject to 
transition provisions until December 31, 2017.\6\ Also starting on 
January 1, 2018, the risk weight for MSAs, temporary difference DTAs, 
and significant investments in the capital of unconsolidated financial 
institutions in

[[Page 40497]]

the form of common stock that are not deducted from regulatory capital 
will increase from 100 percent to 250 percent.
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    \5\ 12 CFR 217.300 (Board); 12 CFR 3.300 (OCC); 12 CFR 324.300 
(FDIC).
    \6\ 12 CFR 217.300(b)(4) and (d) (Board); 12 CFR 3.300(b)(4) and 
(d) (OCC); 12 CFR 324.300(b)(4) and (d) (FDIC).
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II. Retaining Certain 2017 Transition Provisions

    Since the issuance of the capital rules in 2013, banking 
organizations and other members of the public have raised concerns 
regarding the regulatory burden, complexity, and costs associated with 
certain aspects of the capital rules, particularly for community 
banking organizations. As explained in the Federal Financial 
Institutions Examination Council's March 2017 Joint Report to Congress 
on the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA 
report), the agencies are developing a proposal to simplify certain 
aspects of the capital rules with the goal of meaningfully reducing 
regulatory burden on community banking organizations while at the same 
time maintaining safety and soundness and the quality and quantity of 
regulatory capital in the banking system (simplifications NPR).\7\
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    \7\ The EGRPRA report stated that such amendments likely would 
include: (a) Simplifying the current regulatory capital treatment 
for MSAs, timing difference DTAs, and holdings of regulatory capital 
instruments issued by financial institutions; and (b) simplifying 
the current limitations on minority interest in regulatory capital. 
See 82 FR 15900 (March 30, 2017).
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    Consistent with that goal and in anticipation of the 
simplifications NPR, the agencies propose to extend certain transition 
provisions currently in the capital rules for banking organizations 
that are not advanced approaches banking organizations (non-advanced 
approaches banking organizations) while the simplifications NPR is 
pending. This extension proposal is referred to as the transitions NPR. 
As such, for non-advanced approaches banking organizations the 
transition provisions for certain items would not be fully phased in. 
The agencies will review the transition provisions again in connection 
with the simplifications NPR.
    The agencies believe the stringency and complexity of the current 
capital rules' treatment for items affected by the transitions NPR 
remains appropriate for banking organizations that are subject to the 
advanced approaches (typically those with consolidated assets greater 
than or equal to $250 billion, or total consolidated on-balance sheet 
foreign exposures of at least $10 billion), given the business models 
and risk profiles of such banking organizations. The agencies believe 
that the current treatment for these items strikes an appropriate 
balance between complexity and risk sensitivity for the largest and 
most complex banking organizations. Therefore, the transitions NPR 
would not apply to advanced approaches banking organizations.
    The agencies propose to extend the transitions period, as it 
applies to non-advanced approaches banking organizations, for changes 
to section 300 of the capital rules otherwise due to become effective 
on January 1, 2018, applicable to the risk weight and deduction 
treatment for MSAs, temporary difference DTAs, significant investments 
in the capital of unconsolidated financial institutions in the form of 
common stock, non-significant investments in the capital of 
unconsolidated financial institutions, and significant investments in 
the capital of unconsolidated financial institutions that are not in 
the form of common stock. The agencies would expect to propose 
modifications in these areas as part of the simplifications NPR.
    Under the transitions NPR, until the simplifications NPR is 
completed or the agencies otherwise determine, in accordance with Table 
7 of section 300 of the capital rules, non-advanced approaches banking 
organizations would continue to:
    <bullet> Deduct from regulatory capital 80 percent of the amount of 
any of these five items that is not includable in regulatory capital;
    <bullet> Apply a 100 percent risk weight to any amounts of MSAs, 
temporary difference DTAs, and significant investments in the capital 
of unconsolidated financial institutions in the form of common stock 
that are not deducted from capital, and continue to apply the current 
risk weights under the capital rules to amounts of non-significant 
investments in the capital of unconsolidated financial institutions and 
significant investments in the capital of unconsolidated financial 
institutions not in the form of common stock that are not deducted from 
capital; and
    <bullet> Include 20 percent of any common equity tier 1 minority 
interest, tier 1 minority interest, and total capital minority interest 
exceeding the capital rule's minority interest limitations (surplus 
minority interest) in regulatory capital.
    For example, under the transitions NPR, a non-advanced approaches 
banking organization with an amount of MSAs above the 10 percent common 
equity tier 1 capital deduction threshold in the capital rules would 
deduct from common equity tier 1 capital only 80 percent of the amount 
of MSAs above this threshold, and would apply a 100 percent risk weight 
to the MSAs that are not deducted from common equity tier 1 capital, 
including the MSAs that otherwise would have been deducted but for the 
transition provisions. Similarly, for purposes of the capital rules' 15 
percent common equity tier 1 capital deduction threshold (the aggregate 
15 percent threshold) that applies collectively across MSAs, temporary 
difference DTAs, and significant investments in the capital of 
unconsolidated financial institutions in the form of common stock, 
under the transitions NPR, a non-advanced approaches banking 
organization would deduct from common equity tier 1 capital 80 percent 
of the amount of these items that exceed the aggregate 15 percent 
threshold.
    Because the transitions NPR would not apply to advanced approaches 
banking organizations, such firms would be required to continue to 
apply the existing transition provisions in the capital rules. 
Specifically, advanced approaches banking organizations would be 
required to apply, starting on January 1, 2018, the capital rules' 
fully phased-in regulatory capital treatment for MSAs, temporary 
difference DTAs, significant investments in the capital of 
unconsolidated financial institutions in the form of common stock, non-
significant investments in the capital of unconsolidated financial 
institutions, significant investments in the capital of unconsolidated 
financial institutions that are not in the form of common stock, and 
surplus minority interest.

