Regulatory Capital Standards Final Rule Amending the Risk-Based Capital Rules to Reflect the Issuance of FAS 166 and FAS 167

Capital

January 21, 2010

Summary:

The attached final rule amends the federal banking and thrift regulatory agencies' general risk-based and advanced risk-based capital adequacy frameworks in recognition of the regulatory capital impact of two recently-issued accounting standards from the Financial Accounting Standard Board (FASB)

Highlights:

The final rule:

Provides for an optional two-quarter implementation delay, followed by an optional two-quarter partial implementation, of the effect on risk-weighted assets that will result from changes to U.S. generally accepted accounting principles from FAS 166 and FAS 167.
Provides for an optional two-quarter delay, followed by an optional two-quarter phase-in, of the application of the agencies' regulatory limit on the inclusion of the allowance for loan and lease losses (ALLL) in Tier 2 capital for the portion of the ALLL associated with the assets a banking organization consolidates as a result of FAS 167.
Eliminates the exclusion of certain consolidated asset-backed commercial paper programs from risk-weighted assets.
Provides a reservation of authority to permit the agencies to require banking organizations to treat entities that are not consolidated under accounting standards as if they were consolidated for risk-based capital purposes, commensurate with the risk relationship of the banking organization to the structure.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/financial-institution-letters/2010/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).