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Federal Register / Vol. 86, No. 188 / Friday, October 1, 2021 / Rules and Regulations
met. We proposed to amend this section by replacing the reference to parts 615
and 628 with a general reference to FCAs capital adequacy standards. This would satisfy the requirement to refer to parts 615 and 628 and would include all existing capital requirements of the FCA
as well as any future capital requirements that we may adopt in other parts of our regulations.
As we noted in the proposal,51
changes to bylaws to conform to this regulatory requirement should not change any substantive rights of the System institution or its memberborrowers.52 System institutions that have already amended their capitalization bylaws to include a reference to parts 615 and 628 do not need to amend their capitalization bylaws to comply with this revision.
We received no comments on this amendment and are adopting it as proposed.
B. Annual Report to Shareholders Corrections We proposed technical revisions to 620.5, which lists the required contents of a System institutions annual report to shareholders, to ensure institutions report financial data as we intended. First, we proposed to move the requirement that System associations report their tier 1 leverage ratio in each annual report for each of the last 5 fiscal years from 620.5f4iv to 620.5f3v, as we had originally intended. In addition, we proposed to amend the requirement in 620.5f4 that institutions report core surplus, total surplus, and the net collateral ratio banks only in a comparative columnar form for each fiscal year ending in 2012 through 2016.
This requirement resulted in System institutions reporting capital ratios beyond the 5-year requirement established in 620.5f, which was not our intention. Accordingly, we proposed to require these disclosures in each annual report through 2021, but only as long as these ratios are part of the previous 5 fiscal years for which disclosures are required. We received no comments on these revisions and are adopting them as proposed.
51 See
85 FR 55786, 55792 September 10, 2020.
the change is non-substantive and does not alter, reduce, or increase the rights of any memberborrowers, a System institutions board may choose to make a conforming change to the capitalization bylaws to include a general reference to regulatory capital adequacy standards without a vote by its member-borrowers, provided that such bylaws allow for technical amendments without a shareholder vote.
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C. Appropriate Risk-Weighting of Cash and Gold Bullion We proposed to delete provisions in 628.32l1 pertaining to the risk weighting of cash that were redundant and potentially confusing. Specifically, existing 628.32l1 states that System institutions must assign a 0-percent risk weight to cash held in accounts at a depository institution, which created potential confusion pertaining to the proper risk weight for deposits that exceed the limit of FDIC deposit insurance coverage currently set at $250,000. In addition, existing 628.32l1 also states that System institutions must assign a 0-percent risk weight to cash held in accounts at a Federal Reserve Bank. As the risk weighting of cash on deposit with a U.S.
depository institution or at the Federal Reserve Bank is adequately and more accurately addressed in 628.32a1iA and B and d1, we proposed eliminating the duplicative and potentially confusing provisions in 628.32l1. We received no comments on these revisions and are adopting them as proposed.
We additionally proposed to revise 628.32l1 to add a provision assigning a 0-percent risk weight to gold bullion held in a System institutions own vaults, consistent with the risk weight assigned to gold bullion held in the vaults of a depository institution.
We received no comments on this revision and are adopting it as proposed.
D. Securitization Formulas Consistent with corrections previously provided in the Capital Bookletter, we proposed to correct 3
formulas used in the simplified supervisory formula approach SSFA to risk-weighting securitizations under 628.43d, and one formula used in the simple risk-weight approach SRWA for risk-weighting equity exposures under 628.52. These formulas were printed incorrectly in the Federal Register version of the 2017 Capital Rule. We received no comments on these corrections and are finalizing them as proposed.
E. Unallocated Retained Earnings and Equivalents Deductions and Adjustments Under 628.10, at least 1.5 percent of the 4 percent tier 1 leverage ratio minimum must consist of URE and URE
equivalents UREE. As the 2017 Capital Rule did not specify how to calculate this requirement, we proposed to prescribe the calculation methodology.
Specifically, we proposed to incorporate
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the guidance in the Capital Bookletter requiring the deductions in 628.22a from the numerator and the deductions used in calculating the tier 1 leverage ratio from the denominator.53 We also proposed to require that institutions deduct from the numerator any purchased equity investments that must be deducted under the corresponding deduction approach in 628.22c. The use of differing deductions for the computation of the tier 1 leverage ratio and the URE and UREE measure, which is a component of the tier 1 leverage ratio, resulted in the URE and UREE
measure, when calculated on a standalone basis, exceeding the tier 1 leverage ratio at many System institutions.54 This was not our intent. The System Comment Letter generally supported our proposed revisions, and we are adopting them as proposed.
In addition, we are adopting technical conforming amendments in 628.10c4 to incorporate adjustments required under proposed 628.22b 55 into the computation of both the tier 1 leverage ratio and the URE and UREE measure. More specifically, we are amending the calculation of average total consolidated assets described in 628.10c4i to include the deduction or adjustment required by 628.22b. Furthermore, we are amending the calculation of the URE and UREE measure described in 628.10c4ii to include the deduction or adjustment required by 628.22b. These conforming changes are consistent with existing call report instructions,56 are technical in nature, and are necessary to maintain consistency in the deductions for the computation of the tier 1 leverage ratio and the URE and UREE measure, consistent with the intent of the proposed rule.
53 See
Capital Bookletter, Item 4.
628.10c4 requires the amounts deducted under 628.22a and c and 628.23 to be deducted from tier 1 capital when calculating the tier 1 leverage ratio. However, the deductions under 628.22c and 628.23 were not applied to the numerator when calculating the URE and UREE
requirement as they do not increase the URE of a System institution. Although we are amending the rule to incorporate deductions under new 628.22b and existing 628.22c, we did not find it necessary to require the deductions under 628.23 when calculating the URE and UREE
measure because third-party stock is not a component of URE, UREE, or CET1 capital.
55 Proposed 628.22b is discussed below under Section III, GAdjustments for Accruing Patronage and Dividends.
56 See the call report instructions for Uniform Call Report schedule RCR.4, item 3, and schedule RC
R.5, item 1.c. The call report instructions are available at https ww3.fca.gov/fcsinfo/CRS/
CallReportFiles/UCR%20Report %20Instructions.pdf.
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