III. Amendments to Reporting Forms

    The agencies are proposing to clarify the reporting instructions 
for the Consolidated Reports of Condition and Income (Call Report) 
(FFIEC 031, FFIEC 041, and FFIEC 051; OMB Control Nos. 1557-0081, 7100-
0036, 3604-0052), the OCC is proposing to clarify the instructions for 
OCC DFAST 14A (OMB Control No. 1557-0319), the FDIC is proposing to 
clarify the instructions for FDIC DFAST 14A (OMB Control No. 3064-
0189), and the Board is proposing to clarify the instructions for the 
FR Y-9C (OMB Control No. 7100-0128), and the FR Y-14A and FR Y-14Q (OMB 
Control No. 7100-0341) to reflect the changes to the capital rules that 
would be required under this proposal.

IV. Request for Comments

    At this time, the agencies are seeking comment more narrowly on 
changes proposed in this transitions NPR. As noted previously, the 
agencies plan to issue a simplifications NPR to simplify certain 
aspects of the capital rules with

[[Page 40498]]

the goal of meaningfully reducing regulatory burden on community 
banking organizations as explained in the EGRPRA report. That 
simplifications NPR would be published in the Federal Register for 
public notice and comment at a later date.
    Question 1. What, if any, operational or administrative challenges 
would the proposed changes in this transitions NPR pose to banking 
organizations? What, if any, alternatives should the agencies consider 
to address such challenges?
    Question 2. What, if any, modifications should the agencies 
consider making to the scope of application of this proposal?

V. Regulatory Analyses

A. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3521) (PRA), 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 agencies reviewed the proposed 
rule and determined that it does not create any new or revise any 
existing collection of information under section 3504(h) of title 44. 
However, the agencies would clarify the reporting instructions for the 
Call Report. The OCC and FDIC would clarify the instructions for DFAST 
14A, and the Board would clarify the instructions for the FR Y-9C, the 
FR Y-14A, and the FR Y-14Q to reflect the changes to the capital rules 
that would be required under this proposal. The draft redlined Call 
Report instructions would be available at https://www.ffiec.gov/ffiec_report_forms.htm, the draft redlined OCC DFAST 14A instructions 
would be available at https://www.occ.gov/tools-forms/forms/bank-operations/stress-test-reporting.html, the draft redlined FDIC DFAST 
14A instructions would be available at https://www.fdic.gov/regulations/reform/dfast/, and the draft redlined FR Y-9C, FR Y-14A, 
and FR Y-14Q instructions would be available at https://www.federalreserve.gov/apps/reportforms/review.aspx.

