[Federal Register: August 1, 1995 (Volume 60, Number 147)]
[Rules and Regulations ]
[Page 39225-39233]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[[Page 39225]]
_______________________________________________________________________
Part IV
Department of the Treasury
Office of the Comptroller of the Currency
Federal Reserve System
Federal Deposit Insurance Corporation
Department of the Treasury
Office of Thrift Supervision
_______________________________________________________________________
12 CFR Part 3, et al.
Capital; Risk-Based Capital Guidelines; Capital Adequacy Guidelines;
Capital Maintenance; Final Rule
[[Page 39226]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 3 and 6
[Docket No. 95-18]
RIN 1557-AB14
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Docket No. R-0887]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 325
RIN 3064-AB61
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 565 and 567
[Docket No. 95-140]
RIN 1550-AA84
Capital; Risk-Based Capital Guidelines; Capital Adequacy
Guidelines; Capital Maintenance
AGENCIES: Office of the Comptroller of the Currency (OCC), Department
of the Treasury; Board of Governors of the Federal Reserve System
(FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift
Supervision (OTS), Department of the Treasury.
ACTION: Joint interim rule with request for comments.
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SUMMARY: The OCC, FRB, FDIC, and OTS (the Agencies) are amending their
capital adequacy standards for banks, bank holding companies, and
savings associations (banking organizations) to treat originated
mortgage servicing rights (OMSRs) the same as purchased mortgage
servicing rights (PMSRs) for regulatory capital purposes. The interim
capital rule was developed in response to the Financial Accounting
Standards Board's issuance of Statement No. 122, ``Accounting for
Mortgage Servicing Rights,'' which eliminates the accounting
distinction between OMSRs and PMSRs by requiring OMSRs to be
capitalized as balance sheet assets, a treatment previously required
only for PMSRs. Under the interim rule, both OMSRs and PMSRs are
``included in'' (i.e., not deducted from) regulatory capital when
determining Tier 1 (core) capital for purposes of the Agencies' risk-
based and leverage capital standards, and when calculating tangible
equity for purposes of prompt corrective action, subject to the
regulatory capital limitations that previously applied only to PMSRs.
Thus, the effect of the interim rule is to permit OMSRs in regulatory
capital, subject to certain limitations.
DATES: The interim rule is effective August 1, 1995. Comments must be
received by October 2, 1995.
ADDRESSES: Commenters should respond to their primary federal
regulator. All comments will be shared among all of the Agencies.
OCC: Written comments should be submitted to Docket No. 95-18,
Communications Division, Ninth Floor, Office of the Comptroller of the
Currency, 250 E Street SW., Washington, DC 20219, Attention: Karen
Carter. Comments will be available for inspection and photocopying at
that address.
FRB: Comments should refer to Docket No. R-0887, and may be mailed
to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue NW., Washington, DC
20551. Comments also may be delivered to Room B-2222 of the Eccles
Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the guard
station in the Eccles Building courtyard on 20th Street NW. (between
Constitution Avenue and C Street) at any time. Comments received will
be available for inspection in Room MP-500 of the Martin Building
between 9:00 a.m. and 5:00 p.m. weekdays, except as provided in 12 CFR
261.8 of the Board's rules regarding availability of information.
FDIC: Written comments shall be addressed to Office of the
Executive Secretary, Federal Deposit Insurance Corporation, 550 17th
Street NW., Washington, DC 20429. Comments may be hand delivered to
Room F-402, 1776 F Street NW., Washington, DC 20429, on business days
between 8:30 a.m. and 5:00 p.m. (Fax number: (202) 898-3838; Internet
address: comments@fdic.gov) Comments will be available for inspection
at the FDIC's Reading Room, Room 7118, 550 17th Street NW., Washington,
DC, between 9:00 a.m. and 4:30 p.m. on business days.
OTS: Send comments to Chief, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, N.W., Washington, D.C. 20552, Attention Docket No. 95-140.
These submissions may be hand-delivered to 1700 G Street, N.W. between
9 a.m. and 5 p.m. on business days; they may be sent by facsimile
transmission to FAX Number (202) 906-7755. Comments will be available
for inspection at 1700 G Street, N.W., from 1:00 p.m. until 4:00 p.m.
on business days.
FOR FURTHER INFORMATION CONTACT: OCC: Christine A. Smith, Esq.,
Professional Accounting Fellow, (202/874-5180), Roger Tufts, Senior
Economic Advisor, (202/874-5070), Office of the Chief National Bank
Examiner; Mitchell Stengel, Financial Economist, (202/874-5431), Risk
Analysis Division; Ronald Shimabukuro, Senior Attorney, or P. Moni
SenGupta, Attorney, (202/874-5090), Legislative and Regulatory
Activities Division, Washington, D.C. 20219.
FRB: Arthur W. Lindo, Supervisory Financial Analyst, (202/452-2695)
or Thomas R. Boemio, Supervisory Financial Analyst, (202/452-2982),
Division of Banking Supervision and Regulation. For the hearing
impaired only, Telecommunication Device for the Deaf (TDD), Dorothea
Thompson (202) 452-3544, Board of Governors of the Federal Reserve
System, 20th and C Streets, N.W., Washington, D.C. 20551.
FDIC: For supervisory issues, Stephen G. Pfeifer, Examination
Specialist, (202/898-8904), Accounting Section, Division of
Supervision; for legal issues, Jules E. Bernard, Counsel, (202/898-
3731), Legal Division.
OTS: John F. Connolly, Senior Program Manager for Capital Policy,
(202/906-6465), or Timothy J. Stier, Assistant Chief Accountant, (202/
906-5699), Supervision; Deborah Dakin, Assistant Chief Counsel, (202/
906-6445), Regulations and Legislation Division, Office of the Chief
Counsel, Office of Thrift Supervision, 1700 G Street, N.W., Washington,
D.C. 20552.
SUPPLEMENTARY INFORMATION:
Background
Mortgage servicing rights are the contractual obligations
undertaken by an institution to provide servicing for mortgage loans
owned by others, typically for a fee. Originated mortgage servicing
rights (OMSRs) generally represent the servicing rights acquired when
an institution originates mortgage loans and subsequently sells the
loans but retains the servicing rights. Purchased mortgage servicing
rights (PMSRs) are mortgage servicing rights that have been purchased
from other parties.
