Proposed Regulatory Capital Rule Incorporates Guidance in FASB 166 and 167

The federal banking and thrift regulatory agencies are seeking comment on a proposed regulatory capital rule related to FASB’s adoption of Statement no. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140, and Statement no. 167, Amendments to FASB Interpretation No. 46(R). Beginning in 2010, these accounting standards will make substantive changes to how banking organizations account for items, including securitized assets, that are currently excluded from these organizations’ balance sheets.

The Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued the joint proposal to better align regulatory capital requirements with the actual risks of certain exposures. Banking organizations affected by the new accounting standards generally will be subject to higher minimum regulatory capital requirements. The proposal seeks comment and supporting data on whether it is necessary to phase in the increase in regulatory capital requirements. It also seeks comment and supporting data on the features and characteristics of transactions that, although consolidated under the new accounting standards, might merit an alternative capital treatment, as well as on the potential impact of the new accounting standards on lending, provisioning and other activities.

Comments are due within 30 days after publication in the Federal Register, which is expected shortly.