§ 3.1 - Purpose, applicability, reservations of authority, and timing.

§ 3.1 Purpose, applicability, reservations of authority, and timing.

Cross Reference

Link to an amendment published at 84 FR 56374, Oct. 22, 2019.

Cross Reference

The effective date of this amendment was corrected to read January 1, 2020, at 84 FR 64193, Nov. 21, 2019.

(a) Purpose. This part establishes minimum capital requirements and overall capital adequacy standards for national banks and Federal savings associations. This part does not apply to Federal branches and agencies of foreign banks. This part includes methodologies for calculating minimum capital requirements, public disclosure requirements related to the capital requirements, and transition provisions for the application of this part.

(b) Limitation of authority. Nothing in this part shall be read to limit the authority of the OCC to take action under other provisions of law, including action to address unsafe or unsound practices or conditions, deficient capital levels, or violations of law or regulation, under section 8 of the Federal Deposit Insurance Act.

(c) Applicability. Subject to the requirements in paragraphs (d) and (f) of this section:

(1) Minimum capital requirements and overall capital adequacy standards. Each national bank or Federal savings association must calculate its minimum capital requirements and meet the overall capital adequacy standards in subpart B of this part.

(2) Regulatory capital. Each national bank or Federal savings association must calculate its regulatory capital in accordance with subpart C of this part.

(3) Risk-weighted assets.

(i) Each national bank or Federal savings association must use the methodologies in subpart D of this part (and subpart F of this part for a market risk national bank or Federal savings association) to calculate standardized total risk-weighted assets.

(ii) Each advanced approaches national bank or Federal savings association must use the methodologies in subpart E (and subpart F of this part for a market risk national bank or Federal savings association) to calculate advanced approaches total risk-weighted assets.

(4) Disclosures.

(i) Except for an advanced approaches national bank or Federal savings association that is making public disclosures pursuant to the requirements in subpart E of this part, each national bank or Federal savings association with total consolidated assets of $50 billion or more must make the public disclosures described in subpart D of this part.

(ii) Each market risk national bank or Federal savings association must make the public disclosures described in subpart F of this part.

(iii) Each advanced approaches national bank or Federal savings association must make the public disclosures described in subpart E of this part.

(d) Reservation of authority -

(1) Additional capital in the aggregate. The OCC may require a national bank or Federal savings association to hold an amount of regulatory capital greater than otherwise required under this part if the OCC determines that the national bank's or Federal savings association's capital requirements under this part are not commensurate with the national bank's or Federal savings association's credit, market, operational, or other risks.

(2) Regulatory capital elements.

(i) If the OCC determines that a particular common equity tier 1, additional tier 1, or tier 2 capital element has characteristics or terms that diminish its ability to absorb losses, or otherwise present safety and soundness concerns, the OCC may require the national bank or Federal savings association to exclude all or a portion of such element from common equity tier 1 capital, additional tier 1 capital, or tier 2 capital, as appropriate.

(ii) Notwithstanding the criteria for regulatory capital instruments set forth in subpart C of this part, the OCC may find that a capital element may be included in a national bank's or Federal savings association's common equity tier 1 capital, additional tier 1 capital, or tier 2 capital on a permanent or temporary basis consistent with the loss absorption capacity of the element and in accordance with § 3.20(e).

(3) Risk-weighted asset amounts. If the OCC determines that the risk-weighted asset amount calculated under this part by the national bank or Federal savings association for one or more exposures is not commensurate with the risks associated with those exposures, the OCC may require the national bank or Federal savings association to assign a different risk-weighted asset amount to the exposure(s) or to deduct the amount of the exposure(s) from its regulatory capital.

(4) Total leverage. If the OCC determines that the total leverage exposure, or the amount reflected in the national bank's or Federal savings association's reported average total consolidated assets, for an on- or off-balance sheet exposure calculated by a national bank or Federal savings association under § 3.10 is inappropriate for the exposure(s) or the circumstances of the national bank or Federal savings association, the OCC may require the national bank or Federal savings association to adjust this exposure amount in the numerator and the denominator for purposes of the leverage ratio calculations.

(5) Consolidation of certain exposures. The OCC may determine that the risk-based capital treatment for an exposure or the treatment provided to an entity that is not consolidated on the national bank's or Federal savings association's balance sheet is not commensurate with the risk of the exposure and the relationship of the national bank or Federal savings association to the entity. Upon making this determination, the OCC may require the national bank or Federal savings association to treat the exposure or entity as if it were consolidated on the balance sheet of the national bank or Federal savings association for purposes of determining the national bank's or Federal savings association's risk-based capital requirements and calculating the national bank's or Federal savings association's risk-based capital ratios accordingly. The OCC will look to the substance of, and risk associated with, the transaction, as well as other relevant factors the OCC deems appropriate in determining whether to require such treatment.

(6) Other reservation of authority. With respect to any deduction or limitation required under this part, the OCC may require a different deduction or limitation, provided that such alternative deduction or limitation is commensurate with the national bank's or Federal savings association's risk and consistent with safety and soundness.

(e) Notice and response procedures. In making a determination under this section, the OCC will apply notice and response procedures in the same manner as the notice and response procedures in § 3.404.

