The Federal Reserve, the FDIC and the OCC have finalized two rules intended to help banks respond to the challenges of the coronavirus pandemic. The agencies previously adopted both as interim final rules in March.
The first of the final rules revises the definition of eligible retained income for all depository institutions, bank holding companies and savings and loan holding companies subject to the agencies’ capital rule. The revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual.
The second of the final rules amends the treatment of the total loss absorbing capacity, or TLAC that the eight U.S. global systemically important banks and designated foreign banks with U.S. operations are required to hold. The rule revises the definition of eligible retained income in the TLAC rule to be a covered company’s net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, or the average of a covered company’s net income over the preceding four quarters—whichever is greater.