Basel III Capital Impact Study Act

To require the Federal banking agencies to conduct an impact study on the cumulative effect of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act before issuing final rules amending the agencies’ general risk-based capital requirements for determining risk-weighted assets as proposed in the Standardized Approach for Risk Weighted Assets Notice of Proposed Rulemaking and the Advanced Approaches Risk-based Capital Rule; Market Risk Capital Rule Notice of Proposed Rulemaking, and the Implementation of Basel III, Minimum Regulatory Capital Ratios Notice of Proposed Rulemaking issued in June 2012, and for other purposes. 1. Short title This Act may be cited as the Basel III Capital Impact Study Act 2. Study required The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (hereinafter, the Federal banking agencies (1) determining risk-weighted assets as proposed in the Standardized Approach for Risk Weighted Assets Notice of Proposed Rulemaking issued in June 2012 (hereinafter, the Standardized Approach NPR (2) determining risk-weighted assets as proposed in the Advanced Approaches Risk-based Capital Rule; Market Risk Capital Rule Notice of Proposed Rulemaking issued in June 2012 (hereinafter, the Advanced Approach NPR (3) determining minimum regulatory capital ratios as proposed in the Regulatory Capital, Implementation of Basel III, Minimum Regulatory Capital Ratios, Capital Adequacy, Transition Provisions, and Prompt Corrective Action Notice of Proposed Rulemaking issued in June 2012 (hereinafter, the Basel III NPR 3. Study and report (a) Study (1) In general The Federal banking agencies shall, jointly, conduct a study of the impact of the Standardized Approach NPR and the Advanced Approach NPR, respectively, on the minimum regulatory capital requirements of insured depository institutions and insured depository institution holding companies. As part of this study, the Federal banking agencies shall separately identify the various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and of amendments made by that Act, that affect capital quality, capital levels, asset quality, and the risk management activities of insured depository institutions and insured depository holding companies (hereinafter identified provisions (A) Section 115 (regarding enhanced supervision and prudential standards). (B) Section 165 (regarding enhanced supervision and prudential standards). (C) Section 166 (regarding early remediation requirements). (D) Section 171 (regarding leverage and risk-based capital requirements). (E) Section 619 (regarding prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds). (F) Section 939 (regarding the removal of statutory references to credit ratings). (G) Section 941 (regarding regulation of credit risk retention and exemption of qualified residential mortgages). (H) Section 1412 (regarding safe harbor and rebuttable presumptions for qualified mortgages). (2) Contents of study In conducting the study required in paragraph (1), the Federal banking agencies shall determine and make projections of the likely cumulative impact of the Standardized Approach NPR, the Advanced Approach NPR, the Basel III NPR, and the identified provisions on required regulatory capital levels, capital quality, asset quality, and risk management at covered financial institutions. Based on these findings, the Federal banking agencies shall provide an assessment regarding— (A) changes to required capital levels; (B) the aggregate increase or decrease of total risk-weighted asset levels for the institutions to which the Standardized Approach NPR or Advanced Approach NPR would be applicable based on current assets; (C) whether the NPRs and identified provisions will cause capital levels at covered institutions to fluctuate with more frequency or by greater amounts than the current rules and indicate what, if any, safety and soundness issues such fluctuations raise for financial institutions or the financial system; (D) whether the NPRs and the identified provisions will result in the discontinuation of the use of certain risk management tools by covered financial institutions and the impact on the safety and soundness of financial institutions and the financial system; (E) the impact the NPRs and the identified provisions will have on residential mortgage lending and home equity lines of credit; (F) the likely cumulative impact of the NPRs and the identified provisions will have on the availability of credit, generally and in low- and moderate-income areas; (G) the variance in required capital levels, assets, and asset quality between institutions that implement the advanced approaches or approaches to risk weighting of assets and those that use the Standardized Approach NPR or the Advanced Approach NPR and the impact on competition between entities using different approaches; and (H) historical probability of default and loss given default of residential mortgage loans and the proposed risk weightings in the Standardized Approach NPR and the Advanced Approach NPR, and whether such proposed risk weightings are appropriately and fairly calibrated. (3) Voluntary participation The Federal banking agencies may seek input and participation from insured depository institutions and insured depository institution holding companies, however, participation in the study by insured depository institutions and insured depository institution holding companies shall be voluntary. (b) Report (1) In general The Federal banking agencies shall issue a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of the study required by subsection (a). (2) Contents The Federal banking agencies shall include the methodologies and assumptions used in the study as well as the required elements of the study listed in subsection (a) in the report required in this subsection. 4. Competitive equality Section 908(a)(1) of the International Lending Supervision Act of 1983 ( 12 U.S.C. 3907(a)(1) Each appropriate Federal banking agency shall, consistent with safety and soundness, seek to ensure that any differences in rules implementing the capital standards required under this section or other provisions of Federal law for banking institutions, savings associations, bank holding companies, and savings and loan holding companies do not give competitive advantages to any class or group of such institutions, associations, or companies unless required by other Federal law, and do not undermine any requirements for enhanced supervision and prudential standards required by section 115 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5325). .

Summary: Basel III Capital Impact Study Act - Directs the federal banking agencies (the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation [FDIC]), prior to issuing any final rule amending the agencies' general risk-based capital requirements for determining risk-weighted assets and minimum regulatory capital ratios as proposed in certain June 2012 notices of proposed rule making, to study and report regarding the impact of the approaches on the minimum regulatory capital requirements of insured depository institutions and insured depository institution holding companies. Requires the banking agencies to separately identify provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that affect capital quality, capital levels, asset quality, and the risk management activities of insured depository institutions and insured depository holding companies and take into consideration the impact of such provisions. Specifies Dodd-Frank provisions to be included. Permits the banking agencies to solicit participation in the study from insured depository institutions and insured depository institution holding companies on a voluntary basis. Amends the International Lending Supervision Act of 1983 to revise capital adequacy requirements by directing the banking agencies to seek to ensure that any differences in rules implementing the capital standards do not: (1) give competitive advantages to any class or group of institutions unless otherwise required by federal law, or (2) undermine Dodd-Frank requirements for enhanced supervision and prudential standards.