A Federal Reserve push to “modernize” the mutual bank regulatory framework would make that framework more flexible and better suited to the distinctive structure and capital needs of mutual institutions, the American Bankers Association said today.
Earlier this year, the Fed proposed the first comprehensive update of the regulations governing mutual banks since 1993. The proposal would facilitate access to capital by amending the Fed’s capital rule to clarify that mutual capital instruments may qualify as regulatory capital, including as Tier 1 capital. It would also amend Regulation MM to, among other things, eliminate certain dividend waiver requirements, and eliminate the requirement that subsidiary holding companies of mutual holding companies obtain federal charters.
ABA strongly supports proposed changes and believes they should serve as the basis for further reform, the association said in a letter to the Fed. “In particular, the board’s proposed treatment of mutual capital certificates provides a useful template for all mutual bank regulators to develop clear, consistent and predictable standards for special deposits and other instruments that share the essential characteristics of mutual capital certificates.”
ABA also offered several recommendations for further changes to make the proposal more effective, including creating a clear path to capital recognition for certificates conforming to the model terms, permitting disclosure of nonbinding target distribution rates, and further streamlining the proposed dividend-waiver framework.
