§ 390.470 - Reservation of authority.

§ 390.470 Reservation of authority.

(a) Transactions for purposes of evasion. The FDIC may disregard any transaction entered into primarily for the purpose of reducing the minimum required amount of regulatory capital or otherwise evading the requirements of this subpart.

(b) Average versus period-end figures. The FDIC reserves the right to require a State savings association to compute its capital ratios on the basis of average, rather than period-end, assets when the FDIC determines appropriate to carry out the purposes of this subpart.

(c)

(1) Reservation of authority. Notwithstanding the definitions of core and supplementary capital in § 390.465, the FDIC may find that a particular type of purchased intangible asset or capital instrument constitutes or may constitute core or supplementary capital, and may permit one or more State savings associations to include all or a portion of such intangible asset or funds obtained through such capital instrument as core or supplementary capital, permanently or on a temporary basis, for the purposes of compliance with this subpart or for any other purposes. Similarly, the FDIC may find that a particular asset or core or supplementary capital component has characteristics or terms that diminish its contribution to a State savings association's ability to absorb losses, and the FDIC may require the discounting or deduction of such asset or component from the computation of core, supplementary, or total capital.

(2) Notwithstanding § 390.466, the FDIC will look to the substance of a transaction and may find that the assigned risk weight for any asset, or credit equivalent amount or credit conversion factor for any off-balance sheet item does not appropriately reflect the risks imposed on the State savings association. The FDIC may require the State savings association to apply another risk-weight, credit equivalent amount, or credit conversion factor that the FDIC deems appropriate.

(3) The FDIC may find that the capital treatment for an exposure to a transaction not subject to consolidation on the State savings association's balance sheet does not appropriately reflect the risks imposed on the State savings association. Accordingly, the FDIC may require the State savings association to treat the transaction as if it were consolidated on the State savings association's balance sheet. The FDIC will look to the substance of and risk associated with the transaction as well as other relevant factors in determining whether to require such treatment and in calculating risk based capital as the FDIC deems appropriate.

(4) If this subpart does not specifically assign a risk weight, credit equivalent amount, or credit conversion factor, the FDIC may assign any risk weight, credit equivalent amount, or credit conversion factor that it deems appropriate. In making this determination, the FDIC will consider the risks associated with the asset or off-balance sheet item as well as other relevant factors.

(d) In making a determination under this paragraph (c) of this section, the FDIC will notify the State savings association of the determination and solicit a response from the State savings association. After review of the response by the State savings association, the FDIC shall issue a final supervisory decision regarding the determination made under paragraph (c) of this section.