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 122 (FAS 122),
``Accounting for Mortgage Servicing Rights.'' FAS 122 eliminates the
accounting distinction between
[[Page 39227]]
OMSRs and PMSRs and the need for companies engaged in mortgage banking
to sell OMSRs in order to realize their value for financial statement
purposes. FAS 122 specifies that capitalized mortgage servicing rights
are to be treated as a single type of asset, regardless of how these
rights were acquired. As a result, upon an institution's adoption of
FAS 122, both OMSRs and PMSRs must be capitalized as balance sheet
assets, a treatment previously permitted only for PMSRs. Both types of
mortgage servicing rights may be reported in the same balance sheet
asset category. Thus, on a prospective basis, under generally accepted
accounting principles (GAAP), there generally will no longer be any
significant accounting distinction between OMSRs and PMSRs for
reporting, valuation, or disclosure purposes.
Prior to the issuance of FAS 122, GAAP referred to PMSRs as
intangible assets. FAS 122 eliminates the reference to PMSRs as
intangible assets but does not characterize mortgage servicing rights
as either intangible or tangible assets. FAS 122 indicates that no
characterization of mortgage servicing rights as either intangible or
tangible assets is necessary because similar characterizations are not
made for most other assets. However, FAS 122 also indicates that the
elimination of the intangible asset reference does not imply that
mortgage servicing rights are tangible assets.
FAS 122 requires that mortgage servicing rights be considered
impaired whenever their fair value is less than their amortized cost. A
valuation allowance is required for the amount of any impairment, which
must be measured by stratifying mortgage servicing rights based on one
or more of the predominant risk characteristics of the underlying
loans. These characteristics may include loan type, size, note rate,
date of origination, term and geographic location.
FAS 122 is effective for financial statements prepared in
accordance with GAAP for fiscal years beginning after December 15,
1995, although FASB encourages earlier application. On June 21, 1995,
the Federal Financial Institutions Examination Council (FFIEC)
announced that banks must adopt FAS 122 for purposes of the Reports of
Condition and Income (Call Report) as of the same effective date and
with earlier application permitted to the extent allowable in this
accounting standard. The OTS requires savings associations to follow
GAAP for regulatory reporting and, thus, FAS 122's effective date
provisions are also applicable for Thrift Financial Report
purposes.1
\1\Commercial banks are required to file quarterly Consolidated
Reports of Condition and Income (Call Reports) and should report
OMSRs and PMSRs in Schedule RC-M (Memoranda), item 6.a., ``Mortgage
servicing rights'' and in Schedule RC (Balance Sheet), item 10,
``Intangible assets.'' Bank holding companies with total
consolidated assets of $150 million or more file quarterly
Consolidated Financial Statements for Bank Holding Companies (FR Y-
9C reports) with the Federal Reserve, and should report OMSRs and
PMSRs in Schedule HC--Consolidated Balance Sheet, item 10.a.,
``Mortgage servicing rights.'' Savings Associations are required to
file quarterly Thrift Financial Reports and should report
capitalized OMSRs and PMSRs on Thrift Financial Report Schedule SC,
line 640, which is currently labeled ``purchased loan servicing
rights.''
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Interim Amendments to the Capital Adequacy Guidelines
Banking organizations adopting FAS 122 early could reflect OMSRs on
their regulatory reports as soon as June 30, 1995.2 In view of
this implementation schedule, the Agencies are now adopting an interim
rule that is effective immediately in order to give banking
organizations that adopt FAS 122 early direction on the regulatory
capital treatment of OMSRs.
\2\Banking organizations that do not adopt FAS 122 early may not
capitalize OMSRs in 1995 and would not reflect the asset on their
regulatory reports. In the interim, such institutions should
continue to report PMSRs in accordance with the existing Call Report
and Thrift Financial Report instructions until they adopt FAS 122 in
1996.
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Under the interim rule, for risk-based and leverage capital
purposes, mortgage servicing rights, including both PMSRs and
OMSRs3, and purchased credit card relationships (PCCRs) may be
included in capital only to the extent that, in the aggregate, they do
not exceed 50 percent of Tier 1 (core) capital.4 For purposes of
calculating Tier 1 (core) capital, all mortgage servicing rights are
valued--as PMSRs previously were--at the lesser of 90 percent of fair
market value or 100 percent of their book value (net of any valuation
allowance). In addition, under the interim rule, the amount of mortgage
servicing rights that may be included in tangible equity for purposes
of prompt corrective action is the same as that permitted in Tier 1
(core) capital.
\3\Due to the 50 percent of Tier 1 (core) capital limitation, it
is possible that at least some of the OMSRs an institution reports
as balance sheet assets for Call Report and Thrift Financial Report
purposes may be required to be deducted in computing regulatory
capital under this interim rule. For purposes of determining the
amount of any OMSRs that would be deducted (or disallowed) under
this 50 percent of Tier 1 (core) capital limitation, institutions
may choose to reduce their otherwise disallowed OMSRs by the amount
of any associated deferred tax liability. Any such deferred tax
liability used in this manner would not be available for the
institution to use in determining the amount of any net deferred tax
assets that may be included in Tier 1 (core) capital for risk-based
and leverage capital purposes.
\4\The 25 percent of Tier 1 (core) capital sublimit on PCCRs is
not affected by this rulemaking. In addition, all other intangible
assets continue to be fully deducted from capital.
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The Agencies are adopting this interim rule because they believe
that the risk characteristics of OMSRs are similar to those of PMSRs.
In view of the subjectivity and uncertainty surrounding the valuation
of PMSRs and the consequent risks resulting from a high concentration
of these assets, the Agencies previously decided to limit the amount of
PMSRs that an institution could include in regulatory capital.
