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Electronic Code of Federal Regulations

e-CFR data is current as of February 25, 2020

Title 12Chapter IISubchapter APart 217 → Subpart G


Title 12: Banks and Banking
PART 217—CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)


Subpart G—Transition Provisions


Contents
§217.300   Transitions.
§217.301   Current expected credit losses (CECL) transition.

§217.300   Transitions.

Link to an amendment published at 85 FR 4429, Jan. 24, 2020.

(a) Capital conservation and countercyclical capital buffer. (1) From January 1, 2014 through December 31, 2015, a Board-regulated institution is not subject to limits on distributions and discretionary bonus payments under §217.11 of subpart B of this part notwithstanding the amount of its capital conservation buffer or any applicable countercyclical capital buffer amount.

(2) Notwithstanding §217.11, beginning January 1, 2016 through December 31, 2018 a Board-regulated institution's maximum payout ratio shall be determined as set forth in Table 1 to §217.300.

Table 1 to §217.300

Transition periodCapital conservation bufferMaximum payout ratio
(as a percentage of
eligible retained income)
Calendar year 2016Greater than 0.625 percent plus 25 percent of any applicable countercyclical capital buffer amount and 25 percent of any applicable GSIB surchargeNo payout ratio limitation applies under this section.
   Less than or equal to 0.625 percent plus 25 percent of any applicable countercyclical capital buffer amount and 25 percent of any applicable GSIB surcharge, and greater than 0.469 percent plus 17.25 percent of any applicable countercyclical capital buffer amount and 17.25 percent of any applicable GSIB surcharge60 percent.
   Less than or equal to 0.469 percent plus 17.25 percent of any applicable countercyclical capital buffer amount and 17.25 percent of any applicable GSIB surcharge, and greater than 0.313 percent plus 12.5 percent of any applicable countercyclical capital buffer amount and 12.5 percent of any applicable GSIB surcharge40 percent.
   Less than or equal to 0.313 percent plus 12.5 percent of any applicable countercyclical capital buffer amount and 12.5 percent of any applicable GSIB surcharge, and greater than 0.156 percent plus 6.25 percent of any applicable countercyclical capital buffer amount and 6.25 percent of any applicable GSIB surcharge20 percent.
   Less than or equal to 0.156 percent plus 6.25 percent of any applicable countercyclical capital buffer amount and 6.25 percent of any applicable GSIB surcharge0 percent.
Calendar year 2017Greater than 1.25 percent plus 50 percent of any applicable countercyclical capital buffer amount and 50 percent of any applicable GSIB surchargeNo payout ratio limitation applies under this section.
   Less than or equal to 1.25 percent plus 50 percent of any applicable countercyclical capital buffer amount and 50 percent of any applicable GSIB surcharge, and greater than 0.938 percent plus 37.5 percent of any applicable countercyclical capital buffer amount and 37.5 percent of any applicable GSIB surcharge60 percent.
   Less than or equal to 0.938 percent plus 37.5 percent of any applicable countercyclical capital buffer amount and 37.5 percent of any applicable GSIB surcharge, and greater than 0.625 percent plus 25 percent of any applicable countercyclical capital buffer amount and 25 percent of any applicable GSIB surcharge40 percent.
   Less than or equal to 0.625 percent plus 25 percent of any applicable countercyclical capital buffer amount and 25 percent of any applicable GSIB surcharge, and greater than 0.313 percent plus 12.5 percent of any applicable countercyclical capital buffer amount and 12.5 percent of any applicable GSIB surcharge20 percent.
   Less than or equal to 0.313 percent plus 12.5 percent of any applicable countercyclical capital buffer amount and 12.5 percent of any applicable GSIB surcharge0 percent.
Calendar year 2018Greater than 1.875 percent plus 75 percent of any applicable countercyclical capital buffer amount and 75 percent of any applicable GSIB surchargeNo payout ratio limitation applies under this section.
   Less than or equal to 1.875 percent plus 75 percent of any applicable countercyclical capital buffer amount and 75 percent of any applicable GSIB surcharge, and greater than 1.406 percent plus 56.25 percent of any applicable countercyclical capital buffer amount and 56.25 percent of any applicable GSIB surcharge60 percent.
   Less than or equal to 1.406 percent plus 56.25 percent of any applicable countercyclical capital buffer amount and 56.25 percent of any applicable GSIB surcharge, and greater than 0.938 percent plus 37.5 percent of any applicable countercyclical capital buffer amount and 37.5 percent of any applicable GSIB surcharge40 percent
   Less than or equal to 0.938 percent plus 37.5 percent of any applicable countercyclical capital buffer amount and 37.5 percent of any applicable GSIB surcharge, and greater than 0.469 percent plus 18.75 percent of any applicable countercyclical capital buffer amount and 18.75 percent of any applicable GSIB surcharge20 percent.
   Less than or equal to 0.469 percent plus 18.75 percent of any applicable countercyclical capital buffer amount and 18.75 percent of any applicable GSIB surcharge0 percent.

