Agencies Issue Final Capital Simplification Rule

The financial regulatory agencies yesterday issued a joint final rule to simplify the Basel III regulatory capital calculations for all but the very largest banks. The final rule simplifies the treatment of assets subject to common equity tier 1 capital threshold deductions and limitations on minority interest.
 
The final rule simplifies regulatory capital requirements for mortgage servicing assets, certain deferred tax assets and investments in the capital of unconsolidated financial institutions (such as investments in trust preferred securities) by effectively raising the deduction threshold for each of these to 25%. It also simplifies the calculation for capital issued by a consolidated subsidiary of a banking organization and held by third parties (sometimes referred to a minority interest) that is includable in regulatory capital.
 
Read the final rule.