Basel III Proposals: Issues for Community Banks (Presentation held on August 8, 2012)

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In This Presentation:

The OCC, FRB, and FDIC jointly issued 3 Notices of Proposed Rulemaking (NPRs) that would revise and replace the agencies’ current capital rules

- Basel III NPR (Capital)

- Standardized Approach NPR (Risk-weighted assets)

- Advanced Approaches NPR

Applicability: Basel III and Standardized Approach NPRs most relevant to community banks; apply to all banks, savings associations, SLHCs, and U.S. BHCs with greater than $500 million in total assets.

Comment Period Ends September 7, 2012

- Basel III NPR - Summary

1. Revises definitions of regulatory capital components and changes eligibility criteria of certain capital instruments

2. Changes minimum capital requirements and adds a new Common Equity Tier 1 Risk-based Capital Ratio (fully phased-in: 4.5%)

3. Revises the Prompt Corrective Action (PCA) rules to incorporate changes

4. New Capital Conservation Buffer that may restrict capital distributions and executive bonuses

5. Establishes transition periods

- Standardized Approach NPR -Summary

1. Proposed modification to the calculation of risk-weighted assets (i.e., the calculation of the denominator of a bank’s risk-based capital ratios)

2. Modification of risk weights for 11 asset classes, including residential mortgage exposures, high volatility commercial loans, past due assets, and other assets

3. Proposed effective date of January 1, 2015

Please see full presenation below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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