Joint Report to Congressional Committees: Differences in Accounting and Capital Standards Among the Federal Banking Agencies as of September 30, 2024

<NOTICE> DEPARTMENT OF THE TREASURY <SUBAGY>Office of the Comptroller of the Currency</SUBAGY> FEDERAL RESERVE SYSTEM FEDERAL DEPOSIT INSURANCE CORPORATION <SUBJECT>Joint Report to Congressional Committees: Differences in Accounting and Capital Standards Among the Federal Banking Agencies as of September 30, 2024</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; and Federal Deposit Insurance Corporation. <HD SOURCE="HED">ACTION:</HD> Report to congressional committees. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) have prepared this report pursuant to section 37(c) of the Federal Deposit Insurance Act. Section 37(c) requires the agencies to jointly submit an annual report to the Committee on Financial Services of the U.S. House of Representatives and to the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate describing differences among the accounting and capital standards used by the agencies for insured depository institutions (institutions). Section 37(c) requires that this report be published in the <E T="04">Federal Register</E> . The agencies have not identified any material differences among the agencies' accounting and capital standards applicable to the institutions they regulate and supervise. </SUM> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> <E T="03">OCC:</E> Joshua Kuntz, Risk Expert, Capital Policy, (202) 649-5074, Carl Kaminski, Assistant Director, Chief Counsel's Office, (202) 649-5869, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services. <E T="03">Board:</E> Andrew Willis, Manager, (202) 912-4323, Daniel Schwindt, Financial Institution Policy Analyst III, (202) 960-5463, Division of Supervision and Regulation, Mark Buresh, Senior Special Counsel (202) 452-5270 and Jasmin Keskinen, Senior Attorney, (202) 475-6650, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551. For users of Telecommunications Device for the Deaf (TDD) and TTY-TRS, please call 711 from any telephone, anywhere in the United States. <E T="03">FDIC:</E> Benedetto Bosco, Chief, Capital Policy Section, (703) 245-0778, Christine Bouvier, Assistant Chief Accountant, (202) 898-7289, Richard Smith, Capital Policy Analyst, Capital Policy Section, (703) 254-0782, Division of Risk Management Supervision, Merritt Pardini, Counsel, (202) 898-6680, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <E T="03">The text of the report follows:</E> <HD SOURCE="HD1">Report to Congress</HD> <HD SOURCE="HD1">Report to the Committee on Financial Services of the U.S. House of Representatives and to the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate Regarding Differences in Accounting and Capital Standards Among the Federal Banking Agencies</HD> <HD SOURCE="HD1">Introduction</HD> In accordance with section 37(c), <SU>1</SU> <FTREF/> the agencies are submitting this joint report, which covers differences among their accounting and capital standards existing as of September 30, 2024, applicable to institutions. <SU>2</SU> <FTREF/> As of September 30, 2024, the agencies have not identified any material differences among the agencies' accounting standards applicable to institutions. <FTNT> <SU>1</SU>  12 U.S.C. 1831n(c)(1) and 12 U.S.C. 1831n(c)(3). </FTNT> <FTNT> <SU>2</SU>  Although not required under section 37(c), this report includes descriptions of certain of the Board's capital standards applicable to depository institution holding companies where such descriptions are relevant to the discussion of capital standards applicable to institutions. </FTNT> In 2013, the agencies revised the risk-based and leverage capital rule for institutions (capital rule), <SU>3</SU> <FTREF/> which harmonized the agencies' capital rule in a comprehensive manner. <SU>4</SU> <FTREF/> Since 2013, the agencies have revised the capital rule on several occasions, further reducing the number of differences in the agencies' capital rule. Today, only a few differences remain, which are statutorily mandated for certain categories of institutions, or which reflect certain technical, generally nonmaterial differences among the agencies' capital rule. No new material differences were identified in the capital standards applicable to institutions in this report compared to the previous report submitted by the agencies pursuant to section 37(c). <FTNT> <SU>3</SU>  See 78 FR 62018 (October 11, 2013) (final rule issued by the OCC and the Board); 78 FR 55340 (September 10, 2013) (interim final rule issued by the FDIC). The FDIC later issued its final rule in 79 FR 20754 (April 