Therefore, the Agencies believe that it is consistent to limit OMSRs in
the same manner as PMSRs, pending a review of the comments received on
this interim rule and the Agencies' resulting determination of the
appropriate capital treatment of mortgage servicing rights. This
interim capital rule is consistent with the recommendations provided on
June 21, 1995, to the Agencies by the FFIEC's Task Force on
Supervision.
The Agencies are seeking comment on all aspects of this interim
rule. The Agencies also request specific comment on the following:
(1) For regulatory capital purposes, the Agencies have considered
PMSRs as intangible assets. This determination was based, in part, on
the prior GAAP characterization of this asset. FAS 122 indicates
indifference toward any characterization of mortgage servicing rights
(both PMSRs and OMSRs) as intangible or tangible assets.
(a) Should mortgage servicing rights be viewed as intangible assets
for regulatory capital purposes?
(b) If mortgage servicing rights are considered to be intangible
assets for regulatory capital purposes, should they continue to be
subject to the regulatory capital limitations previously applied only
to PMSRs?
(c) If mortgage servicing rights are considered to be tangible
assets for regulatory capital purposes, what regulatory capital
limitations, if any, should apply?
(2) How should any deferred tax liability associated with PMSRs and
OMSRs be treated when calculating a regulatory capital limit?
(3) When an institution originates mortgage loans and swaps them
for mortgage-backed securities, including agency guaranteed mortgage-
backed securities, FAS 122 requires the institution to attribute a
separate cost basis to the loan and servicing right components of such
mortgage-backed securities. What is the appropriate regulatory capital
treatment of mortgage servicing rights that are associated with
mortgage-backed securities that are
[[Page 39228]]
acquired in swap transactions and included in an institution's assets?
Regulatory Flexibility Act Analysis
The Agencies do not believe that the adoption of their interim
rule will have a significant economic impact on a substantial number of
small business entities (in this case, small banking organizations), in
accordance with the spirit and purposes of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.). Because of the pre-FAS 122 accounting
treatment of OMSRs, no banking organizations--large or small--currently
carry any OMSRs, which are the subject of the interim rule, as assets
on their balance sheets or include them in capital. The Agencies'
interim rule, in combination with the requirement that institutions
adopt FAS 122 for regulatory reporting purposes, allows banking
organizations to increase their regulatory capital by including OMSRs
in assets and Tier 1 (core) capital. This interim rule would only
affect those banking organizations that originate and subsequently sell
or securitize mortgage loans but retain the servicing rights. In
addition, FAS 122 is to be applied prospectively. As a result, OMSRs
will only need to be capitalized for those transactions that occur
after the date as of which an institution adopts FAS 122. Moreover,
because the risk-based and leverage capital guidelines generally do not
apply to bank holding companies with consolidated assets of less than
$150 million, this proposal will not affect such companies.
OCC and OTS Executive Order 12866 Statement
The Comptroller of the Currency and the Director of the OTS have
determined that the interim rule described in this notice is not a
significant regulatory action under Executive Order 12866. Accordingly,
a regulatory impact analysis is not required.
Paperwork Reduction Act and Regulatory Burden
The Agencies have determined that this interim rule will not
increase the regulatory paperwork burden of banking organizations
pursuant to the provisions of the Paperwork Reduction Act (44 U.S.C.
3501 et seq.).
Section 302 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Pub. L. 103-325, 108 Stat. 2160) provides that
the federal banking agencies must consider the administrative burdens
and benefits of any new regulation that imposes additional requirements
on insured depository institutions. The Agencies have found that their
interim rule does not impose any additional reporting or recordkeeping
burdens. Section 302 also requires such a rule to take effect on the
first day of the calendar quarter following final publication of the
rule, unless the agency, for good cause, determines an earlier
effective date is appropriate. The Agencies have decided that their
interim rule should be effective immediately because it provides
institutions with information on the regulatory capital treatment for
OMSRs that may begin to be reported on the June 30, 1995 Call Report
and Thrift Financial Report.
Administrative Procedure Act
Pursuant to section 553 of the Administrative Procedure Act, 5
U.S.C. 553, the Agencies find good cause for issuing this interim rule
in advance of the receipt of comments from interested parties and for
waiving the 30-day delay of effectiveness provisions of the
Administrative Procedures Act. This ``good cause'' determination is
based upon institutions' immediate need to know how to treat OMSRs in
computing regulatory capital. This guidance is necessary because the
Financial Accounting Standards Board, on May 12, 1995, revised the
treatment of OMSRs under generally accepted accounting principles by
adopting Statement of Financial Accounting Standard No. 122 (FAS 122),
``Accounting for Mortgage Servicing Rights,'' which institutions may
adopt beginning in reports prepared as of June 30, 1995. Under FAS 122,
OMSRs will be capitalized and included in assets with corresponding
increases to an institution's capital base. Prior to the issuance of
FAS 122, OMSRs were not capitalized and not recorded on the balance
sheet. This interim rule allows institutions that early adopt FAS 122
in their June 30, 1995, regulatory reports to include OMSRs in assets
and regulatory capital, subject to certain limitations.
OCC and OTS Unfunded Mandates Act Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act) (signed into law on March 22, 1995)
requires that an agency prepare a budgetary impact statement before
promulgating a rule that includes a Federal mandate that may result in
expenditure by State, local and tribal governments, in the aggregate,
or by the private sector, of $100 million or more in any one year. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule. As discussed in the preamble, this interim rule, in conjunction
with FAS 122, permits OMSRs to be capitalized as balance sheet items, a
treatment that was previously only permitted for PMSRs. Under the
interim rule, OMSRs will be included in calculating Tier 1 (core)
capital for risk-based capital and leverage capital standards subject
to the same constraints that are imposed on PMSRs. Thus, no additional
cost of $100 million or more, to State, local, or tribal governments or
to the private sector will result from this rule. Accordingly, the OCC
and the OTS have not prepared a budgetary impact statement nor
specifically addressed any regulatory alternatives.
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, National banks,
Reporting and recordkeeping requirements, Risk.
12 CFR Part 6
Capital, National banks.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Crime, Currency, Federal Reserve System, Flood insurance,
Mortgages, Reporting and recordkeeping requirements, Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 325
Bank deposit insurance, Banks, banking, Capital adequacy, Reporting
and recordkeeping requirements, Savings associations, State nonmember
banks.
