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Basel III Treatment of DTAs and MSAs

October 9, 2017

Authors

Robert Klingler

Basel III Treatment of DTAs and MSAs

October 9, 2017

by: Robert Klingler

We have heard, read and seen (and internally had) some confusion regarding the joint proposed rulemaking regarding the potential simplification of the capital rules as they relate to Mortgage Servicing Assets (MSAs) and certain Deferred Tax Assets (DTAs).

In addition to simply being complicated regulations, the regulators also have two proposed rulemakings outstanding related to these items. In August 2017, the

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HVCRE Update – New Interagency FAQ

April 14, 2015

Authors

Jerry Blanchard

HVCRE Update – New Interagency FAQ

April 14, 2015

by: Jerry Blanchard

As previously mentioned, the federal banking regulators have been working on a FAQ on the topic. The interagency FAQ was published on April 6, 2015. While there were no surprises in what was published there were a number of takeaways from the FAQ that lenders need to keep in mind and I have added those to my previous list of FAQ. Under Basel III, as a general rule, a lender applies a 100% risk weighting to all corporate exposures, including bonds and loans. There are various exceptions to that rule, one of which involves what is referred to

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High Volatility CRE Rules and Contributed Capital

March 30, 2015

Authors

Jerry Blanchard

High Volatility CRE Rules and Contributed Capital

March 30, 2015

by: Jerry Blanchard

The new risk weighting rules applicable to commercial real estate are now fully in effect for all banks. The rule flows out of the new capital rulemaking carried out by the federal banking agencies as a result of Basel III. As a general rule, the agencies agreed to apply a 100% risk weighting to all corporate exposures, including bonds and loans. There were various exceptions to that rule, one of which involves what is referred to as “High Volatility Commercial Real Estate” (“HVCRE”) loans. Simply put, acquisition, development and construction loans are viewed as a more risky subset of commercial

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AOCI Opt-out Election Process

February 18, 2015

Authors

Robert Klingler

AOCI Opt-out Election Process

February 18, 2015

by: Robert Klingler

In connection with the effectiveness of BASEL III, most banks are required to decide whether to elect to opt-out of the inclusion of Accumulated Other Comprehensive Income (“AOCI”) in their Common Equity Tier 1 Capital.  All non-advanced approaches institutions (i.e.  banks less than $250 billion in total assets with less than $10 billion in on-balance sheet foreign exposure) will need to indicate whether they are making the AOCI opt-out in their March 31, 2015 Call Reports.  This is a one-time election and generally irrevocable, except in the limited cases of subsequent mergers between institutions with different elections.

As a reminder,

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BASEL III: The Final Rules are Here and It’s Time to Get Ready

August 14, 2013

Authors

Jonathan Hightower

BASEL III: The Final Rules are Here and It’s Time to Get Ready

August 14, 2013

by: Jonathan Hightower

Over the past year, my colleagues and I have spent an untold number of hours researching, writing and speaking about the Basel III capital rules. We felt it important to help bankers focus on the proposed rules in order to help them prepare and to help facilitate an appropriate response to the proposed rules. Because the rules were in proposed form, however, many bankers, bank directors and industry participants did not focus on these capital rules, instead waiting until they were finalized. Well, we’re here.

Earlier this month, the regulatory agencies finalized their revisions

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Wow! The Fed responds to comments from Community Banks on Basel III

July 2, 2013

Authors

Jonathan Hightower

Wow! The Fed responds to comments from Community Banks on Basel III

July 2, 2013

by: Jonathan Hightower

While the final Basel III capital rules have not been published at the time of this post, it was clear from this morning’s comments at the meeting of the Board of Governors of the Federal Reserve System that community banks have been heard. Highlights from the meeting include the following positions of the Federal Reserve on the Basel III rules.

Regulators Announce Delay in Adoption of Final Basel III Capital Rules

November 9, 2012

Authors

Jonathan Hightower

Regulators Announce Delay in Adoption of Final Basel III Capital Rules

November 9, 2012

by: Jonathan Hightower

Given the tremendous volume of comments from industry participants regarding the Basel III capital rules and the mounting political pressure regarding adoption of the rules, many industry observers had speculated that the Federal Reserve, FDIC, and OCC would be challenged to adopt the final rules before January 1, 2013 (the date established for effectiveness of portions of the rule in the release of the proposed rules). On November 9, 2012, the agencies announced that they indeed will not be able to meet that deadline.   This announcement runs contrary to the recently renewed directive by the Basel Committee on Banking Supervision

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Fall 2012 Update on Regulatory and Legal Changes Affecting Community Banks

October 30, 2012

Authors

Dan Wheeler

Fall 2012 Update on Regulatory and Legal Changes Affecting Community Banks

October 30, 2012

by: Dan Wheeler

Bank regulators have been as busy as usual in 2012, but some of the more interesting regulatory and legal changes have come from non-bank regulators and the courts. And, the JOBS Act changes described below actually lifts the regulatory burden on banks a bit, a rare respite in an otherwise challenging regulatory environment.

The JOBS Act eases bank capital activities and M&A.  The Jumpstart Our Business Startups Act affects community banks in 4 key ways:

Basel III Proposals Will Bring Changes to the Accounting of Bank Securities Portfolios

October 16, 2012

Authors

Michael Shumaker

Basel III Proposals Will Bring Changes to the Accounting of Bank Securities Portfolios

October 16, 2012

by: Michael Shumaker

As part of the proposed Basel III capital rules, banks will be required to hold a greater portion of their total capital in the form of common equity. With the creation of a new Common Equity Tier 1 (“CET1”) ratio to be included with other minimum capital ratios and a new Capital Conservation Buffer to be composed exclusively of common equity, the proposed new capital rules signal a regulatory departure from allowing forms of hybrid capital to constitute a significant amount of a bank’s total capital. While the impacts of the new preference for CET1 will be significant, the methodology for

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The Georgia Bankers Association Delivers a Detailed Critique of the Basel III Proposals

October 15, 2012

Authors

Bryan Cave

The Georgia Bankers Association Delivers a Detailed Critique of the Basel III Proposals

October 15, 2012

by: Bryan Cave

On October 12, 2012, the Georgia Bankers Association (the “GBA”) delivered a public comment letter on the proposed Basel III capital rules and the related proposed risk-weighting rules. A copy of the letter is available for viewing here.  In the comment letter, the GBA identifies over a dozen categories of key flaws in the proposed rules and concludes that the proposals should be withdrawn for further study or, at the very least, should be modified to exempt community and regional banks from their requirements.

The GBA takes the position in the comment letter that the

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