14, 2014). The agencies' respective capital rule is at 12 CFR part 3 (OCC), 12 CFR part 217 (Board), and 12 CFR part 324 (FDIC). The capital rule applies to institutions, as well as to certain bank holding companies (BHCs) and savings and loan holding companies (SLHCs). See also 12 CFR 217.1(c). </FTNT> <FTNT> <SU>4</SU>  The capital rule reflects the scope of each agency's regulatory jurisdiction. For example, the Board's capital rule includes requirements related to BHCs, SLHCs, and state member banks (SMBs), while the FDIC's capital rule includes provisions for state nonmember banks and state savings associations, and the OCC's capital rule includes provisions for national banks and federal savings associations. </FTNT> <HD SOURCE="HD1">Differences in the Standards Among the Federal Banking Agencies</HD> <HD SOURCE="HD2">Differences in Accounting Standards</HD> As of September 30, 2024, the agencies have not identified any material differences among themselves in the accounting standards applicable to institutions. <HD SOURCE="HD2">Differences in Capital Standards</HD> The following are the remaining technical differences among the capital standards of the agencies' capital rule. <SU>5</SU> <FTREF/> <FTNT> <SU>5</SU>  Certain minor differences, such as terminology specific to each agency for the institutions that it supervises, are not included in this report. </FTNT> <HD SOURCE="HD3">Definitions</HD> The agencies' capital rule largely contains the same definitions. <SU>6</SU> <FTREF/> The differences that exist generally serve to accommodate the different needs of the institutions that each agency charters, regulates, and/or supervises. <FTNT> <SU>6</SU>  See 12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC). </FTNT> The agencies' capital rule has differing definitions of a pre-sold construction loan. The capital rule of all three agencies provides that a pre-sold construction loan means any “one-to-four family residential construction loan to a builder that meets the requirements of section 618(a)(1) or (2) of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 (12 U.S.C. 1831n), and, in addition to other criteria, the purchaser has not terminated the contract.”  <SU>7</SU> <FTREF/> The Board's definition provides further clarification that, if a purchaser has terminated the contract, the institution must immediately apply a 100 percent risk weight to the loan and report the revised risk weight in the next quarterly Consolidated Reports of Condition and Income (Call Report). <SU>8</SU> <FTREF/> Similarly, if the purchaser has terminated the contract, the OCC and FDIC capital rule would immediately disqualify the loan from receiving a 50 percent risk weight, and would apply a 100 percent risk weight to the loan. The change in risk weight would be reflected in the next quarterly Call Report. Thus, the minor wording difference between the agencies should have no practical consequence. <FTNT> <SU>7</SU>  12 CFR 3.2 (OCC); 12 CFR 217.2 (Board); 12 CFR 324.2 (FDIC). </FTNT> <FTNT> <SU>8</SU>  12 CFR 217.2. </FTNT> <HD SOURCE="HD3">Capital Components and Eligibility Criteria for Regulatory Capital Instruments</HD> While the capital rule generally provides uniform eligibility criteria for regulatory capital instruments, there are some textual differences among the agencies' capital rule. The capital rule of each of the three agencies requires that, for an instrument to qualify as common equity tier 1 or additional tier 1 capital, cash dividend payments be paid out of net income and retained earnings, but the Board's capital rule also allows cash dividend payments to be paid out of related surplus. <SU>9</SU> <FTREF/> The provision in the Board's capital rule that allows dividends to be paid out of related surplus is a difference in substance among the agencies' capital rule. However, due to the restrictions on institutions regulated by the Board in separate regulations, this additional language in the Board's rule has a practical impact only on bank holding companies (BHCs) and savings and loan holding companies (SLHCs) and is not a difference as applied to institutions. The agencies apply the criteria for determining eligibility of regulatory capital instruments in a manner that ensures consistent outcomes for institutions. <FTNT> <SU>9</SU>  12 CFR 217.20(b)(1)(v) and 217.20(c)(1)(viii) (Board). </FTNT> Both the Board's capital rule and the FDIC's capital rule also include an additional sentence noting that institutions regulated by each agency are subject to restrictions independent ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 19k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━