B. Regulatory Flexibility Act Analysis

    OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), 
requires an agency, in connection with a final rule, to prepare a Final 
Regulatory Flexibility Analysis describing the impact of the rule on 
small entities (defined by the Small Business Administration (SBA) for 
purposes of the RFA to include banking entities with total assets of 
$550 million or less) or to certify that the rule will not have a 
significant economic impact on a substantial number of small entities.
    As of March 31, 2017, the OCC supervised 928 small entities.\8\ The 
rule applies to all OCC-supervised entities that are not subject to the 
advanced approaches risk-based capital rules, and thus potentially 
affects a substantial number of small entities. The OCC has determined 
that 135 such entities engage in affected activities to an extent that 
they would be impacted directly by the proposed rule. However, the 
proposed rule would provide a small economic benefit to those entities. 
Thus, the OCC has determined that rule would not have a significant 
impact on any OCC-supervised small entities.
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    \8\ The OCC calculated the number of small entities using the 
SBA's size thresholds for commercial banks and savings institutions, 
and trust companies, which are $550 million and $38.5 million, 
respectively. Consistent with the General Principles of Affiliation, 
13 CFR 121.103(a), the OCC counted the assets of affiliated 
financial institutions when determining whether to classify a 
national bank or Federal savings association as a small entity.
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    Therefore, the OCC certifies that the proposed rule will not have a 
significant economic impact on a substantial number of OCC-supervised 
small entities.
    Board: The Board is providing an initial regulatory flexibility 
analysis with respect to this proposed rule. As discussed in the 
Supplemental Information, the proposal would revise the transition 
provisions in the regulatory capital rules to extend the treatment 
effective for calendar year 2017 for several regulatory capital 
adjustments and deductions that are subject to multi-year phase-in 
schedules. Through the simplifications NPR, the agencies intend in the 
near term to seek public comment on a proposal to simplify certain 
items of the regulatory capital rules and, thus, the agencies believe 
it is appropriate to extend the transition provisions currently in 
effect for these items while the simplifications NPR is pending. The 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), generally 
requires that an agency prepare and make available an initial 
regulatory flexibility analysis in connection with a notice of proposed 
rulemaking. 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 $550 million or less 
(small banking organization).\9\ As of March 31, 2017, there were 
approximately 3,546 small bank holding companies, 234 small savings and 
loan holding companies, and 584 small state member banks.
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    \9\ See 13 CFR 121.201. Effective July 14, 2014, the Small 
Business Administration revised the size standards for banking 
organizations to $550 million in assets from $500 million in assets. 
79 FR 33647 (June 12, 2014).
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    The proposed rule would apply to all state member banks, as well as 
all bank holding companies and savings and loan holding companies that 
are subject to the Board's regulatory capital rule, but excluding state 
member banks, bank holding companies, and savings and loan holding 
companies that are subject to the advanced approaches in the capital 
rules. In general, the Board's capital rules only apply to bank holding 
companies and savings and loan holding companies that are not subject 
to the Board's Small Bank Holding Company Policy Statement, which 
applies to bank holding companies and savings and loan holding 
companies with less than $1 billion in total assets that also meet 
certain additional criteria.\10\ Thus, most bank holding companies and 
savings and loan holding companies that would be subject to the 
proposed rule exceed the $550 million asset threshold at which a 
banking organization would qualify as a small banking organization.
---------------------------------------------------------------------------

    \10\ See 12 CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225, 
appendix C; 12 CFR 238.9.
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    Given the proposed rule does not impact the recordkeeping and 
reporting requirements that affected small banking organizations are 
currently subject to, there would be no change to the information that 
small banking organizations must track and report. The proposal would 
merely retain the transition provisions in effect for calendar year 
2017 for the items that would be affected by the simplifications NPR 
until the simplifications NPR is finalized or the agencies determine 
otherwise.
    The proposal would permit affected small banking organizations, 
beginning in 2018 and thereafter, to deduct less investments in the 
capital of unconsolidated financial institutions, MSAs, and temporary 
difference DTAs from common equity tier 1 capital than would otherwise 
be required under the current transition provisions. The proposal would 
also allow small banking organizations to continue using a 100 percent 
risk weight for non-deducted MSAs, temporary difference DTAs and 
significant investments in the capital of unconsolidated financial 
institutions rather than the 250 percent risk weight for these items 
which is scheduled to take effect beginning January 1, 2018. Thus, for 
small banking

[[Page 40499]]

