The Office of the Comptroller of the Currency reassured community banks that new Basel III capital rules released Tuesday will not create unnecessary burdens.
Leading up to the final rule, community banks voiced their concerns to the OCC, suggesting capital requirements alone could weigh down smaller institutions.
The new Basel III guidance aims to stabilize the financial system by implementing higher equity and capital guidelines.
Under the final rule, small banks and thrifts are allowed to opt out of Accumulated Other Comprehensive Income, which, if not permitted, would have resulted in volatile changes in capital levels that would be difficult and expensive for small banks to manage, the OCC stated.
Additionally, the OCC agreed to continue to apply existing risk-based capital standards, including a 50% risk weight for prudently underwritten first-lien mortgages that are not past due.
Community banks also are exempt from having to phase out Trust Preferred Securities from Tier-1 capital, and instead, capital instruments issued by these institutions prior to May 2010 will be grandfathered in as long as they are currently classified as Tier-1 capital.
In light of the changes, the OCC permitted small institutions to have an extra year to implement these new requirements, postponing the implementation to Jan. 1, 2015.
"I think those are important accommodations, and it is entirely appropriate that they apply to the community banks and thrifts that had nothing to do with bringing on the crisis," Comptroller of the Currency Thomas Curry said.