(b) [Reserved]

(c) Non-qualifying capital instruments—(1) Depository institution holding companies with total consolidated assets of more than $15 billion as of December 31, 2009 that were not mutual holding companies prior to May 19, 2010. The transition provisions in this paragraph (c)(1) apply to debt or equity instruments that do not meet the criteria for additional tier 1 or tier 2 capital instruments in §217.20, but that were issued and included in tier 1 or tier 2 capital, respectively (or, in the case of a savings and loan holding company, would have been included in tier 1 or tier 2 capital if the savings and loan holding company had been subject to the general risk-based capital rules under 12 CFR part 225, appendix A), prior to May 19, 2010 (non-qualifying capital instruments), and that were issued by a depository institution holding company with total consolidated assets greater than or equal to $15 billion as of December 31, 2009 that was not a mutual holding company prior to May 19, 2010 (2010 MHC) (depository institution holding company of $15 billion or more).

(i) A depository institution holding company of $15 billion or more may include in tier 1 and tier 2 capital non-qualifying capital instruments up to the applicable percentage set forth in Table 8 to §217.300 of the aggregate outstanding principal amounts of non-qualifying tier 1 and tier 2 capital instruments, respectively, that are outstanding as of January 1, 2014, beginning January 1, 2014, for a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution that is not a savings and loan holding company, and beginning January 1, 2015, for all other depository institution holding companies of $15 billion or more.

(ii) A depository institution holding company of $15 billion or more must apply the applicable percentages set forth in Table 8 to §217.300 separately to the aggregate amounts of its tier 1 and tier 2 non-qualifying capital instruments.

(iii) The amount of non-qualifying capital instruments that must be excluded from additional tier 1 capital in accordance with this section may be included in tier 2 capital without limitation, provided the instruments meet the criteria for tier 2 capital set forth in §217.20(d).

(iv) Non-qualifying capital instruments that do not meet the criteria for tier 2 capital set forth in §217.20(d) may be included in tier 2 capital as follows:

(A) A depository institution holding company of $15 billion or more that is not an advanced approaches Board-regulated institution may include non-qualifying capital instruments that have been phased-out of tier 1 capital in tier 2 capital, and

(B) During calendar years 2014 and 2015, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8 to §217.300. Beginning January 1, 2016, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8, up to the applicable percentages set forth in Table 9 to §217.300.

(2) Mergers and acquisitions. (i) A depository institution holding company of $15 billion or more that acquires after December 31, 2013 either a depository institution holding company with total consolidated assets of less than $15 billion as of December 31, 2009 (depository institution holding company under $15 billion) or a depository institution holding company that is a 2010 MHC, may include in regulatory capital the non-qualifying capital instruments issued by the acquired organization up to the applicable percentages set forth in Table 8 to §217.300.

(ii) If a depository institution holding company under $15 billion acquires after December 31, 2013 a depository institution holding company under $15 billion or a 2010 MHC, and the resulting organization has total consolidated assets of $15 billion or more as reported on the resulting organization's FR Y-9C for the period in which the transaction occurred, the resulting organization may include in regulatory capital non-qualifying instruments of the resulting organization up to the applicable percentages set forth in Table 8 to §217.300.

Table 8 to §217.300

Transition period
(calendar year)
Percentage of non-qualifying capital instruments includable in additional tier 1 or tier 2 capital for a depository institution holding company of $15 billion or more
Calendar year 201450
Calendar year 201525
Calendar year 2016 and thereafter  0

(3) Depository institution holding companies under $15 billion and 2010 MHCs. (i) Non-qualifying capital instruments issued by depository institution holding companies under $15 billion and 2010 MHCs prior to May 19, 2010, may be included in additional tier 1 or tier 2 capital if the instrument was included in tier 1 or tier 2 capital, respectively, as of January 1, 2014.

(ii) Non-qualifying capital instruments includable in tier 1 capital are subject to a limit of 25 percent of tier 1 capital elements, excluding any non-qualifying capital instruments and after applying all regulatory capital deductions and adjustments to tier 1 capital.

(iii) Non-qualifying capital instruments that are not included in tier 1 as a result of the limitation in paragraph (c)(3)(ii) of this section are includable in tier 2 capital.

