Federal Reserve Board proposes change to Risk-Based Capital Standards

Summary of the Federal Reserve Board's Proposal on Trust Preferred Securities and the Definition of Capital:

The Board of Governors of the Federal Reserve System (Board) has proposed to allow the continued inclusion of outstanding and prospective issuances of trust preferred securities among tier 1 capital of bank holding companies. The Board also proposes to revise the quantitative limits applied to perpetual preferred stock, trust preferred securities, and minority interests included within tier 1 capital. In addition, the Board is proposing to revise the qualitative standards for capital instruments included in regulatory capital consistent with longstanding Board policies. Changes to the qualitative requirements will reflect the Board's effort to address supervisory concerns, competitive equity considerations, and changes in the generally accepted accounting principles. The proposed changes will, according to the Board, have the effect of strengthening the definition of regulatory capital for Bank Holding Companies.

• Link to Federal Reserve Proposed Rule:
  www.federalreserve.gov/boarddocs/press/bcreg/2004/20040506/attachment.pdf
• Links to KBL, NBA Industrial Bank, and Riverside comment letters:
  KBL Comment: Noel M. Gruber
  www.federalreserve.gov/SECRS/2004/July/20040701/R-1193/R-1193_2_1.pdf
• NBA Comment: Norma A. Hart
  www.federalreserve.gov/SECRS/2004/July/20040715/R-1193/R-1193_32_1.pdf
  Industrial Bank: B. Doyle Mitchell, Jr.
• www.federalreserve.gov/SECRS/2004/July/20040713/R-1193/R-1193_14_1.pdf
• Riverside Gulf Coast: Randall Graber
  www.federalreserve.gov/SECRS/2004/July/20040720/R-1193/R-1193_26_1.pdf