Banking Agencies to Allow Treasury’s Emergency Capital Investments to Count as Bank Capital

The Federal Reserve, FDIC and OCC today announced an interim final rule allowing Treasury investments made to community development financial institutions and minority depository institutions under the newly established Emergency Capital Investment program qualify as regulatory capital. Comments are due 60 days after publication in the Federal Register.

Under the program—which was established as part of the December COVID-19 relief bill and which is currently accepting funding applications—Treasury investments may take the form of senior preferred stock or subordinated debt, depending on the type of applicant and other factors. Under today’s IFR, preferred stock issued under the EICP will qualify as additional tier 1 capital, and subordinated debt will qualify as tier 2 capital, the agencies noted.

“Treasury’s Emergency Capital Investment Program helps make capital more available for Community Development Financial Institutions and minority banks. That’s a step in the right direction,” Acting Comptroller of the Currency Blake Paulson said in a statement. “Making clear that these funds qualify as regulatory capital helps make the most of the program so institutions can maximize its benefits.”

The OCC also issued a pledge to strengthen minority depository institutions through its participation in “Project REACh,” which brings together leaders from the banking industry, national civil rights organizations, business, and technology to reduce specific barriers that prevent full, equal, and fair participation in the nation’s economy. “The pledge helps minority banks remain vibrant parts of the economic landscape through larger banks’ commitments to additional investment, technical assistance, executive development, and business partnerships,” Paulson added. “Twenty-one banks have already taken the pledge, and we are eager to see others join.”