organizations that have significant amounts of MSAs or temporary 
difference DTAs, the proposal could have a temporary positive impact in 
their capital ratios during 2018 and thereafter.
    The impact from increasing the deduction of investments in the 
capital of unconsolidated financial institutions, MSAs, and temporary 
difference DTAs from 80 percent of the amounts to be deducted under the 
capital rules in 2017 to 100 percent in 2018 is estimated to decrease 
common equity tier 1 capital by 0.01 percent on average across all 
covered small bank holding companies, savings and loan holding 
companies, and state member banks. Similarly, the impact from 
increasing from 80 percent in 2017 to 100 percent in 2018 the exclusion 
of surplus minority interest is estimated to decrease total regulatory 
capital by 0.04 percent across the same set of institutions. Based on 
March 31, 2017 data for the same set of institutions, increasing the 
risk-weight for non-deducted MSAs and temporary difference DTAs to 250 
percent from 100 percent would result in an increase in risk-weighted 
assets of 0.64 percent. Therefore, retaining the transition provisions 
for the regulatory capital treatment of MSAs, temporary difference 
DTAs, investments in the capital of unconsolidated financial 
institutions, and minority interests, would have a marginally positive 
impact on the regulatory capital ratios of small banking organizations.
    The Board does not believe that the proposed rule duplicates, 
overlaps, or conflicts with any other Federal rules. In addition, the 
primary alternative to the proposed rule would be to retain the 
transition provisions as currently written in the capital rules, which 
would mean that the transitions would become fully phased-in starting 
on January 1, 2018. As discussed, this would result in marginally lower 
regulatory capital ratios than if the proposal were finalized. In light 
of the foregoing, the Board does not believe that the proposed rule, if 
adopted in final form, would have a significant economic impact on a 
substantial number of small entities. Nonetheless, the Board seeks 
comment on whether the proposed rule would impose undue burdens on, or 
have unintended consequences for, small organizations, and whether 
there are ways such potential burdens or consequences could be 
minimized in a manner consistent with the purpose of the proposed rule. 
A final regulatory flexibility analysis will be conducted after 
consideration of comments received during the public comment period.
    FDIC: The Regulatory Flexibility Act (RFA) generally requires that, 
in connection with a notice of proposed rulemaking, an agency prepare 
and make available for public comment an initial regulatory flexibility 
analysis describing the impact of the proposed rule on small entities. 
A regulatory flexibility analysis is not required, however, if the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. The Small Business 
Administration has defined ``small entities'' to include banking 
organizations with total assets less than or equal to $550 million. As 
of March 31, 2017, the FDIC supervises 3,750 banking institutions, 
3,028 of which qualify as small entities according to the terms of the 
RFA.
    The proposed rule would extend the current regulatory capital 
treatment of: (i) Mortgage servicing assets (MSAs); (ii) deferred tax 
assets (DTAS) arising from temporary differences that could not be 
realized through net operating loss carrybacks; (iii) significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock; (iv) non-significant investments in the 
capital of unconsolidated financial institutions; (v) significant 
investments in the capital of unconsolidated financial institutions 
that are not in the form of common stock; and (vi) common equity tier 1 
minority interest, tier 1 minority interest, and total capital minority 
interest exceeding the capital rules' minority interest limitations. 
The transitions NPR would likely pose small economic benefits for small 
FDIC-supervised institutions by preventing any increase in risk-based 
capital requirements due to the completion of the transition provisions 
for the above items.
    According to Call Report data (as of March 31, 2017), 431 FDIC-
supervised small banking entities reported holding some volume of the 
above asset classes. Additionally, as of March 31, 2017, the risk-based 
capital deduction related to these assets under the capital rules has 
been incurred by only 53 FDIC-supervised small banking entities.
    The impact from increasing the deduction of investments in the 
capital of unconsolidated financial institutions, MSAs, and temporary 
difference DTAs from 80 percent of the amounts to be deducted under the 
capital rules (12 CFR 324.300) in 2017 to 100 percent in 2018 would 
decrease common equity tier 1 capital by 0.02 percent on average across 
all covered small FDIC-supervised banking institutions. Similarly, the 
impact from increasing from 80 percent in 2017 to 100 percent under the 
capital rules (12 CFR 324.300) in 2018 the exclusion of surplus 
minority interest would decrease total regulatory capital by 0.01 
percent across the same set of institutions. Based on March 31, 2017 
data for the same set of institutions, increasing the risk-weight for 
non-deducted MSAs and temporary difference DTAs to 250 percent from 100 
percent would result in an increase in risk-weighted assets of 0.37 
percent. Therefore, retaining the transition provisions for the 
regulatory capital treatment of MSAs, temporary difference DTAs, 
investments in the capital of unconsolidated financial institutions, 
and minority interests, would have a marginally positive impact on the 
regulatory capital ratios of substantially all small FDIC-supervised 
banking institutions.
    FDIC analysis has identified that absent the transitions NPR, 23 
small FDIC-supervised banking institutions would have a decrease of 1 
percent or more in common equity tier 1 capital, tier 1 capital and or 
total capital. Furthermore, 33 small FDIC-supervised banking 
institutions would have an increase in risk weighted assets greater 
than 3 percent absent the transitions NPR. Therefore, the FDIC 
certifies that this proposed rule would not have a significant economic 
impact on a substantial number of small entities that it supervises.

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act 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 transitions NPR in a simple and straightforward manner, and invite 
comment on the use of plain language. For example:
    <bullet> Have the agencies organized the material to suit your 
needs? If not, how could they present the transitions NPR rule more 
clearly?
    <bullet> Are the requirements in the transitions NPR clearly 
stated? If not, how could the transitions NPR be more clearly stated?
    <bullet> Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
    <bullet> Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would achieve that?

[[Page 40500]]

    <bullet> What other changes can the agencies incorporate to make 
the regulation easier to understand?