12 CFR Part 565
Administrative practice and procedure, Capital, Savings
associations.
12 CFR Part 567
Capital, Reporting and recordkeeping requirements, Savings
associations.
Authority and Issuance
Office of the Comptroller of the Currency
12 CFR Chapter I
For the reasons set out in the joint preamble, the Office of the
Comptroller
[[Page 39229]]
of the Currency amends 12 CFR chapter I as set forth below.
PART 3--MINIMUM CAPITAL RATIOS; ISSUANCE OF DIRECTIVES
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n
note, 1835, 3907, and 3909.
2. In part 3, paragraph (c)(2) of Sec. 3.100 is revised to read as
follows:
Sec. 3.100 Capital and surplus.
* * * * *
(c) * * *
(2) Mortgage servicing rights;
* * * * *
3. In appendix A to part 3, paragraph (c)(13) of section 1 is
revised to read as follows:
Appendix A to Part 3--Risk-Based Capital Guidelines
Section 1. Purpose, Applicability of Guidelines, and Definitions
* * * * *
(c) * * *
(13) Intangible assets include mortgage servicing rights,
purchased credit card relationships (servicing rights), goodwill,
favorable leaseholds, and core deposit value.
* * * * *
4. In appendix A to part 3, paragraphs (c) introductory text,
(c)(1), and (c)(3) of section 2 are revised to read as follows:
* * * * *
Section 2. Components of Capital
* * * * *
(c) Deductions From Capital. The following items are deducted
from the appropriate portion of a national bank's capital base when
calculating its risk-based capital ratio:
\6\[Reserved].
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(1) Deductions from Tier 1 capital. The following items are
deducted from Tier 1 capital before the Tier 2 portion of the
calculation is made:
(i) All goodwill subject to the transition rules contained in
section 4(a)(1)(ii) of this appendix A;
(ii) Other intangible assets, except as provided in section
2(c)(2) of this appendix A; and
(iii) Deferred tax assets, except as provided in section 2(c)(3)
of this appendix A, that are dependent upon future taxable income,
which exceed the lesser of either:
(A) The amount of deferred tax assets that the bank could
reasonably expect to realize within one year of the quarter-end Call
Report, based on its estimate of future taxable income for that
year; or
(B) 10% of Tier 1 capital, net of goodwill and all intangible
assets other than mortgage servicing rights and purchased credit
card relationships, and before any disallowed deferred tax assets
are deducted.
(2) Qualifying intangible assets. Subject to the following
conditions, mortgage servicing rights (originated and purchased) and
purchased credit card relationships need not be deducted from Tier 1
capital:
(i) The total of all intangible assets which are included in
Tier 1 capital is limited to 50 percent of Tier 1 capital, of which
no more than 25 percent of Tier 1 capital can consist of purchased
credit card relationships. Calculation of these limitations must be
based on Tier 1 capital net of goodwill and other disallowed
intangible assets.
(ii) Each intangible asset which is included in Tier 1 capital
must be valued at the lesser of:
(A) 90 percent of the fair market value of the intangible asset,
determined in accordance with section 2(c)(2)(iii) of this appendix
A; or
(B) 100 percent of the remaining unamortized book value of the
intangible asset, determined at least quarterly in accordance with
the instructions of the Call Report.
(iii) Banks shall determine the current fair market value of
each intangible asset included in Tier 1 capital at least quarterly.
The quarterly determination of the current fair market value of the
intangible asset must include adjustments for any significant
changes in original valuation assumptions, including changes in
prepayment estimates. In determining the current fair market value
of the intangible asset, the bank shall apply an appropriate market
discount rate to the expected net cash flows of the intangible
asset.
* * * * *
PART 6--PROMPT CORRECTIVE ACTION
1. The authority citation for part 6 continues to read as follows:
Authority: 12 U.S.C. 93a, 1831o.
2. In subpart A to part 6, paragraph (g) of Sec. 6.2 is revised to
read as follows:
Sec. 6.2 Definitions.
* * * * *
(g) Tangible equity means the amount of Tier 1 capital elements in
the OCC's Risk-Based Capital Guidelines (appendix A to part 3 of this
chapter) plus the amount of outstanding cumulative perpetual preferred
stock (including related surplus) minus all intangible assets except
mortgage servicing rights to the extent permitted in Tier 1 capital
under section 2(c) in appendix A to part 3 of this chapter.
* * * * *
Dated: July 21, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
12 CFR Chapter II
For the reasons outlined in the joint preamble, the Board of
Governors of the Federal Reserve System amends 12 CFR Chapter II as set
forth below.
PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL
RESERVE SYSTEM (REGULATION H)
1. The authority citation for part 208 is revised to read as
follows:
Authority: 12 U.S.C. 36, 248(a), 248(c), 321-338, 371d, 461,
481-486, 601, 611, 1814, 1823(j), 1828(o), 1831o, 1831p-1, 3105,
3310, 3331-3351 and 3906-3909; 15 U.S.C. 78b, 78l(b), 78l(g),
78l(i), 78o-4(c) (5), 78q, 78q-l, and 78w; 31 U.S.C. 5318; 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
2. In Sec. 208.31, paragraph (f) is revised to read as follows:
Sec. 208.31 Definitions.
* * * * *
(f) Tangible equity means the amount of core capital elements in
the Board's Capital Adequacy Guidelines for State Member Banks: Risk-
Based Measure (Appendix A to this part), plus the amount of outstanding
cumulative perpetual preferred stock (including related surplus), minus
all intangible assets except mortgage servicing rights to the extent
that the Board determines that mortgage servicing rights may be
included in calculating the bank's tier 1 capital.