(4) Depository institutions. (i) Beginning on January 1, 2014, a depository institution that is an advanced approaches Board-regulated institution, and beginning on January 1, 2015, all other depository institutions, may include in regulatory capital debt or equity instruments issued prior to September 12, 2010 that do not meet the criteria for additional tier 1 or tier 2 capital instruments in §217.20 but that were included in tier 1 or tier 2 capital respectively as of September 12, 2010 (non-qualifying capital instruments issued prior to September 12, 2010) up to the percentage of the outstanding principal amount of such non-qualifying capital instruments as of January 1, 2014 in accordance with Table 9 to §217.300.

(ii) Table 9 to §217.300 applies separately to tier 1 and tier 2 non-qualifying capital instruments.

(iii) The amount of non-qualifying capital instruments that cannot be included in additional tier 1 capital under this section may be included in tier 2 capital without limitation, provided that the instruments meet the criteria for tier 2 capital instruments under §217.20(d).

Table 9 to §217.300

Transition period (calendar year)Percentage of non-qualifying capital
instruments includable in additional tier 1 or tier 2 capital
Calendar year 201480
Calendar year 201570
Calendar year 201660
Calendar year 201750
Calendar year 201840
Calendar year 201930
Calendar year 202020
Calendar year 202110
Calendar year 2022 and thereafter0

(d) [Reserved]

(e) Prompt corrective action. For purposes of 12 CFR part 208, subpart D, a Board-regulated institution must calculate its capital measures and tangible equity ratio in accordance with the transition provisions in this section.

(f) Until July 21, 2015, this part will not apply to any bank holding company subsidiary of a foreign banking organization that is currently relying on Supervision and Regulation Letter SR 01-01 issued by the Board (as in effect on May 19, 2010).

(g) A Board-regulated institution that is not an advanced approaches Board-regulated institution may apply the treatment under §§217.21 and 217.22(c)(2), (5), (6), and (d)(2) applicable to an advanced approaches Board-regulated institution during the calendar quarter beginning January 1, 2020. During the quarter beginning January 1, 2020, a Board-regulated institution that makes such an election must deduct 80 percent of the amount otherwise required to be deducted under §217.22(d)(2) and must apply a 100 percent risk weight to assets not deducted under §217.22(d)(2). In addition, during the quarter beginning January 1, 2020, a Board-regulated institution that makes such an election must include in its regulatory capital 20 percent of any minority interest that exceeds the amount of minority interest includable in regulatory capital under §217.21 as it applies to an advanced approaches Board-regulated institution. A Board-regulated institution that is not an advanced approaches Board-regulated institution must apply the treatment under §§217.21 and 217.22 applicable to a Board-regulated institution that is not an advanced approaches Board-regulated institution beginning April 1, 2020, and thereafter.

[Reg. Q, 78 FR 62157, 62285, Oct. 11, 2013, as amended at 78 FR 62290, Oct. 11, 2013; 80 FR 70672, Nov. 16, 2015; 80 FR 49103, Aug. 14, 2015; 82 FR 55316, Nov. 21, 2017; 83 FR 705, Jan. 8, 2018; 84 FR 35269, July 22, 2019; 84 FR 61807, Nov. 13, 2019]

§217.301   Current expected credit losses (CECL) transition.

(a) CECL transition provision. (1) A Board-regulated institution may elect to use a CECL transition provision pursuant to this section only if the Board-regulated institution records a reduction in retained earnings due to the adoption of CECL as of the beginning of the fiscal year in which the Board-regulated institution adopts CECL.

(2) A Board-regulated institution that elects to use the CECL transition provision must use the CECL transition provision in the first Call Report or FR Y-9C that includes CECL filed by the Board-regulated institution after it adopts CECL.

(3) A Board-regulated institution that does not elect to use the CECL transition provision as of the first Call Report or FR Y-9C that includes CECL filed as described in paragraph (a)(2) of this section may not elect to use the CECL transition provision in subsequent reporting periods.

(b) Definitions. For purposes of this section, the following definitions apply:

(1) Transition period means the three-year period beginning the first day of the fiscal year in which a Board-regulated institution adopts CECL.

(2) CECL transitional amount means the decrease net of any DTAs in the amount of a Board-regulated institution's retained earnings as of the beginning of the fiscal year in which the Board-regulated institution adopts CECL from the amount of the Board-regulated institution's retained earnings as of the closing of the fiscal year-end immediately prior to the Board-regulated institution's adoption of CECL.

(3) DTA transitional amount means the increase in the amount of a Board-regulated institution's DTAs arising from temporary differences as of the beginning of the fiscal year in which the Board-regulated institution adopts CECL from the amount of the Board-regulated institution's DTAs arising from temporary differences as of the closing of the fiscal year-end immediately prior to the Board-regulated institution's adoption of CECL.

