Sec. 208.40 Authority, purpose, scope, other supervisory authority, and disclosure of capital categories.

(a) Authority. Subpart D of Regulation H (12 CFR part 208, Subpart D) is issued by the Board of Governors of the Federal Reserve System (Board) under section 38 (section 38) of the FDI Act as added by section 131 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236 (1991)) (12 U.S.C. 1831o).

(b) Purpose and scope. This subpart D defines the capital measures and capital levels that are used for determining the supervisory actions authorized under section 38 of the FDI Act. (Section 38 of the FDI Act establishes a framework of supervisory actions for insured depository institutions that are not adequately capitalized.) This subpart also establishes procedures for submission and review of capital restoration plans and for issuance and review of directives and orders pursuant to section 38. Certain of the provisions of this subpart apply to officers, directors, and employees of state member banks. Other provisions apply to any company that controls a member bank and to the affiliates of the member bank.

(c) Other supervisory authority. Neither section 38 nor this subpart in any way limits the authority of the Board under any other provision of law to take supervisory actions to address unsafe or unsound practices or conditions, deficient capital levels, violations of law, or other practices. Action under section 38 of the FDI Act and this subpart may be taken independently of, in conjunction with, or in addition to any other enforcement action available to the Board, including issuance of cease and desist orders, capital directives, approval or denial of applications or notices, assessment of civil money penalties, or any other actions authorized by law.

(d) Disclosure of capital categories. The assignment of a bank under this subpart within a particular capital category is for purposes of implementing and applying the provisions of section 38. Unless permitted by the Board or otherwise required by law, no bank may state in any advertisement or promotional material its capital category under this subpart or that the Board or any other Federal banking agency has assigned the bank to a particular capital category.

(e) Transition procedures—(1) Definitions applicable before January 1, 2015, for certain banks. Before January 1, 2015, notwithstanding any other requirement in this subpart and with respect to any bank that is not an advanced approaches bank:

(i) The definitions of leverage ratio, tier 1 capital, tier 1 risk-based capital, and total risk-based capital as calculated or defined under Appendix A to this part or Appendix B to this part, as applicable, remain in effect for purposes of this subpart;

(ii) The definition of total assets means quarterly average total assets as reported in a bank's Report of Condition and Income (Call Report), minus all intangible assets except mortgage servicing assets to the extent that the Federal Reserve determines that mortgage servicing assets may be included in calculating the bank's tier 1 capital. At its discretion the Federal Reserve may calculate total assets using a bank's period-end assets rather than quarterly average assets; and

(iii) The definition of tangible equity of a member bank that is not an advanced approaches bank is the amount of core capital elements as defined in appendix A to this part, plus the amount of outstanding cumulative perpetual preferred stock (including related surplus) minus all intangible assets except mortgage servicing assets to the extent that the Board determines that mortgage servicing assets may be included in calculating the bank's tier 1 capital, as calculated in accordance with Appendix A to this part.

(2) Timing. The calculation of the definitions of common equity tier 1 capital, the common equity tier 1 risk-based capital ratio, the leverage ratio, the supplementary leverage ratio, tangible equity, tier 1 capital, the tier 1 risk-based capital ratio, total assets, total leverage exposure, the total risk-based capital ratio, and total risk-weighted assets under this subpart is subject to the timing provisions at 12 CFR 217.1(f) and the transitions at 12 CFR part 217, subpart G.