July 18, 2013

Federal Banking Agencies Issue Final Rule to Implement Basel III and Otherwise Revise the Financial Regulatory Capital Framework

Arnold & Porter Advisory

On July 2, 2013, the Board of Governors of the Federal Reserve System (Board) adopted a final rule establishing a comprehensive capital framework that will revise and replace the Board's current capital rules (the final rule). One week later, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) (together with the Board, the agencies) adopted an interim final rule and a final capital rule, respectively, that are identical in substance to the final rule issued by the Board. The agencies also issued a joint proposed rule that would apply a supplementary leverage ratio to the largest banking organizations. The final rule and joint proposed rule will update the agencies' general risk-based and leverage capital requirements to incorporate agreements reached by the Basel Committee on Banking Supervision (BCBS) in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" and certain other revisions to the Basel capital framework in response to the global financial crisis. They also implement Section 171 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which calls for new leverage and risk-based capital requirements, as well as other provisions of the Act. The largest banking organizations, referred to herein as advanced approaches banking organizations, must begin compliance with the final rule on January 1, 2014. Other banking organizations must begin compliance on January 1, 2015.

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