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Financial Institution Letter

Final Rule Adopts Existing Interim Final Rule Definition of Eligible Retained Income

August 26, 2020  |  FIL-83-2020


The FDIC, the Board of Governors of the Federal Reserve, and the Office of the Comptroller of the Currency (the agencies) jointly issued a final rule that adopts without change an interim final rule that revised the definition of “eligible retained income” for all institutions, bank holding companies, and savings and loan holding companies (banking organizations).

A copy of the Final Rule can be found on the FDIC’s website.

Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter (FIL) is applicable to all institutions.


  • The final rule adopts the interim final rule that revised the definition of eligible retained income to the greater of (1) a banking organization’s net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (2) the average of a banking organization’s net income over the preceding four quarters.
  • The revised definition is intended to facilitate the ability of banking organizations to use their capital buffers as intended in adverse conditions and serve as a financial intermediary and source of credit to the economy.
  • The revised definition will reduce the likelihood that a banking organization is suddenly subject to abrupt and restrictive distribution limitations in a scenario of lower than expected capital levels.
  • The revised definition will assist in the ability of S-corporation banks to provide dividends to shareholders in order to meet their pass-through tax liabilities. S-corporation banks should refer to FIL-40-2014 for additional guidance.
  • The final rule is effective on January 1, 2021. The revised definition of eligible retained income remains available under the interim final rule prior to that effective date.


FDIC-Supervised Institutions

Suggested Routing:

Chief Executive Officer
Chief Financial Officer
Chief Risk Officer

Related Topics:

Risk-Based Capital Rules, 12 CFR Part 324

Regulatory Capital Rule: Eligible Retained Income