* * * * *
3. Appendix A to part 208 is amended by revising section II.B.1.b.
to read as follows:
Appendix A to Part 208--Capital Adequacy Guidelines for State Member
Banks: Risk-Based Measure
* * * * *
II. * * *
B. * * *
1. * * *
b. Other intangible assets. i. The only types of identifiable
intangible assets that may be included in, that is, not deducted
from, a bank's capital are readily marketable mortgage servicing
rights and purchased credit card relationships, provided that, in
the aggregate, the total amount of these assets included in capital
does not exceed 50 percent of tier 1 capital. Purchased credit card
relationships are subject to a separate sublimit of 25 percent of
tier 1 capital.14
\14\Amounts of mortgage servicing rights and purchased credit
card relationships in excess of these limitations, as well as all
other identifiable intangible assets, including core deposit
intangibles and favorable leaseholds, are to be deducted from a
bank's core capital elements in determining tier 1 capital. However,
identifiable intangible assets (other than mortgage servicing rights
and purchased credit card relationships) acquired on or before
February 19, 1992, generally will not be deducted from capital for
supervisory purposes, although they will continue to be deducted for
applications purposes.
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ii. For purposes of calculating these limitations on mortgage
servicing rights and purchased credit card relationships, tier 1
capital is defined as the sum of core capital
[[Page 39230]]
elements, net of goodwill and all identifiable intangible assets other
than mortgage servicing rights and purchased credit card
relationships, regardless of the date acquired. This method of
calculation could result in mortgage servicing rights and purchased
credit card relationships being included in capital in an amount
greater than 50 percent--or in purchased credit card relationships
being included in an amount greater than 25 percent--of the amount
of tier 1 capital used to calculate an institution's capital ratios.
In such instances, the Federal Reserve may determine that a bank is
operating in an unsafe and unsound manner because of over-reliance
on intangible assets in tier 1 capital.
iii. Banks must review the book value of all intangible assets
at least quarterly and make adjustments to these values as
necessary. The fair market value of mortgage servicing rights and
purchased credit card relationships also must be determined at least
quarterly. The fair market value generally shall be determined by
applying an appropriate market discount rate to the expected future
net cash flows. This determination shall include adjustments for any
significant changes in original valuation assumptions, including
changes in prepayment estimates or account attrition rates.
iv. Examiners will review both the book value and the fair
market value assigned to these assets, together with supporting
documentation, during the examination process. In addition, the
Federal Reserve may require, on a case-by-case basis, an independent
valuation of a bank's intangible assets.
v. The amount of mortgage servicing rights and purchased credit
card relationships that a bank may include in capital shall be the
lesser of 90 percent of their fair market value, as determined in
accordance with this section, or 100 percent of their book value, as
adjusted for capital purposes in accordance with the instructions in
the commercial bank Consolidated Reports of Condition and Income
(Call Reports). If both the application of the limits on mortgage
servicing rights and purchased credit card relationships and the
adjustment of the balance sheet amount for these intangibles would
result in an amount being deducted from capital, the bank would
deduct only the greater of the two amounts from its core capital
elements in determining tier 1 capital.
vi. The treatment of identifiable intangible assets set forth in
this section generally will be used in the calculation of a bank's
capital ratios for supervisory and applications purposes. However,
in making an overall assessment of a bank's capital adequacy for
applications purposes, the Board may, if it deems appropriate, take
into account the quality and composition of a bank's capital,
together with the quality and value of its tangible and intangible
assets.
vii. Consistent with long-standing Board policy, banks
experiencing substantial growth, whether internally or by
acquisition, are expected to maintain strong capital positions
substantially above minimum supervisory levels, without significant
reliance on intangible assets.
2. * * *
* * * * *
4. Appendix A to part 208 is amended by revising section II.B.4. to
read as follows:
* * * * *
II. * * *
B. * * *
4. Deferred tax assets. The amount of deferred tax assets that
are dependent upon future taxable income, net of the valuation
allowance for deferred tax assets, that may be included in, that is,
not deducted from, a bank's capital may not exceed the lesser of:
(i) the amount of these deferred tax assets that the bank is
expected to realize within one year of the calendar quarter-end
date, based on its projections of future taxable income for that
year,20 or (ii) 10 percent of tier 1 capital. The reported
amount of deferred tax assets, net of any valuation allowance for
deferred tax assets, in excess of the lesser of these two amounts is
to be deducted from a bank's core capital elements in determining
tier 1 capital. For purposes of calculating the 10 percent
limitation, tier 1 capital is defined as the sum of core capital
elements, net of goodwill and all identifiable intangible assets
other than mortgage servicing rights and purchased credit card
relationships, before any disallowed deferred tax assets are
deducted. There generally is no limit in tier 1 capital on the
amount of deferred tax assets that can be realized from taxes paid
in prior carryback years or from future reversals of existing
taxable temporary differences, but, for banks that have a parent,
this may not exceed the amount the bank could reasonably expect its
parent to refund.
\20\To determine the amount of expected deferred tax assets
realizable in the next 12 months, an institution should assume that
all existing temporary differences fully reverse as of the report
date. Projected future taxable income should not include net
operating loss carryforwards to be used during that year or the
amount of existing temporary differences a bank expects to reverse
within the year. Such projections should include the estimated
effect of tax planning strategies that the organization expects to
implement to realize net operating losses or tax credit
carryforwards that would otherwise expire during the year.
Institutions do not have to prepare a new 12 month projection each
quarter. Rather, on interim report dates, institutions may use the
future taxable income projections for their current fiscal year,
adjusted for any significant changes that have occurred or are
expected to occur.
