This month the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule. The final 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 FDIC-supervised institutions subject to the advanced approaches risk-based capital rules, a supplementary leverage ratio that incorporates a broader set of exposures in the denominator. It goes into effect January 1, 20104.
Specifically, the final rule constitutes six main changes. First, it revises regulatory capital definitions and minimum ratios. Second, it redefines tier 1 capital as two components: common equity tier 1 capital and additional tier 1 capital. Third, it creates a new capital ratio called the Common Equity Tier 1 Risk-based Capital Ratio. Fourth, it implements a capital conservation buffer. Fifth, it revises prompt corrective action (PCA) thresholds and adds the new ratio to the PCA framework. Finally, it changes risk weights for certain assets and off-balance sheet exposures.
The FDIC is encouraging feedback on the interaction of the changes with the proposed rule regarding supplementary leverage ratio for large, systemically important banking organizations. An informative PowerPoint presentation about the final rule is available here.