D. OCC Unfunded Mandates Reform Act of 1995 Determination

    The OCC analyzed the proposed rule under the factors set forth in 
the Unfunded Mandates Reform Act of 1995 (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). The OCC has 
determined that this proposed rule would not result in expenditures by 
State, local, and Tribal governments, or the private sector, of $100 
million or more in any one year.\11\ Accordingly, the OCC has not 
prepared a written statement to accompany this NPR.
---------------------------------------------------------------------------

    \11\ The OCC estimates that the proposed rule would lead to an 
aggregate increase in reported regulatory capital of $665.5 million 
in 2018 for national banks and Federal savings associations compared 
to the amount they would report if they were required to complete 
the 2018 phase-in provisions. The OCC estimates that this increase 
in reported regulatory capital--which could allow banking 
organizations to increase their leverage and thus increase their tax 
deductions for interest paid on debt--would have a total aggregate 
value of approximately $16 million per year across all directly 
impacted OCC-supervised entities (that is, national banks and 
Federal savings associations not subject to the advanced approaches 
risk-based capital rules).
---------------------------------------------------------------------------

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, the OCC proposes to 
amend 12 CFR part 3 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 revising paragraph (b)(4), adding 
paragraph (b)(5), and revising paragraph (d)(1) and table 10 to Sec.  
3.300 to read as follows:


Sec.  3.300  Transitions.

* * * * *
    (b) * * *
    (4) Additional transition deductions from regulatory capital. 
Except as provided in paragraph (b)(5) of this section:
    (i) Beginning January 1, 2014 for an advanced approaches national 
bank or Federal savings association, and beginning January 1, 2015 for 
a national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association, and in each 
case through December 31, 2017, a national bank or Federal savings 
association, must use Table 7 to Sec.  3.300 to determine the amount of 
investments in capital instruments and the items subject to the 10 and 
15 percent common equity tier 1 capital deduction thresholds (Sec.  
3.22(d)) (that is, MSAs, DTAs arising from temporary differences that 
the national bank or Federal savings association could not realize 
through net operating loss carrybacks, and significant investments in 
the capital of unconsolidated financial institutions in the form of 
common stock) that must be deducted from common equity tier 1 capital.
    (ii) Beginning January 1, 2014 for an advanced approaches national 
bank or Federal savings association, and beginning January 1, 2015 for 
a national bank or Federal savings association that is not an advanced 
approaches national bank or Federal savings association, and in each 
case through December 31, 2017, a national bank or Federal savings 
association must apply a 100 percent risk weight to the aggregate 
amount of the items subject to the 10 and 15 percent common equity tier 
1 capital deduction thresholds that are not deducted under this 
section. As set forth in Sec.  3.22(d)(2), beginning January 1, 2018, a 
national bank or Federal savings association must apply a 250 percent 
risk weight to the aggregate amount of the items subject to the 10 and 
15 percent common equity tier 1 capital deduction thresholds that are 
not deducted from common equity tier 1 capital.

                         Table 7 to Sec.   3.300
------------------------------------------------------------------------
                                                        Transitions for
                                                        deductions under
                                                         Sec.   3.22(c)
                                                           and (d)--
                  Transition period                      Percentage of
                                                           additional
                                                        deductions from
                                                           regulatory
------------------------------------------------------------capital-----
Calendar year 2014...................................                 20
Calendar year 2015...................................                 40
Calendar year 2016...................................                 60
Calendar year 2017...................................                 80
Calendar year 2018 and thereafter....................                100
------------------------------------------------------------------------

    (iii) For purposes of calculating the transition deductions in this 
paragraph (b)(4) beginning January 1, 2014 for an advanced approaches 
national bank or Federal savings association, and beginning January 1, 
2015 for a national bank or Federal savings association that is not an 
advanced approaches national bank or Federal savings association, and 
in each case through December 31, 2017, a national bank's or Federal 
savings association's 15 percent common equity tier 1 capital deduction 
threshold for MSAs, DTAs arising from temporary differences that the 
national bank or Federal savings association could not realize through 
net operating loss carrybacks, and significant investments in the 
capital of unconsolidated financial institutions in the form of common 
stock is equal to 15 percent of the sum of the national bank's or 
Federal savings association's common equity tier 1 elements, after 
regulatory adjustments and deductions required under Sec.  3.22(a) 
through (c) (transition 15 percent common equity tier 1 capital 
deduction threshold).
    (iv) Beginning January 1, 2018, a national bank or Federal savings 
association must calculate the 15 percent common equity tier 1 capital 
deduction threshold in accordance with Sec.  3.22(d).
    (5) Special transition provisions for non-significant investments 
in the capital of unconsolidated financial institutions, significant 
investments in the capital of unconsolidated financial institutions 
that are not in the form of common stock, MSAs, DTAs arising from 
temporary differences that the national bank or Federal savings 
association could not realize through net operating loss carrybacks, 
and significant investments in the capital of unconsolidated financial 
institutions in the form of common stock. Beginning January 1, 2018, a 
national bank or Federal savings association that is not an advanced 
approaches national bank

