Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations; Technical Correction

CourtThe Comptroller Of The Currency Office
Record Number2019-27168
Published date18 December 2019
Federal Register, Volume 84 Issue 243 (Wednesday, December 18, 2019)
[Federal Register Volume 84, Number 243 (Wednesday, December 18, 2019)]
                [Rules and Regulations]
                [Pages 69296-69298]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-27168]
                [[Page 69296]]
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                DEPARTMENT OF THE TREASURY
                Office of the Comptroller of the Currency
                12 CFR Parts 1, 5, 23, 24, 32, and 34
                [Docket ID OCC-2018-0040]
                RIN 1557-AE59
                Regulatory Capital Rule: Capital Simplification for Qualifying
                Community Banking Organizations; Technical Correction
                AGENCY: Office of the Comptroller of the Currency, Treasury.
                ACTION: Final rule; correction.
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                SUMMARY: The OCC is making technical corrections to the Capital
                Simplification for Qualifying Community Banking Organizations final
                rule that appeared in the Federal Register on November 13, 2019. The
                technical corrections align the rule text in the final rule with
                changes made by other final rules. The technical corrections also
                include a conforming edit.
                DATES: This correction is effective January 1, 2020.
                FOR FURTHER INFORMATION CONTACT: Carl Kaminski, Special Counsel, or
                Daniel Perez, Senior Attorney, Chief Counsel's Office, (202) 649-5490,
                for persons who are deaf or hearing impaired, TTY, (202) 649-5597,
                Office of the Comptroller of the Currency, 400 7th Street SW,
                Washington, DC 20219.
                SUPPLEMENTARY INFORMATION:
                I. Description of Technical Corrections
                 On November 13, 2019, the OCC, together with the Board of Governors
                of the Federal Reserve System and the Federal Deposit Insurance
                Corporation (collectively, the agencies), published in the Federal
                Register a final rule titled ``Regulatory Capital Rule: Capital
                Simplification for Qualifying Community Banking Organizations'' (the
                CBLR final rule).\1\
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                 \1\ 84 FR 61776.
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                 Under the CBLR final rule, qualifying community banking
                organizations that opt into the community bank leverage ratio framework
                are not required to calculate tier 2 capital. The Supplementary
                Information section of the final rule stated, ``[C]ertain of the
                agencies' non-capital rules refer to `capital stock and surplus' (or
                similar items)[,] which is generally defined as tier 1 capital and tier
                2 capital plus the amount of allowances for loan and lease losses not
                included in tier 2 capital. The final rule amends standards referencing
                `capital stock and surplus' (or similar items) so that an electing
                banking organization uses tier 1 capital plus allowances for loan and
                lease losses (or adjusted allowance for credit losses, as
                applicable).'' \2\
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                 \2\ 84 FR 61787.
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                 In separate final rules titled ``Regulatory Capital Rule:
                Implementation and Transition of the Current Expected Credit Losses
                Methodology for Allowances and Related Adjustments to the Regulatory
                Capital Rule and Conforming Amendments to Other Regulations'' (CECL
                final rule) \3\ and ``Other Real Estate Owned and Technical
                Amendments'' (OREO final rule),\4\ the OCC made further revisions to
                the defined term ``capital and surplus.'' These final rules became
                effective or will become effective before the effective date for the
                CBLR final rule. Due to the specific phrasing of its amendatory
                instructions, the CBLR final rule as currently published would have
                inadvertently reversed certain changes made by the CECL and OREO final
                rules. In one instance, for example, the CBLR final rule would have
                reinserted a definition for ``capital and surplus'' that was removed by
                the OREO final rule. Accordingly, the OCC is correcting sections of the
                CBLR final rule that would have revised the term ``capital and
                surplus'' to re-incorporate the intended changes made in the CECL final
                rule and OREO final rule. The OCC is also making certain stylistic
                edits to these sections of the CBLR final rule to align them with the
                CECL final rule.
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                 \3\ 84 FR 4222 (Feb. 14, 2019). The CECL final rule is effective
                as of April 1, 2019.
                 \4\ 84 FR 56369 (Oct. 22, 2019). The OREO final rule was
                originally effective as of December 1, 2019, but is now effective as
                of January 1, 2020. See 84 FR 64193 (Nov. 21, 2019).