---------------------------------------------------------------------------
* * * * *
5. Appendix B to part 208 is amended by revising section II.b. to
read as follows:
Appendix B to Part 208--Capital Adequacy Guidelines for State Member
Banks: Tier 1 Leverage Measure
* * * * *
II. * * *
b. A bank's tier 1 leverage ratio is calculated by dividing its
tier 1 capital (the numerator of the ratio) by its average total
consolidated assets (the denominator of the ratio). The ratio will
also be calculated using period-end assets whenever necessary, on a
case-by-case basis. For the purpose of this leverage ratio, the
definition of tier 1 capital for year-end 1992 as set forth in the
risk-based capital guidelines contained in Appendix A of this part
will be used.2 As a general matter, average total consolidated
assets are defined as the quarterly average total assets (defined
net of the allowance for loan and lease losses) reported on the
bank's Reports of Condition and Income (Call Reports), less
goodwill; amounts of mortgage servicing rights and purchased credit
card relationships that, in the aggregate, are in excess of 50
percent of tier 1 capital; amounts of purchased credit card
relationships in excess of 25 percent of tier 1 capital; all other
intangible assets; any investments in subsidiaries or associated
companies that the Federal Reserve determines should be deducted
from tier 1 capital; and deferred tax assets that are dependent upon
future taxable income, net of their valuation allowance, in excess
of the limitation set forth in section II.B.4 of this Appendix
A.3
\2\At the end of 1992, tier 1 capital for state member banks
includes common equity, minority interest in the equity accounts of
consolidated subsidiaries, and qualifying noncumulative perpetual
preferred stock. In addition, as a general matter, tier 1 capital
excludes goodwill; amounts of mortgage servicing rights and
purchased credit card relationships that, in the aggregate, exceed
50 percent of tier 1 capital; amounts of purchased credit card
relationships that exceed 25 percent of tier 1 capital; all other
intangible assets; and deferred tax assets that are dependent upon
future taxable income, net of their valuation allowance, in excess
of certain limitations. The Federal Reserve may exclude certain
investments in subsidiaries or associated companies as appropriate.
\3\Deductions from tier 1 capital and other adjustments are
discussed more fully in section II.B. in Appendix A of this part.
---------------------------------------------------------------------------
* * * * *
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
1. The authority citation for part 225 continues to read as
follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(l), 3106, 3108, 3310, 3331-3351, 3907, and
3909.
2. Appendix A to part 225 is amended by revising section II.B.1.b.
to read as follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
II. * * *
B. * * *
1.* * *
b. Other intangible assets. i. The only types of identifiable
intangible assets that may be included in, that is, not deducted
from, a organization's capital are readily marketable mortgage
servicing rights and purchased credit card relationships, provided
that, in the aggregate, the total amount of these assets included in
capital does not exceed 50 percent of tier 1 capital. Purchased
credit card relationships are subject to a separate sublimit of 25
percent of tier 1 capital.\15\
\15\Amounts of mortgage servicing rights and purchased credit
card relationships in excess of these limitations, as well as all
other identifiable intangible assets, including core deposit
intangibles and favorable leaseholds, are to be deducted from an
organization's core capital elements in determining tier 1 capital.
However, identifiable intangible assets (other than mortgage
servicing rights and purchased credit card relationships) acquired
on or before February 19, 1992, generally will not be deducted from
capital for supervisory purposes, although they will continue to be
deducted for applications purposes.
[[Page 39231]]
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ii. For purposes of calculating these limitations on mortgage
servicing rights and purchased credit card relationships, tier 1
capital is defined as the sum of core capital elements, net of
goodwill and all identifiable intangible assets other than mortgage
servicing rights and purchased credit card relationships, regardless
of the date acquired. This method of calculation could result in
mortgage servicing rights and purchased credit card relationships
being included in capital in an amount greater than 50 percent--or
in purchased credit card relationships being included in an amount
greater than 25 percent--of the amount of tier 1 capital used to
calculate an institution's capital ratios. In such instances, the
Federal Reserve may determine that an organization is operating in
an unsafe and unsound manner because of overreliance on intangible
assets in tier 1 capital.
iii. Bank holding companies must review the book value of all
intangible assets at least quarterly and make adjustments to these
values as necessary. The fair market value of mortgage servicing
rights and purchased credit card relationships also must be
determined at least quarterly. The fair market value generally shall
be determined by applying an appropriate market discount rate to the
expected future net cash flows. This determination shall include
adjustments for any significant changes in original valuation
assumptions, including changes in prepayment estimates or account
attrition rates.
iv. Examiners will review both the book value and the fair
market value assigned to these assets, together with supporting
documentation, during the inspection process. In addition, the
Federal Reserve may require, on a case-by-case basis, an independent
valuation of an organization's intangible assets.
v. The amount of mortgage servicing rights and purchased credit
card relationships that a bank holding company may include in
capital shall be the lesser of 90 percent of their fair market
value, as determined in accordance with this section, or 100 percent
of their book value, as adjusted for capital purposes in accordance
with the instructions to the Consolidated Financial Statements for
Bank Holding Companies (FR Y-9C Report). If both the application of
the limits on mortgage servicing rights and purchased credit card
relationships and the adjustment of the balance sheet amount for
these intangibles would result in an amount being deducted from
capital, the bank holding company would deduct only the greater of
the two amounts from its core capital elements in determining tier 1
capital.
vi. The treatment of identifiable intangible assets set forth in
this section generally will be used in the calculation of a bank
holding company's capital ratios for supervisory and applications
purposes. However, in making an overall assessment of an
organization's capital adequacy for applications purposes, the Board
may, if it deems appropriate, take into account the quality and
composition of an organization's capital, together with the quality
and value of its tangible and intangible assets.
vii. Consistent with long-standing Board policy, banking
organizations experiencing substantial growth, whether internally or
by acquisition, are expected to maintain strong capital positions
substantially above minimum supervisory levels, without significant
reliance on intangible assets.
2.* * *
* * * * *
3. Appendix A to Part 225 is amended by revising section II.B.4. to
read as follows:
* * * * *
II. * * *
B. * * *
4. Deferred tax assets. The amount of deferred tax assets that
are dependent upon future taxable income, net of the valuation
allowance for deferred tax assets, that may be included in, that is,
not deducted from, a banking organization's capital may not exceed
the lesser of: (i) the amount of these deferred tax assets that the
banking organization is expected to realize within one year of the
calendar quarter-end date, based on its projections of future
taxable income for that year,\23\ or (ii) 10 percent of tier 1
capital. The reported amount of deferred tax assets, net of any
valuation allowance for deferred tax assets, in excess of the lesser
of these two amounts is to be deducted from a banking organization's
core capital elements in determining tier 1 capital. For purposes of
calculating the 10 percent limitation, tier 1 capital is defined as
the sum of core capital elements, net of goodwill and all
identifiable intangible assets other than mortgage servicing rights
and purchased credit card relationships, before any disallowed
deferred tax assets are deducted. There generally is no limit in
tier 1 capital on the amount of deferred tax assets that can be
realized from taxes paid in prior carryback years or from future
reversals of existing taxable temporary differences.