[[Page 40501]]

or Federal savings association must continue to apply the transition 
provisions described in paragraphs (b)(4)(i), (ii), and (iii) of this 
section applicable to calendar year 2017 to items that are subject to 
deduction under Sec.  3.22(c)(4), (c)(5), and (d), respectively.
* * * * *
    (d) Minority interest--(1) Surplus minority interest--(i) Advanced 
approaches national bank or Federal savings association surplus 
minority interest. Beginning January 1, 2014 through December 31, 2017, 
an advanced approaches national bank or Federal savings association may 
include in common equity tier 1 capital, tier 1 capital, or total 
capital the percentage of the common equity tier 1 minority interest, 
tier 1 minority interest, and total capital minority interest 
outstanding as of January 1, 2014, that exceeds any common equity tier 
1 minority interest, tier 1 minority interest, or total capital 
minority interest includable under Sec.  3.21 (surplus minority 
interest), respectively, as set forth in Table 10 to Sec.  3.300.
    (ii) Non-advanced approaches national bank and Federal savings 
association surplus minority interest. A national bank or Federal 
savings association that is not an advanced approaches national bank or 
Federal savings association may include in common equity tier 1 
capital, tier 1 capital, or total capital 20 percent of the common 
equity tier 1 minority interest, tier 1 minority interest and total 
capital minority interest outstanding as of January 1, 2014, that 
exceeds any common equity tier 1 minority interest, tier 1 minority 
interest, or total capital minority interest includable under Sec.  
3.21 (surplus minority interest), respectively.
* * * * *

                        Table 10 to Sec.   3.300
------------------------------------------------------------------------
                                                         Percentage  of
                                                         the amount  of
                                                        surplus or  non-
                                                           qualifying
                                                            minority
                  Transition period                      interest that
                                                        can be  included
                                                         in  regulatory
                                                        capital  during
                                                        the  transition
                                                             period
------------------------------------------------------------------------
Calendar year 2014...................................                 80
Calendar year 2015...................................                 60
Calendar year 2016...................................                 40
Calendar year 2017...................................                 20
Calendar year 2018 and thereafter....................                  0
------------------------------------------------------------------------

* * * * *

12 CFR Part 217

Board of Governors of the Federal Reserve System

    For the reasons set out in the joint preamble, part 217 of chapter 
II of title 12 of the Code of Federal Regulations is proposed to be 
amended 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 revising paragraph (b)(4), adding 
paragraph (b)(5), and revising paragraph (d)(1) and table 10 to Sec.  
217.300 to read as follows:


Sec.  217.300   Transitions.

* * * * *
    (b) * * *
    (4) Additional transition deductions from regulatory capital. 
Except as provided in paragraph (b)(5) of this section:
    (i) Beginning January 1, 2014 for an advanced approaches Board-
regulated institution, and beginning January 1, 2015 for a Board-
regulated institution that is not an advanced approaches institution, 
and in each case through December 31, 2017, an institution, must use 
Table 7 to Sec.  217.300 to determine the amount of investments in 
capital instruments and the items subject to the 10 and 15 percent 
common equity tier 1 capital deduction thresholds (Sec.  217.22(d)) 
(that is, MSAs, DTAs arising from temporary differences that the 
institution could not realize through net operating loss carrybacks, 
and significant investments in the capital of unconsolidated financial 
institutions in the form of common stock) that must be deducted from 
common equity tier 1 capital.
    (ii) Beginning January 1, 2014 for an advanced approaches 
institution, and beginning January 1, 2015 for an institution that is 
not an advanced approaches institution, and in each case through 
December 31, 2017, an institution must apply a 100 percent risk-weight 
to the aggregate amount of the items subject to the 10 and 15 percent 
common equity tier 1 capital deduction thresholds that are not deducted 
under this section. As set forth in Sec.  217.22(d)(2), beginning 
January 1, 2018, a Board-regulated institution must apply a 250 percent 
risk-weight to the aggregate amount of the items subject to the 10 and 
15 percent common equity tier 1 capital deduction thresholds that are 
not deducted from common equity tier 1 capital.

                        Table 7 to Sec.   217.300
------------------------------------------------------------------------
                                                        Transitions  for
                                                       deductions  under
                                                        Sec.   217.22(c)
                                                            and (d)--
                  Transition period                      percentage  of
                                                           additional
                                                        deductions  from
                                                           regulatory
                                                            capital
------------------------------------------------------------------------
Calendar year 2014...................................                 20
Calendar year 2015...................................                 40
Calendar year 2016...................................                 60
Calendar year 2017...................................                 80
Calendar year 2018 and thereafter....................                100
------------------------------------------------------------------------

