The Board of Governors of the Federal Reserve System (“FRB”) issued two interim final rules intended to clarify how companies should incorporate the Basel III regulatory capital reforms into their capital and business projections during the next cycle of capital plan submissions and stress tests. Rules to implement the Basel III capital reforms were finalized in July, and will be phased in beginning in 2014 or 2015, depending on the size of each banking organization.
The FRB’s first interim final rule applies to bank holding companies with $50 billion or more in total consolidated assets, and clarifies that, in the next capital planning and stress test cycle, these companies must incorporate the revised capital framework into their capital planning projects and into the stress tests required under Dodd-Frank using the transition paths established in the Basel III final rule.
The second interim final rule provides a one-year transition period for most banking organizations with between $10 billion and $50 billion in total consolidated assets. These companies are conducting their first company-run stress tests this fall, and will be required to calculate these stress test projects using the Board’s current regulatory capital rules to allow time to adjust their internal systems to the revised capital framework.
The interim final rules are effective immediately, but are subject to comment (with a comment deadline of November 25, 2013).
See: FRB Press Release; Interim Final Rules.
Related News: FDIC Publishes Basel III and Capital Requirement Rules (Fed. Reg.) (September 12, 2013); FDIC and OCC Adopt Rules Regarding the Implementation of Basel III Capital Requirements (July 10, 2013); Delta Strategy Group: Summary of New Basel Capital Proposals (July 3, 2013).