[Federal Register Volume 59, Number 119 (Wednesday, June 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15137]
[[Page Unknown]]
[Federal Register: June 22, 1994]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 567
[No. 93-239]
RIN 1550-AA71
Regulatory Capital: Common Stockholders' Equity
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of Thrift Supervision (OFS) proposes to amend its
minimum regulatory capital regulations by revising the definition of
the term ``common stockholders' equity.'' This proposed amendment will
revise OTS's definition of common stockholders' equity in order to
incorporate a recent change in generally accepted accounting principles
(GAAP), made by Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS
No. 115).
DATES: Comments must be received on or before July 22, 1994.
ADDRESSES: Send comments to Director, Information Services Division,
Public Affairs, Office of Thrift Supervision, 1700 G Street, NW.,
Washington, DC 20552. Attention Docket No. [93-239). These submissions
may be hand delivered to 1700 G Street, NW., from 9:00 A.M. to 5:00
P.M. on business days; they may be sent by facsimile transmission to
FAX number (202) 906-7755. Submissions must be received by 5:00 P.M. on
the day they are due in order to be considered by the OTS. Late-filed,
misaddressed, or misidentified submissions will not be considered in
this rulemaking. Comments will be available for public inspection at
1700 G Street, NW., from 1.00 P.M. until 4:00 P.M. on business days.
Visitors will be escorted to and from the Public Reading Room at
established intervals.
FOR FURTHER INFORMATION CONTACT:
Arthur W. Lindo, Senior Account, (202) 906-5642, Accounting Policy;
John F. Connolly, Senior Program Manager for Capital Policy, (202) 906-
6465; Lorraine E. Waller, Counsel, Regulations and Legislation
Division, Chief Counsel's Office, (202) 906-6458, Office of Thrift
Supervision, 1700 G St., NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Background
Under OTS's capital rule, 12 CFR 567.1, common stockholders'
equity, the primary component of core capital for most savings
associations, includes items that are generally the same as the items
that comprised GAAP equity, when the capital rule was adopted. Today's
proposal would revise the OTS's definition of common stockholders'
equity in order to incorporate a change in GAAP made by the Financial
Accounting Standards Board, in May 1993, when it issued SAFAS No. 115.
SFAS No. 115 requires that most debt and equity securities be
reported at fair value, rather than at amortized cost. It supersedes
SFAS No. 12, Accounting for Certain Marketable Securities. When SFAS
No. 115 becomes effective,\1\ unrealized gains and losses on available-
for-sale securities will be included in GAAP equity. On August 10,
1993, the Federal Financial Institutions Examination Council announced
that it will adopt SFAS No. 115, and that it will require all federally
supervised banks and savings associations to adopt SFAS No. 115. The
OTS and the Federal banking regulatory agencies announced their
intention to proposed amendments to their respective capital rules to
make the rules reflect the accounting and reporting standards contained
in SFAS No. 115.
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\1\SFAS No. 115 will be effective for fiscal years beginning
after December 15, 1993. SFAS No. 115, however, includes early
adoption provisions, under which savings associations may adopt its
standards as early as June 30, 1993, depending on when their fiscal
years end.
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Section 4(b)(2) of the Home Owners' Loan Act of 1933 (HOLA), 12
U.S.C. 1463(b)(2), requires the OTS to prescribe accounting standards
that ``incorporate [GAAP] to the same degree that such principles are
used to determine compliance with regulations prescribed by the Federal
banking agencies.'' The proposal revises the OTS definition of common
stockholders' equity so that it will be consistent with the change in
GAAP made by SFAS No. 115. It is similar to amendments the other
Federal banking agencies have proposed to their respective capital
rules in order to incorporate the modification of GAAP made by SFAS No.
115.
II. Comment Solicitation
The OTS solicits comment on all aspects of the proposal, but is
particularly interested in comments on the following specific
questions:
1. If the SFAS No. 115 unrealized gains and losses are included in
regulatory capital, how should OTS include these adjustments in its
calculations?
a. Should SFAS No. 115 unrealized gains and losses be included in
core capital for purposes of the leverage ratio requirement?
b. Should SFAS No. 115 unrealized gains and losses be included in
core capital for purposes of the risk-based capital requirement?
c. Should SFAS No. 115 unrealized gains and losses be included in
supplementary capital for purposes of the risk-based capital
requirement?
2. Should SFAS No. 115 unrealized gains and losses be included in
capital for purposes of Prompt Corrective Action (PCA)? If so, should
the OTS initiate a rulemaking to amend the PCA capital definitions
(i.e., tangible equity) or capital categories to ameliorate the
statutory effects resulting from the potential volatility due to SFAS
No. 115 adjustments?
3. What changes, if any, in asset-liability management, or risk
management, would likely result from the inclusion of SFAS No. 115
unrealized gains and losses in capital? Would such changes increase or
decrease the risk to the Savings Association Insurance Fund?
III. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub.
L. 96-354, 5 U.S.C. 601), it is certified that this regulation will not
have a significant economic impact on a substantial number of small
savings associations. This proposed regulation simply revises the
definition of common stockholders' equity included in the OTS capital
rule so that it will include a new component of GAAP equity that was
added to GAAP equity by SFAS No. 115. Section 4(b)(2) of HOLA requires
the OTS to promulgate accounting standards that incorporate GAAP
standards to the same degree that those standards are used by the
Federal banking agencies.
IV. Executive Order 12866
The Director of the OTS has determined that this proposed rule is
not a ``significant regulatory action'' for purposes of Executive Order
12866. The OTS proposes to revise its capital definition, in order to
bring it into conformity with SFAS No. 115, and to ensure that its
definition of common stockholders' equity is consistent with those of
the other Federal banking agencies.
List of Subjects in 12 CFR Part 567
Capital, Savings associations.
Accordingly, the Office of Thrift Supervision hereby proposes to
amend part 567, chapter V, title 12, Code of Federal Regulations, as
set forth below.
SUBCHAPTER D--REGULATIONS APPLICABLE TO ALL SAVINGS ASSOCIATIONS
PART 567--[AMENDED]
1. The authority 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 (d) to read as
follows:
Sec. 567.1 Definitions.
* * * * *
(d) Common stockholders' equity. The term common stockholders'
equity includes common stock, common stock surplus, retained earnings,
adjustments for the cumulative effect of foreign currency translation
and unrealized gains and losses on available-for-sale securities.
* * * * *
Dated: December 15, 1993.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
Editorial Note: This document was received at the Office of the
Federal Register on June 17, 1994.
[FR Doc. 94-15137 Filed 6-21-94; 8:45 am]
BILLING CODE 6720-01-P