    (iii) For purposes of calculating the transition deductions in this 
paragraph (b)(4) beginning January 1, 2014 for an advanced approaches 
Board-regulated institution, and beginning January 1, 2015 for Board-
regulated institution that is not an advanced approaches Board-
regulated institution, and in each case through December 31, 2017, an 
institution's 15 percent common equity tier 1 capital deduction 
threshold for MSAs, DTAs arising from temporary differences that the 
institution could not realize through net operating loss carrybacks, 
and significant investments in the capital of unconsolidated financial 
institutions in the form of common stock is equal to 15 percent of the 
sum of the institution's common equity tier 1 elements, after 
regulatory adjustments and deductions required under Sec.  217.22(a) 
through (c) (transition 15 percent common equity tier 1 capital 
deduction threshold).
    (iv) Beginning January 1, 2018 a Board-regulated institution must 
calculate the 15 percent common equity tier 1 capital deduction 
threshold in accordance with Sec.  217.22(d).
    (5) Special transition provisions for non-significant investments 
in the capital of unconsolidated financial institutions, significant 
investments in the capital of unconsolidated financial institutions 
that are not in the form of common stock, MSAs, DTAs arising from 
temporary differences that the Board-regulated institution could not 
realize through net operating loss carrybacks, and significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock. Beginning January 1,

[[Page 40502]]

2018, a Board-regulated institution that is not an advanced approaches 
Board-regulated institution must continue to apply the transition 
provisions described in paragraphs (b)(4)(i), (ii), and (iii) of this 
section applicable to calendar year 2017 to items that are subject to 
deduction under Sec.  217.22(c)(4), (c)(5), and (d), respectively.
* * * * *
    (d) Minority interest--(1) Surplus minority interest--(i) Advanced 
approaches institution surplus minority interest. Beginning January 1, 
2014 through December 31, 2017, an advanced approaches Board-regulated 
institution may include in common equity tier 1 capital, tier 1 
capital, or total capital the percentage of the common equity tier 1 
minority interest, tier 1 minority interest and total capital minority 
interest outstanding as of January 1, 2014 that exceeds any common 
equity tier 1 minority interest, tier 1 minority interest or total 
capital minority interest includable under Sec.  217.21 (surplus 
minority interest), respectively, as set forth in Table 10 to Sec.  
217.300.
    (ii) Non-advanced approaches institution surplus minority interest. 
A Board-regulated institution that is not an advanced approaches Board-
regulated institution may include in common equity tier 1 capital, tier 
1 capital, or total capital 20 percent of the common equity tier 1 
minority interest, tier 1 minority interest and total capital minority 
interest outstanding as of January 1, 2014, that exceeds any common 
equity tier 1 minority interest, tier 1 minority interest or total 
capital minority interest includable under Sec.  217.21 (surplus 
minority interest), respectively.
* * * * *

                       Table 10 to Sec.   217.300
------------------------------------------------------------------------
                                                         Percentage  of
                                                         the amount  of
                                                        surplus or  non-
                                                           qualifying
                                                            minority
                  Transition period                      interest  that
                                                        can be included
                                                         in  regulatory
                                                        capital  during
                                                         the transition
                                                             period
------------------------------------------------------------------------
Calendar year 2014...................................                 80
Calendar year 2015...................................                 60
Calendar year 2016...................................                 40
Calendar year 2017...................................                 20
Calendar year 2018 and thereafter....................                  0
------------------------------------------------------------------------

* * * * *

12 CFR Part 324

Federal Deposit Insurance Corporation

    For the reasons set out in the joint preamble, the FDIC proposes to 
amend 12 CFR part 324 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. Section 324.300 is amended by revising paragraph (b)(4), adding 
paragraph (b)(5), and revising paragraph (d)(1) and table 9 to Sec.  
324.300 to read as follows:


Sec.  324.300   Transitions.

* * * * *
    (b) * * *
    (4) Additional transition deductions from regulatory capital. 
Except as provided in paragraph (b)(5) of this section:
    (i) Beginning January 1, 2014, for an advanced approaches FDIC-
supervised institution, and beginning January 1, 2015, for an FDIC-
supervised institution that is not an advanced approaches FDIC-
supervised institution, and in each case through December 31, 2017, an 
FDIC-supervised institution, must use Table 7 to Sec.  324.300 to 
determine the amount of investments in capital instruments and the 
items subject to the 10 and 15 percent common equity tier 1 capital 
deduction thresholds (Sec.  324.22(d)) (that is, MSAs, DTAs arising 
from temporary differences that the FDIC-supervised institution could 
not realize through net operating loss carrybacks, and significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock) that must be deducted from common equity tier 
1 capital.
    (ii) Beginning January 1, 2014, for an FDIC-supervised advanced 
approaches institution, and beginning January 1, 2015, for an FDIC-
supervised institution that is not an advanced approaches FDIC-
supervised institution, and in each case through December 31, 2017, an 
FDIC-supervised institution must apply a 100 percent risk-weight to the 
aggregate amount of the items subject to the 10 and 15 percent common 
equity tier 1 capital deduction thresholds that are not deducted under 
this section. As set forth in Sec.  324.22(d)(2), beginning January 1, 
2018, an FDIC-supervised institution must apply a 250 percent risk-
weight to the aggregate amount of the items subject to the 10 and 15 
percent common equity tier 1 capital deduction thresholds that are not 
deducted from common equity tier 1 capital.