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                 The term ``total capital'' includes tier 2 capital and therefore
                was revised by the CBLR final rule for the same reasons described
                above. The Supplementary Information section of the final rule stated,
                ``The final rule amends standards referencing total capital so that an
                electing banking organization uses tier 1 capital instead of total
                capital.'' \5\ The CBLR final rule would have amended an instance of
                the term ``total capital'' in paragraph (h)(2) of 12 CFR 5.58 but not a
                similar instance of the term in paragraph (h)(3). Accordingly, the OCC
                is also making a conforming edit to 12 CFR 5.58(h)(3) to incorporate
                the change made to paragraph (h)(2).
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                 \5\ 84 FR 61787.
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                II. Regulatory Analysis
                A. Administrative Procedure Act and Effective Date
                 Under 5 U.S.C. 553(b)(B) of the Administrative Procedure Act (APA),
                an agency may, for good cause, find (and incorporate the finding and a
                brief statement of reasons therefore in the rules issued) that notice
                and public procedure thereon are impracticable, unnecessary, or
                contrary to the public interest. As described above in this
                Supplementary Information section, this Federal Register notice makes
                non-substantive, technical corrections to the CBLR final rule. For that
                reason, the OCC has determined that publishing a notice of proposed
                rulemaking and providing opportunity for public comment are
                unnecessary.
                 The effective date of these corrections is January 1, 2020. Under 5
                U.S.C. 553(d)(3) of the APA, the required publication or service of a
                substantive rule shall be made not less than 30 days before its
                effective date, except, among other things, as provided by the agency
                for good cause found and published with the rule. The OCC has concluded
                that these technical corrections are not substantive within the meaning
                of the APA's delayed effective date provision. Moreover, the OCC finds
                that there is good cause for dispensing with the delayed effective date
                requirement, even if it applied, because OCC-supervised institutions,
                from review of the CBLR final rule, CECL final rule, and OREO final
                rule, were given sufficient notice as to the effects and purposes of
                those rules and would not have reasonably relied on the errors
                addressed by these technical corrections.
                B. Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA) does not apply to a rulemaking
                when a general notice of proposed rulemaking is not required. 5 U.S.C.
                603 and 604. As noted previously, the OCC has determined that it is
                unnecessary to publish a general notice of proposed rulemaking for
                technical corrections. Accordingly, the RFA's requirements relating to
                an initial and final regulatory flexibility analysis do not apply.
                C. Paperwork Reduction Act of 1995
                 The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states
                that no agency may conduct or sponsor, nor is the respondent required
                to respond to, an information collection unless it displays a currently
                valid Office of Management and Budget (OMB) control number. The OCC has
                determined that these technical corrections do not create any new, or
                revise any existing,
                [[Page 69297]]
                collections of information pursuant to the Paperwork Reduction Act.
                Consequently, no information collection request will be submitted to
                the OMB for review.
                D. Unfunded Mandates Reform Act of 1995
                 Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded
                Mandates Act), 2 U.S.C. 1532, requires the OCC to prepare a budgetary
                impact statement before promulgating any final rule for which a general
                notice of proposed rulemaking was published. As discussed above, the
                OCC has determined that the publication of a general notice of proposed
                rulemaking is unnecessary. Accordingly, these technical corrections are
                not subject to section 202 of the Unfunded Mandates Act.
                E. Riegle Community Development and Regulatory Improvement Act of 1994
                 Section 302 of the Riegle Community Development and Regulatory
                Improvement Act of 1994 (RCDRIA) (12 U.S.C. 4802) requires that each
                Federal banking agency, in determining the effective date and
                administrative compliance requirements for new regulations that impose
                additional reporting, disclosure, or other requirements on insured
                depository institutions (IDIs), consider, consistent with principles of
                safety and soundness and the public interest, any administrative
                burdens that such regulations would place on depository institutions,
                including small depository institutions, and customers of depository
                institutions, as well as the benefits of such regulations.\6\ In
                addition, new regulations and amendments to regulations that impose
                additional reporting, disclosures, or other new requirements on IDIs
                generally must take effect on the first day of a calendar quarter that
                begins on or after the date on which the regulations are published in
                final form.\7\
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                 \6\ 12 U.S.C 4802(a).
