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Financial Institution Letters

Regulatory Capital Standards Deduction of Goodwill Net of Associated Deferred Tax Liability FIL-144-2008
December 16, 2008


Summary: The federal banking agencies are jointly issuing the attached final rule allowing goodwill, which must be deducted from Tier 1 capital, to be reduced by the amount of any associated deferred tax liability. The final rule will take effect 30 days after its publication in the Federal Register. However, a bank may elect to apply this final rule for regulatory capital reporting purposes as of December 31, 2008.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Highlights


  • Under the agencies' existing regulatory capital rules, certain assets that must be deducted from Tier 1 capital may be reduced by any deferred tax liability specifically related to the asset.


  • Under the attached final rule, the agencies are extending this treatment to goodwill acquired in a taxable business combination, thereby allowing a bank, bank holding company or savings association to make the required deduction of goodwill from Tier 1 capital net of any associated deferred tax liability.


  • The agencies decided not to extend similar treatment to other intangible assets currently required to be deducted fully from Tier 1 capital.

Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer

Related Topics:
Risk-Based Capital Standards
12 CFR Part 325

Attachment:
Final Rule, Minimum Capital Ratios; Capital Adequacy Guidelines; Capital Maintenance; Capital: Deduction of Goodwill Net of Associated Deferred Tax Liability

Contacts:
Christine Bouvier, Senior Policy Analyst (Bank
Accounting), at cbouvier@fdic.gov or (202) 898- 7289

Nancy Hunt, Senior Policy Analyst, at
nhunt@fdic.gov or (202) 898-6643

Mark Handzlik, Senior Attorney, at
mhandzlik@fdic.gov or (202) 898-3990

Printable Format:
FIL-144-2008 - PDF (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2008/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226
(1-877-275-3342 or 703- 562-2200).




Last Updated 12/16/2008 communications@fdic.gov