\23\To determine the amount of expected deferred tax assets
realizable in the next 12 months, an institution should assume that
all existing temporary differences fully reverse as of the report
date. Projected future taxable income should not include net
operating loss carryforwards to be used during that year or the
amount of existing temporary differences a bank holding company
expects to reverse within the year. Such projections should include
the estimated effect of tax planning strategies that the
organization expects to implement to realize net operating losses or
tax credit carryforwards that would otherwise expire during the
year. Institutions do not have to prepare a new 12 month projection
each quarter. Rather, on interim report dates, institutions may use
the future taxable income projections for their current fiscal year,
adjusted for any significant changes that have occurred or are
expected to occur.
---------------------------------------------------------------------------
* * * * *
4. Appendix D to part 225 is amended by revising section II.b. to
read as follows:
Appendix D to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Tier 1 Leverage Measure
* * * * *
II. * * *
b. A banking organization's tier 1 leverage ratio is calculated
by dividing its tier 1 capital (the numerator of the ratio) by its
average total consolidated assets (the denominator of the ratio).
The ratio will also be calculated using period-end assets whenever
necessary, on a case-by-case basis. For the purpose of this leverage
ratio, the definition of tier 1 capital for year-end 1992 as set
forth in the risk-based capital guidelines contained in Appendix A
of this part will be used.\3\ As a general matter, average total
consolidated assets are defined as the quarterly average total
assets (defined net of the allowance for loan and lease losses)
reported on the organization's Consolidated Financial Statements (FR
Y-9C Report), less goodwill; amounts of mortgage servicing rights
and purchased credit card relationships that, in the aggregate, are
in excess of 50 percent of tier 1 capital; amounts of purchased
credit card relationships in excess of 25 percent of tier 1 capital;
all other intangible assets; any investments in subsidiaries or
associated companies that the Federal Reserve determines should be
deducted from tier 1 capital; and deferred tax assets that are
dependent upon future taxable income, net of their valuation
allowance, in excess of the limitation set forth in section II.B.4
of this Appendix A.\4\
\3\At the end of 1992, tier 1 capital for banking organizations
includes common equity, minority interest in the equity accounts of
consolidated subsidiaries, qualifying noncumulative perpetual
preferred stock, and qualifying cumulative perpetual preferred
stock. (Cumulative perpetual preferred stock is limited to 25
percent of tier 1 capital.) In addition, as a general matter, tier 1
capital excludes goodwill; amounts of mortgage servicing rights and
purchased credit card relationships that, in the aggregate, exceed
50 percent of tier 1 capital; amounts of purchased credit card
relationships that exceed 25 percent of tier 1 capital; all other
intangible assets; and deferred tax assets that are dependent upon
future taxable income, net of their valuation allowance, in excess
of certain limitations. The Federal Reserve may exclude certain
investments in subsidiaries or associated companies as appropriate.
\4\Deductions from tier 1 capital and other adjustments are
discussed more fully in section II.B. in Appendix A of this part.
---------------------------------------------------------------------------
* * * * *
By order of the Board of Governors of the Federal Reserve
System, July 26, 1995
William W. Wiles,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR Chapter III
For the reasons outlined in the joint preamble, the Board of
Directors of the Federal Deposit Insurance Corporation amends 12 CFR
chapter III as set forth below.
[[Page 39232]]
PART 325--CAPITAL MAINTENANCE
1. The authority citation for part 325 continues to read as
follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761,
1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236,
2355, 2386 (12 U.S.C. 1828 note).
2. In Sec. 325.2, paragraph (n) is amended by removing the word
``purchased'' each place it appears and paragraph (s) is revised to
read as follows:
Sec. 325.2 Definitions.
* * * * *
(s) Tangible equity means the amount of core capital elements as
defined in Section I.A.1. of the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to this Part 325), plus the amount of
outstanding cumulative perpetual preferred stock (including related
surplus), minus all intangible assets except mortgage servicing rights
to the extent that the FDIC determines pursuant to Sec. 325.5(f) of
this part that mortgage servicing rights may be included in calculating
the bank's Tier 1 capital.
* * * * *
Sec. 325.5 [Amended]
3. Section 325.5 is amended by removing the words ``purchased
mortgage servicing rights'' and adding, in their place, the words
``mortgage servicing rights'' in paragraphs (f), (g)(2)(i)(B), and
(g)(5).
Appendix A to Part 325 [Amended]
4. In Appendix A to part 325, remove the words ``purchased mortgage
servicing rights'' in footnote 2 to ``Table I--Definition of Qualifying
Capital'' and add, in their place, the words ``mortgage servicing
rights''.
Appendix B to Part 325 [Amended]
5. In Appendix B to part 325, section IV.A.:
a. Remove the words ``purchased mortgage servicing rights'' and
add, in their place, the words ``mortgage servicing rights'' each place
they appear in footnote 1 and in the last sentence of the last
paragraph; and
b. Remove the words ``purchased servicing intangibles'' and add, in
their place, the words ``servicing intangibles'' in the last sentence
of the last paragraph.
By order of the Board of Directors.
Dated at Washington, DC, this 21st day of July, 1995.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
Office of Thrift Supervision
12 CFR Chapter V
For the reasons outlined in the joint preamble, the Office of
Thrift Supervision hereby amends 12 CFR chapter V as set forth below.
SUBCHAPTER D--REGULATIONS APPLICABLE TO ALL SAVINGS ASSOCIATIONS
PART 565--PROMPT CORRECTIVE ACTION
1. The authority citation for part 565 continues to read as
follows:
Authority: 12 U.S.C. 1831o.
2. Section 565.2 is amended by revising paragraph (f) to read as
follows:
Sec. 565.2 Definitions
* * * * *
(f) Tangible equity means the amount of a savings association's
core capital as defined in part 567 of this subchapter plus the amount
of its outstanding cumulative perpetual preferred stock (including
related surplus), minus intangible assets as defined in Sec. 567.1(m)
of this subchapter and mortgage servicing rights not includable in core
capital pursuant to Sec. 567.12 of this subchapter.