(4) AACL transitional amount means the difference in the amount of a Board-regulated institution's AACL as of the beginning of the fiscal year in which the Board-regulated institution adopts CECL and the amount of the Board-regulated institution's ALLL as of the closing of the fiscal year-end immediately prior to the Board-regulated institution's adoption of CECL.

(5) Eligible credit reserves transitional amount means the increase in the amount of a Board-regulated institution's eligible credit reserves as of the beginning of the fiscal year in which the Board-regulated institution adopts CECL from the amount of the Board-regulated institution's eligible credit reserves as of the closing of the fiscal year-end immediately prior to the Board-regulated institution's adoption of CECL.

(c) Calculation of CECL transition provision. (1) For purposes of the election described in paragraph (a)(1) of this section, a Board-regulated institution must make the following adjustments in its calculation of regulatory capital ratios:

(i) Increase retained earnings by seventy-five percent of its CECL transitional amount during the first year of the transition period, increase retained earnings by fifty percent of its CECL transitional amount during the second year of the transition period, and increase retained earnings by twenty-five percent of its CECL transitional amount during the third year of the transition period;

(ii) Decrease amounts of DTAs arising from temporary differences by seventy-five percent of its DTA transitional amount during the first year of the transition period, decrease amounts of DTAs arising from temporary differences by fifty percent of its DTA transitional amount during the second year of the transition period, and decrease amounts of DTAs arising from temporary differences by twenty-five percent of its DTA transitional amount during the third year of the transition period;

(iii) Decrease amounts of AACL by seventy-five percent of its AACL transitional amount during the first year of the transition period, decrease amounts of AACL by fifty percent of its AACL transitional amount during the second year of the transition period, and decrease amounts of AACL by twenty-five percent of its AACL transitional amount during the third year of the transition period;

(iv) Increase average total consolidated assets as reported on the Call Report or FR Y-9C for purposes of the leverage ratio by seventy-five percent of its CECL transitional amount during the first year of the transition period, increase average total consolidated assets as reported on the Call Report or FR Y-9C for purposes of the leverage ratio by fifty percent of its CECL transitional amount during the second year of the transition period, and increase average total consolidated assets as reported on the Call Report or FR Y-9C for purposes of the leverage ratio by twenty-five percent of its CECL transitional amount during the third year of the transition period;

(2) For purposes of the election described in paragraph (a)(1) of this section, an advanced approaches Board-regulated institution must make the following additional adjustments to its calculation of regulatory capital ratios:

(i) Increase total leverage exposure for purposes of the supplementary leverage ratio by seventy-five percent of its CECL transitional amount during the first year of the transition period, increase total leverage exposure for purposes of the supplementary leverage ratio by fifty percent of its CECL transitional amount during the second year of the transition period, and increase total leverage exposure for purposes of the supplementary leverage ratio by twenty-five percent of its CECL transitional amount during the third year of the transition period; and

(ii) An advanced approaches Board-regulated institution that has completed the parallel run process and has received notification from the Board pursuant to §217.121(d) must decrease amounts of eligible credit reserves by seventy-five percent of its eligible credit reserves transitional amount during the first year of the transition period, decrease amounts of eligible credit reserves by fifty percent of its eligible credit reserves transitional amount during the second year of the transition provision, and decrease amounts of eligible credit reserves by twenty-five percent of its eligible credit reserves transitional amount during the third year of the transition period.

(3) An advanced approaches Board-regulated institution that has completed the parallel run process and has received notification from the Board pursuant to §217.121(d), whose amount of expected credit loss exceeded its eligible credit reserves immediately prior to the adoption of CECL, and that has an increase in common equity tier 1 capital as of the beginning of the fiscal year in which it adopts CECL after including the first year portion of the CECL transitional amount must decrease its CECL transitional amount used in paragraph (c) of this section by the full amount of its DTA transitional amount.

(4) Notwithstanding any other requirement in this section, for purposes of this paragraph, in the event of a business combination involving a Board-regulated institution where one or both Board-regulated institutions have elected the treatment described in this section:

(i) If the acquirer Board-regulated institution (as determined under GAAP) elected the treatment described in this section, the acquirer Board-regulated institution must continue to use the transitional amounts (unaffected by the business combination) that it calculated as of the date that it adopted CECL through the end of its transition period.

(ii) If the acquired company (as determined under GAAP) elected the treatment described in this section, any transitional amount of the acquired company does not transfer to the resulting Board-regulated institution.

[Reg. Q, 84 FR 4243, Feb. 14, 2019]

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