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US Federal Reserve Board - new final rule on Basel III...

US Federal Reserve Board - new final rule on Basel III capital requirements

The Board of Governors of the Federal Reserve System has approved a final rule that revises the risk-based and leverage capital requirements for banks.

The rule implements the Basel III regulatory capital reforms and certain changes required by the Dodd-Frank in the US.

The final rule:

  • implements a revised definition of regulatory capital, a new common equity tier (CET) 1 minimum capital requirement, a higher minimum tier 1 capital requirement, and, for banking organisations subject to the advanced approaches risk-based capital rules (advanced approaches banking organisations), a supplementary leverage ratio that incorporates a broader set of exposures in the denominator;
  • incorporates these new requirements into the US agencies’ corrective action framework;
  • establishes limits on a bank's capital distributions and certain discretionary bonus payments;
  • amends the methodologies for determining risk-weighted assets for all banks, and introduces disclosure requirements that would apply to top-tier banks domiciled in the US with USD $50 billion or more in total assets; and
  • adopts changes to regulatory capital requirements.

Compliance is subject to a series of transitional periods beginning 1 January 2014.

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