                        Table 7 to Sec.   324.300
------------------------------------------------------------------------
                                                        Transitions for
                                                        deductions under
                                                        Sec.   324.22(c)
                                                           and (d)--
                  Transition period                      Percentage of
                                                           additional
                                                        deductions from
                                                           regulatory
                                                            capital
------------------------------------------------------------------------
Calendar year 2014...................................                 20
Calendar year 2015...................................                 40
Calendar year 2016...................................                 60
Calendar year 2017...................................                 80
Calendar year 2018 and thereafter....................                100
------------------------------------------------------------------------

    (iii) For purposes of calculating the transition deductions in this 
paragraph (b)(4) beginning January 1, 2014, for an advanced approaches 
FDIC-supervised institution, and beginning January 1, 2015, for an 
FDIC-supervised institution that is not an advanced approaches FDIC-
supervised institution, and in each case through December 31, 2017, an 
FDIC-supervised institution's 15 percent common equity tier 1 capital 
deduction threshold for MSAs, DTAs arising from temporary differences 
that the FDIC-supervised institution could not realize through net 
operating loss carrybacks, and significant investments in the capital 
of unconsolidated financial institutions in the form of common stock is 
equal to 15 percent of the sum of the FDIC-supervised institution's 
common equity tier 1 elements, after regulatory adjustments and 
deductions required under Sec.  324.22(a) through (c) (transition 15 
percent common equity tier 1 capital deduction threshold).
    (iv) Beginning January 1, 2018, an FDIC-supervised institution must 
calculate the 15 percent common equity tier 1 capital deduction 
threshold in accordance with Sec.  324.22(d).
    (5) Special transition provisions for non-significant investments 
in the capital of unconsolidated financial institutions, significant 
investments in the capital of unconsolidated financial institutions 
that are not in the form of common stock, MSAs, DTAs arising from 
temporary differences that the FDIC-supervised institution could not

[[Page 40503]]

realize through net operating loss carrybacks, and significant 
investments in the capital of unconsolidated financial institutions in 
the form of common stock. Beginning January 1, 2018, an FDIC-supervised 
institution that is not an advanced approaches FDIC-supervised 
institution must continue to apply the transition provisions described 
in paragraphs (b)(4)(i), (ii), and (iii) of this section applicable to 
calendar year 2017 to items that are subject to deduction under Sec.  
324.22(c)(4), (c)(5), and (d), respectively.
* * * * *
    (d) Minority interest--(1) Surplus minority interest--(i) Advanced 
approaches FDIC-supervised institution surplus minority interest. 
Beginning January 1, 2014, through December 31, 2017, an advanced 
approaches FDIC-supervised institution may include in common equity 
tier 1 capital, tier 1 capital, or total capital the percentage of the 
common equity tier 1 minority interest, tier 1 minority interest and 
total capital minority interest outstanding as of January 1, 2014 that 
exceeds any common equity tier 1 minority interest, tier 1 minority 
interest or total capital minority interest includable under Sec.  
324.21 (surplus minority interest), respectively, as set forth in Table 
9 to Sec.  324.300.
    (ii) Non-advanced approaches FDIC-supervised institution surplus 
minority interest. An FDIC-supervised institution that is not an 
advanced approaches FDIC-supervised institution may include in common 
equity tier 1 capital, tier 1 capital, or total capital 20 percent of 
the common equity tier 1 minority interest, tier 1 minority interest 
and total capital minority interest outstanding as of January 1, 2014 
that exceeds any common equity tier 1 minority interest, tier 1 
minority interest or total capital minority interest includable under 
Sec.  324.21 (surplus minority interest), respectively.
* * * * *

                        Table 9 to Sec.   324.300
------------------------------------------------------------------------
                                                       Percentage of the
                                                       amount of surplus
                                                       or non-qualifying
                                                            minority
                                                       interest that can
                  Transition period                      be included in
                                                           regulatory
                                                         capital during
                                                         the transition
                                                             period
------------------------------------------------------------------------
Calendar year 2014...................................                 80
Calendar year 2015...................................                 60
Calendar year 2016...................................                 40
Calendar year 2017...................................                 20
Calendar year 2018 and thereafter....................                  0
------------------------------------------------------------------------

* * * * *

    Dated: August 2, 2017.
Keith A. Noreika,
Acting Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, August 16, 2017.

Ann E. Misback,
Secretary of the Board.
    Dated at Washington, DC this 9th of August, 2017.

    By order of the Board Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2017-17822 Filed 8-24-17; 8:45 am]
BILLING CODE 4810-33-P


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