                 \7\ 12 U.S.C 4802(b).
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                 Because these technical corrections do not impose additional
                reporting, disclosure, or other requirements on IDIs, section 302 of
                RCDRIA does not apply.
                F. Congressional Review Act
                 The OMB has determined that these technical corrections are not a
                ``major rule'' within the meaning of the Congressional Review Act.
                Corrections
                 In the final rule published on November 13, 2019, at 84 FR 61776,
                the following corrections are made:
                Sec. 1.2 [Corrected]
                0
                1. On page 61792, in the second column, in amendment 2, in Sec. 1.2,
                paragraphs (a)(1)(ii) and (a)(2)(ii), ``allowances for loan and lease
                losses'' is corrected to read ``allowance for loan and lease losses or
                adjusted allowances for credit losses, as applicable,'' in both
                instances where it appears.
                Sec. 5.3 [Corrected]
                0
                2. a. On page 61793, in the third column, in amendment 9, in Sec. 5.3,
                paragraph (e)(1)(ii), ``allowances for loan and lease losses or
                allowance'' is corrected to read ``allowance for loan and lease losses
                or adjusted allowances'';
                0
                b. On page 61794, in the first column, in amendment 9, in Sec. 5.3,
                paragraph (e)(2)(i), ``bank's or savings association's Consolidated
                Reports of Condition and Income (Call Reports) filed under 12 U.S.C.
                161 or 12 U.S.C. 1464(v), respectively'' is corrected to read ``Call
                Report'';
                0
                c. On page 61794, in the first column, in amendment 9, in Sec. 5.3,
                paragraph (e)(2)(ii), ``allowances for loan and lease losses'' is
                corrected to read ``allowance for loan and lease losses or adjusted
                allowances for credit losses, as applicable,''; and ``reported in the
                institution's Call Reports, described in paragraph (e)(2)(i) of this
                section'' is corrected to read ``described in paragraph (e)(2)(i) of
                this section, as reported in the Call Report''.
                Sec. 5.37 [Corrected]
                0
                3. a. On page 61794, in the first column, in amendment 10, in Sec.
                5.37, paragraph (c)(3)(i)(B), ``allowances for loan and lease losses or
                allowance'' is corrected to read ``allowance for loan and lease losses
                or adjusted allowances''; and ``national bank's or Federal savings
                association's Call Report'' is corrected to read ``Consolidated Reports
                of Condition and Income (Call Report)'';
                0
                b. On page 61794, in the first column, in amendment 10, in Sec. 5.37,
                paragraph (c)(3)(ii)(A), ``national bank's or Federal savings
                association's Consolidated Reports of Condition and Income (Call
                Reports) filed under 12 U.S.C. 161 or 12 U.S.C. 1464(v), respectively''
                is corrected to read ``Call Report'';
                0
                c. On page 61794, in the first column, in amendment 10, in Sec. 5.37,
                paragraph (c)(3)(ii)(B), ``allowances for loan and lease losses'' is
                corrected to read ``allowance for loan and lease losses or adjusted
                allowances for credit losses, as applicable,'' and ``national bank's or
                Federal savings association's Call Reports filed under 12 U.S.C. 161 or
                1464(v), respectively'' is corrected to read ``Call Report''.
                Sec. 5.58 [Corrected]
                0
                4. a. On page 61794, in the first column, in amendment 11, the
                instruction ``Section 5.58 is amended by revising paragraph (h)(2) to
                read as follows:'' is corrected to read ``Section 5.58 is amended by
                revising paragraphs (h)(2) and (3) to read as follows:''; and
                0
                b. On page 61794, in the second column, in amendment 11, in Sec. 5.58,
                the revised rule text is amended by adding paragraph (h)(3) to read as
                follows:
                Sec. 5.58 Pass-through investments by a Federal savings association.