(f) Timing.

(1) Subject to the transition provisions in subpart G of this part, an advanced approaches national bank or Federal savings association that is not a savings and loan holding company must:

(i) Except as described in paragraph (f)(1)(ii) of this section, beginning on January 1, 2014, calculate advanced approaches total risk-weighted assets in accordance with subpart E and, if applicable, subpart F of this part and, beginning on January 1, 2015, calculate standardized total risk-weighted assets in accordance with subpart D and, if applicable, subpart F of this part;

(ii) From January 1, 2014 to December 31, 2014:

(A) Calculate risk-weighted assets in accordance with the general risk-based capital rules under appendix A to this part and, if applicable, subpart F of this part (national banks), or 12 CFR part 167 and, if applicable, subpart F of this part (Federal savings associations)^[1] and substitute such risk-weighted assets for standardized total risk-weighted assets for purposes of § 3.10;

(B) If applicable, calculate general market risk equivalent assets in accordance with appendix B to this part, section 4(a)(3) (national banks) and substitute such general market risk equivalent assets for standardized market risk-weighted assets for purposes of § 3.20(d)(3); and

(C) Substitute the corresponding provision or provisions of appendix A to this part, and, if applicable, appendix B to this part (national banks), or 12 CFR part 167 (Federal savings associations) for any reference to subpart D of this part in: § 3.121(c); § 3.124(a) and (b); § 3.144(b); § 3.154(c) and (d); § 3.202(b) (definition of covered position in paragraph (b)(3)(iv)); and § 3.211(b);^[2]

(

[Reserved]

(iii) Beginning on January 1, 2014, calculate and maintain minimum capital ratios in accordance with subparts A, B, and C of this part, provided, however, that such national bank or Federal savings association must:

(A) From January 1, 2014 to December 31, 2014, maintain a minimum common equity tier 1 capital ratio of 4 percent, a minimum tier 1 capital ratio of 5.5 percent, a minimum total capital ratio of 8 percent, and a minimum leverage ratio of 4 percent; and

(B) From January 1, 2015 to December 31, 2017, an advanced approaches national bank or Federal savings association:

(1) Is not required to maintain a supplementary leverage ratio; and

(2) Must calculate a supplementary leverage ratio in accordance with § 3.10(c), and must report the calculated supplementary leverage ratio on any applicable regulatory reports.

(2) Subject to the transition provisions in subpart G of this part, a national bank or Federal savings association that is not an advanced approaches national bank or Federal savings association or a savings and loan holding company that is an advanced approaches national bank or Federal savings association must:

(i) Beginning on January 1, 2015, calculate standardized total risk-weighted assets in accordance with subpart D, and if applicable, subpart F of this part; and

(ii) Beginning on January 1, 2015, calculate and maintain minimum capital ratios in accordance with subparts A, B and C of this part, provided, however, that from January 1, 2015 to December 31, 2017, a savings and loan holding company that is an advanced approaches national bank or Federal savings association:

(A) Is not required to maintain a supplementary leverage ratio; and

(B) Must calculate a supplementary leverage ratio in accordance with § 3.10(c), and must report the calculated supplementary leverage ratio on any applicable regulatory reports.

(3) Beginning on January 1, 2016, and subject to the transition provisions in subpart G of this part, a national bank or Federal savings association is subject to limitations on distributions and discretionary bonus payments with respect to its capital conservation buffer and any applicable countercyclical capital buffer amount, in accordance with subpart B of this part.

(4) No national bank or Federal savings association that is not an advanced approaches bank or advanced approaches savings association is subject to this part 3 until January 1, 2015.

(5) A national bank or Federal savings association that changes from one category of national bank or Federal savings association to another of such categories must comply with the requirements of its category in this part, including applicable transition provisions of the requirements in this part, no later than on the first day of the second quarter following the change in the national bank's or Federal savings association's category.

[78 FR 62157, 62273, Oct. 11, 2013, as amended at 79 FR 57740, Sept. 26, 2014; 84 FR 35248, July 22, 2019; 84 FR 56374, Oct. 22, 2019; 84 FR 59263, Nov. 1, 2019]

Footnotes - 3.1

^[1] For the purpose of calculating its general risk-based capital ratios from January 1, 2014 to December 31, 2014, an advanced approaches national bank or Federal savings association shall adjust, as appropriate, its risk-weighted asset measure (as that amount is calculated under appendix A to this part, Sec. 3 and, if applicable, subpart F of this part (national banks), or 12 CFR part 167 and, if applicable, subpart F of this part (Federal savings associations) in the general risk-based capital rules) by excluding those assets that are deducted from its regulatory capital under § 3.22.

^[2] In addition, for purposes of § 3.201(c)(3), from January 1, 2014 to December 31, 2014, for any circumstance in which the OCC may require a national bank or Federal savings association to calculate risk-based capital requirements for specific positions or portfolios under subpart D of this part, the OCC will instead require the national bank or Federal savings association to make such calculations according to appendix A to this part and, if applicable, subpart F of this part (national banks), or 12 CFR part 167 and, if applicable, subpart F of this part (Federal savings associations).