[Federal Register Volume 59, Number 119 (Wednesday, June 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15137]


[[Page Unknown]]

[Federal Register: June 22, 1994]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 567

[No. 93-239]
RIN 1550-AA71

 

Regulatory Capital: Common Stockholders' Equity

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OFS) proposes to amend its 
minimum regulatory capital regulations by revising the definition of 
the term ``common stockholders' equity.'' This proposed amendment will 
revise OTS's definition of common stockholders' equity in order to 
incorporate a recent change in generally accepted accounting principles 
(GAAP), made by Statement of Financial Accounting Standards No. 115, 
Accounting for Certain Investments in Debt and Equity Securities (SFAS 
No. 115).

DATES: Comments must be received on or before July 22, 1994.

ADDRESSES: Send comments to Director, Information Services Division, 
Public Affairs, Office of Thrift Supervision, 1700 G Street, NW., 
Washington, DC 20552. Attention Docket No. [93-239). These submissions 
may be hand delivered to 1700 G Street, NW., from 9:00 A.M. to 5:00 
P.M. on business days; they may be sent by facsimile transmission to 
FAX number (202) 906-7755. Submissions must be received by 5:00 P.M. on 
the day they are due in order to be considered by the OTS. Late-filed, 
misaddressed, or misidentified submissions will not be considered in 
this rulemaking. Comments will be available for public inspection at 
1700 G Street, NW., from 1.00 P.M. until 4:00 P.M. on business days. 
Visitors will be escorted to and from the Public Reading Room at 
established intervals.

FOR FURTHER INFORMATION CONTACT:
Arthur W. Lindo, Senior Account, (202) 906-5642, Accounting Policy; 
John F. Connolly, Senior Program Manager for Capital Policy, (202) 906-
6465; Lorraine E. Waller, Counsel, Regulations and Legislation 
Division, Chief Counsel's Office, (202) 906-6458, Office of Thrift 
Supervision, 1700 G St., NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    Under OTS's capital rule, 12 CFR 567.1, common stockholders' 
equity, the primary component of core capital for most savings 
associations, includes items that are generally the same as the items 
that comprised GAAP equity, when the capital rule was adopted. Today's 
proposal would revise the OTS's definition of common stockholders' 
equity in order to incorporate a change in GAAP made by the Financial 
Accounting Standards Board, in May 1993, when it issued SAFAS No. 115.
    SFAS No. 115 requires that most debt and equity securities be 
reported at fair value, rather than at amortized cost. It supersedes 
SFAS No. 12, Accounting for Certain Marketable Securities. When SFAS 
No. 115 becomes effective,\1\ unrealized gains and losses on available-
for-sale securities will be included in GAAP equity. On August 10, 
1993, the Federal Financial Institutions Examination Council announced 
that it will adopt SFAS No. 115, and that it will require all federally 
supervised banks and savings associations to adopt SFAS No. 115. The 
OTS and the Federal banking regulatory agencies announced their 
intention to proposed amendments to their respective capital rules to 
make the rules reflect the accounting and reporting standards contained 
in SFAS No. 115.
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    \1\SFAS No. 115 will be effective for fiscal years beginning 
after December 15, 1993. SFAS No. 115, however, includes early 
adoption provisions, under which savings associations may adopt its 
standards as early as June 30, 1993, depending on when their fiscal 
years end.
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    Section 4(b)(2) of the Home Owners' Loan Act of 1933 (HOLA), 12 
U.S.C. 1463(b)(2), requires the OTS to prescribe accounting standards 
that ``incorporate [GAAP] to the same degree that such principles are 
used to determine compliance with regulations prescribed by the Federal 
banking agencies.'' The proposal revises the OTS definition of common 
stockholders' equity so that it will be consistent with the change in 
GAAP made by SFAS No. 115. It is similar to amendments the other 
Federal banking agencies have proposed to their respective capital 
rules in order to incorporate the modification of GAAP made by SFAS No. 
115.

II. Comment Solicitation

    The OTS solicits comment on all aspects of the proposal, but is 
particularly interested in comments on the following specific 
questions:
    1. If the SFAS No. 115 unrealized gains and losses are included in 
regulatory capital, how should OTS include these adjustments in its 
calculations?
    a. Should SFAS No. 115 unrealized gains and losses be included in 
core capital for purposes of the leverage ratio requirement?
    b. Should SFAS No. 115 unrealized gains and losses be included in 
core capital for purposes of the risk-based capital requirement?
    c. Should SFAS No. 115 unrealized gains and losses be included in 
supplementary capital for purposes of the risk-based capital 
requirement?
    2. Should SFAS No. 115 unrealized gains and losses be included in 
capital for purposes of Prompt Corrective Action (PCA)? If so, should 
the OTS initiate a rulemaking to amend the PCA capital definitions 
(i.e., tangible equity) or capital categories to ameliorate the 
statutory effects resulting from the potential volatility due to SFAS 
No. 115 adjustments?
    3. What changes, if any, in asset-liability management, or risk 
management, would likely result from the inclusion of SFAS No. 115 
unrealized gains and losses in capital? Would such changes increase or 
decrease the risk to the Savings Association Insurance Fund?

III. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601), it is certified that this regulation will not 
have a significant economic impact on a substantial number of small 
savings associations. This proposed regulation simply revises the 
definition of common stockholders' equity included in the OTS capital 
rule so that it will include a new component of GAAP equity that was 
added to GAAP equity by SFAS No. 115. Section 4(b)(2) of HOLA requires 
the OTS to promulgate accounting standards that incorporate GAAP 
standards to the same degree that those standards are used by the 
Federal banking agencies.

IV. Executive Order 12866

    The Director of the OTS has determined that this proposed rule is 
not a ``significant regulatory action'' for purposes of Executive Order 
12866. The OTS proposes to revise its capital definition, in order to 
bring it into conformity with SFAS No. 115, and to ensure that its 
definition of common stockholders' equity is consistent with those of 
the other Federal banking agencies.

List of Subjects in 12 CFR Part 567

    Capital, Savings associations.

    Accordingly, the Office of Thrift Supervision hereby proposes to 
amend part 567, chapter V, title 12, Code of Federal Regulations, as 
set forth below.

SUBCHAPTER D--REGULATIONS APPLICABLE TO ALL SAVINGS ASSOCIATIONS

PART 567--[AMENDED]

    1. The authority for part 567 continues to read as follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828 
(note).

    2. Section 567.1 is amended by revising paragraph (d) to read as 
follows:


Sec. 567.1  Definitions.

* * * * *
    (d) Common stockholders' equity. The term common stockholders' 
equity includes common stock, common stock surplus, retained earnings, 
adjustments for the cumulative effect of foreign currency translation 
and unrealized gains and losses on available-for-sale securities.
* * * * *
    Dated: December 15, 1993.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.

    Editorial Note: This document was received at the Office of the 
Federal Register on June 17, 1994.

[FR Doc. 94-15137 Filed 6-21-94; 8:45 am]
BILLING CODE 6720-01-P