Department of the Treasury, Office of the Comptroller of the Currency, and Federal Reserve System: Regulatory Capital Rules: Regulatory Capital, Implementation of Basel III, Capital Adequacy, Transition Provisions, Prompt Corrective Action, Standardized Approach for Risk-weighted Assets, Market Discipline and Disclosure Requirements, Advanced Approaches Risk-Based Capital Rule, and Market Risk Capital Rule
GAO-14-147R: Oct 30, 2013
GAO reviewed the Department of the Treasury, Office of the Comptroller of the Currency, and Federal Reserve System's new rule on the regulatory capital rules: regulatory capital, implementation of Basel III, capital adequacy, transition provisions, prompt corrective action, standardized approach for risk-weighted assets, market discipline and disclosure requirements, advanced approaches risk-based capital rule, and market risk capital rule. GAO found that (1) the final rule revises the risk-based and leverage capital requirements for banking organizations. Specifically, the rule implements a revised definition of regulatory capital, a new common equity tier 1 minimum capital requirement, a higher minimum tier 1 capital requirement, and, for banking organizations subject to the advanced approaches risk-based capital rules, a supplementary leverage ratio that incorporates a broader set of exposures in the denominator. The final rule incorporates these new requirements into the agencies' prompt corrective action framework. In addition, the rule establishes limits on a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements. Further, the final rule amends the methodologies for determining risk-weighted assets for all banking organizations and introduces disclosure requirements that would apply to top-tier banking organizations domiciled in the United States with $50 billion or more in total assets. The final rule also adopts changes to the agencies' regulatory capital requirements that meet the requirements of section 171 and section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule also codifies the agencies' regulatory capital rules, which have previously resided in various appendices to their respective regulations, into a harmonized integrated regulatory framework. In addition, the rule amends the market risk capital rule (market risk rule) to apply to federal savings associations and amends the advanced approaches and market risk rules to apply to top-tier savings and loan holding companies domiciled in the United States, except for certain savings and loan holding companies that are substantially engaged in insurance underwriting or commercial activities, as described in the final rule; and (2) the agencies complied with applicable requirements in promulgating the rule.