Regulatory Capital Standards Deduction of Goodwill Net of Associated Deferred Tax Liability
FIL-144-2008 December 16, 2008
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.
FDIC-Supervised Banks (Commercial and Savings)
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.