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In March 2017, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) submitted a report to Congress pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996, in which they committed to meaningfully reduce regulatory burden, especially on community banking organizations.  Consistent with that commitment, the agencies invited public comment on a notice of proposed rulemaking that would simplify compliance with certain aspects of the capital rule. A majority of the proposed simplifications would apply solely to banking organizations that are not subject to the advanced approaches capital rule (non-advanced approaches banking organizations). Specifically, the agencies proposed that non-advanced approaches banking organizations apply a simpler regulatory capital treatment for: (i) mortgage servicing assets; (ii) certain deferred tax assets arising from temporary differences; (iii) investments in the capital of unconsolidated financial institutions; and (iv) capital issued by a consolidated subsidiary of a banking organization and held by third parties (minority interest). More generally, the proposal also includes revisions to the treatment of certain acquisition, development, or construction exposures that are designed to address comments regarding the current definition of high volatility commercial real estate under the capital rule’s standardized approach. The proposed revisions to the treatment of acquisition, development, or construction exposures would not apply to those exposures that are outstanding or committed prior to the proposed rule’s effective date.

In addition to the proposed simplifications, the agencies also proposed various additional clarifications and technical amendments to the agencies’ capital rule, which would apply to both non-advanced approaches banking organizations and advanced approaches banking organizations.