* * * * *
PART 567--CAPITAL
1. The authority citation for part 567 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828
(note).
2. Section 567.1 is amended by revising paragraph (m) to read as
follows:
Sec. 567.1 Definitions.
* * * * *
(m) Intangible assets. The term intangible assets means assets
referred to as intangible assets in authoritative literature on
generally accepted accounting principles. These intangible assets
include, but are not limited to, goodwill, favorable leaseholds, core
deposit premiums and purchased credit card relationships. Mortgage
servicing rights (either originated or purchased) are not intangible
assets under this definition.
* * * * *
3. Section 567.5 is amended by revising paragraphs (a)(2) heading,
(a)(2)(i) and (a)(2)(ii) to read as follows:
Sec. 567.5 Components of capital.
(a) * * *
(2) Deductions from core capital. (i) Intangible assets, as defined
in Sec. 567.1(m) of this part, are deducted from assets and capital in
computing core capital, except as otherwise provided by Sec. 567.12 of
this part.
(ii) Mortgage servicing rights (both originated and purchased) that
are not includable in tangible and core capital pursuant to Sec. 567.12
of this part are deducted from assets and capital in computing core
capital.
* * * * *
4. Section 567.6 is amended by revising paragraphs (a)(1)(iv)(L)
and (a)(1)(iv)(M) to read as follows:
Sec. 567.6 Risk-based capital credit risk-weight categories.
(a) * * *
(1) * * *
(iv) * * *
(L) Mortgage servicing rights and intangible assets includable in
core capital pursuant to Sec. 567.12 of this part;
(M) Excess servicing receivables;
* * * * *
5. Section 567.9 is amended by revising paragraph (c)(1) to read as
follows:
Sec. 567.9 Tangible capital requirement.
* * * * *
(c) * * *
(1) Intangible assets, as defined in Sec. 567.1(m) of this part,
and mortgage servicing rights (purchased or originated) not includable
in core and tangible capital pursuant to Sec. 567.12 of this part.
* * * * *
6. Section 567.12 is amended by revising the section heading and
paragraphs (a) through (f) to read as follows:
Sec. 567.12 Qualifying intangible assets and mortgage servicing
rights.
(a) Scope. This section prescribes the maximum amount of qualifying
intangible assets, as defined in Sec. 567.1(m) of this part, and
mortgage servicing rights that savings associations may include in
calculating tangible and core capital.
(b) Definition. Qualifying intangible assets and mortgage servicing
rights means purchased credit card relationships and mortgage servicing
rights (both originated and purchased). Mortgage servicing rights (both
originated and purchased) may be included (that is, not deducted) in
computing core and tangible capital. Purchased credit card
relationships may be included in computing core capital, but must be
deducted in computing tangible capital. These qualifying intangible
assets and mortgage servicing
[[Page 39233]]
rights may be included in capital only in accordance with the
limitations and restrictions set forth in this section. Intangible
assets, as defined in Sec. 567.1(m) of this part, other than purchased
credit card relationships and core deposit intangibles grandfathered by
paragraph (g)(3) of this section, must be deducted in computing
tangible and core capital.
(c) Market valuations. The OTS reserves the authority to require
any savings association to perform an independent market valuation of
qualifying intangible assets and mortgage servicing rights on a case-
by-case basis or through the issuance of policy guidance. An
independent market valuation, if required, shall be conducted in
accordance with any policy guidance issued by the OTS. A required
valuation shall include adjustments for any significant changes in
original valuation assumptions, including changes in prepayment
estimates or attrition rates. The valuation shall determine the current
fair market value of the qualifying intangible assets and mortgage
servicing rights by applying an appropriate market discount rate to the
net cash flows expected to be generated from the qualifying intangible
assets and mortgage servicing rights. This independent market valuation
may be conducted by an independent valuation expert evaluating the
reasonableness of the internal calculations and assumptions used by the
association in conducting its internal analysis. The association shall
calculate an estimated fair market value for the qualifying intangible
assets and mortgage servicing rights at least quarterly regardless of
whether an independent valuation expert is required to perform an
independent market valuation.
(d) Value limitation. For purposes of calculating core capital
under this part (but not for financial statement purposes), qualifying
intangible assets and mortgage servicing rights must be valued at the
lesser of:
(1) 90 percent of their fair market value determined in accordance
with paragraph (c) of this section; or
(2) 100 percent of their remaining unamortized book value
determined in accordance with the instructions for the Thrift Financial
Report.
(e) Core capital limitation.--(1) Aggregate limit. The maximum
aggregate amount of qualifying intangible assets and mortgage servicing
rights that may be included in core capital shall be limited to the
lesser of:
(i) 50 percent of the amount of core capital computed before the
deduction of any disallowed qualifying intangible assets or mortgage
servicing rights; or
(ii) The amount of qualifying intangible assets and mortgage
servicing rights determined in accordance with paragraph (d) of this
section.
(2) Reduction by deferred tax liability. Associations may elect to
reduce the amount of their disallowed (i.e., not includable in capital)
originated mortgage servicing rights exceeding the 50 percent aggregate
limit by the amount of any associated deferred tax liability.
(3) Sublimit for purchased credit card relationships. In addition
to the aggregate limitation on qualifying intangible assets and
mortgage servicing rights set forth in paragraph (e)(1) of this
section, a sublimit shall apply to purchased credit card relationships.
The maximum allowable amount of purchased credit card relationships
shall be limited to the lesser of:
(i) 25 percent of the amount of core capital computed before the
deduction of any disallowed qualifying intangible assets or mortgage
servicing rights; or
(ii) the amount of purchased credit card relationships determined
in accordance with paragraph (d) of this section.
(f) Tangible capital limitation. The maximum amount of mortgage
servicing rights that may be included in tangible capital shall be the
same amount includable in core capital in accordance with the
limitations set by paragraph (e)(1) of this section.
* * * * *
Dated: July 25, 1995.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-18772 Filed 7-31-95; 8:45 am]
BILLING CODES 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P