                * * * * *
                 (h) * * *
                 (3) The book value of the Federal savings association's aggregate
                non-controlling investments does not exceed 25 percent of its total
                capital (or, in the case of a Federal savings association that is a
                qualifying community banking organization that has elected to use the
                community bank leverage ratio framework, 25 percent of its tier 1
                capital, as used under Sec. 3.12 of this chapter) after making the
                investment;
                * * * * *
                Sec. 23.2 [Corrected]
                0
                5. a. On page 61795, in the first column, in amendment 15, in Sec.
                23.2, paragraph (b)(1)(ii), ``allowances for loan and lease losses or
                allowance for credit losses, as applicable, as reported in the national
                bank's Call Report'' is corrected to read ``allowance for loan and
                lease losses or adjusted allowances for credit losses, as applicable,
                as reported in the Consolidated Reports of Condition and Income (Call
                Report)'';
                0
                b. On page 61795, in the first column, in amendment 15, in Sec. 23.2,
                paragraph (b)(2)(i), ``the bank's Consolidated Reports of Condition and
                Income (Call Report) filed under 12 U.S.C. 161'' is corrected to read
                ``the Call Report'';
                0
                c. On page 61795, in the first column, in amendment 15, in Sec. 23.2,
                paragraph (b)(2)(ii), ``allowances for loan and lease losses'' is
                corrected to read ``allowance for loan and lease losses or adjusted
                allowances for credit losses, as applicable,''; and ``the bank's
                Consolidated Report of Condition and Income filed under 12 U.S.C. 161''
                is corrected to read ``the Call Report''.
                [[Page 69298]]
                Sec. 24.2 [Corrected]
                0
                6. a. On page 61795, in the first column, in amendment 17, in Sec.
                24.2, paragraph (b)(1)(ii), ``allowances for loan and lease losses or
                allowance for credit losses, as applicable, as reported in the national
                bank's Call Report'' is corrected to read ``allowance for loan and
                lease losses or adjusted allowances for credit losses, as applicable,
                as reported in the Consolidated Reports of Condition and Income (Call
                Report)'';
                0
                b. On page 61795, in the second column, in amendment 17, in Sec. 24.2,
                paragraph (b)(2)(i), ``the bank's Consolidated Reports of Condition and
                Income (Call Report) filed under 12 U.S.C. 161'' is corrected to read
                ``the Call Report'';
                0
                c. On page 61795, in the second column, in amendment 17, in Sec. 24.2,
                paragraph (b)(2)(ii), ``allowances for loan and lease losses'' is
                corrected to read ``allowance for loan and lease losses or adjusted
                allowances for credit losses, as applicable,''; and ``the bank's Call
                Report as filed under 12 U.S.C. 161'' is corrected to read ``the Call
                Report''.
                Sec. 32.2 [Corrected]
                0
                7. a. On page 61795, in the second column, in amendment 19, in Sec.
                32.2, paragraph (c)(1)(ii), ``allowances for loan and lease losses or
                allowance for credit losses, as applicable, as reported in the national
                bank's or Federal savings association's Call Report'' is corrected to
                read ``allowance for loan and lease losses or adjusted allowances for
                credit losses, as applicable, as reported in the Consolidated Reports
                of Condition and Income (Call Report)'';
                0
                b. On page 61795, in the second column, in amendment 19, in Sec. 32.2,
                paragraph (c)(2)(i), ``the bank's or savings association's Consolidated
                Reports of Condition and Income (Call Report)'' is corrected to read
                ``the Call Report''; and
                0
                c. On page 61795, in the second column, in amendment 19, in Sec. 32.2,
                paragraph (c)(2)(ii), ``allowances for loan and lease losses'' is
                corrected to read ``allowance for loan and lease losses or adjusted
                allowances for credit losses, as applicable,''.
                Sec. 34.81 [Corrected]
                0
                8. On page 61795, in the second and third columns, remove heading
                ``PART 34--REAL ESTATE LENDING AND APPRAISALS,'' remove amendments 20
                and 21, and renumber the subsequent amendments to reflect the removal.
                 Dated: November 27, 2019.
                Jonathan V. Gould,
                Senior Deputy Comptroller and Chief Counsel, Office of the Comptroller
                of the Currency.
                [FR Doc. 2019-27168 Filed 12-17-19; 8:45 am]
                 BILLING CODE 4810-33-P
                

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