Capital conservation and countercyclical capital buffer. (1) From January 1, 2014 through December 31, 2015, a Board-regulated institution is not subject to limits on distributions and discretionary bonus payments under § 217.11 of subpart B of this part notwithstanding the amount of its capital conservation buffer or any applicable countercyclical capital buffer amount.

Notwithstanding § 217.11, beginning January 1, 2016 through December 31, 2018 a Board-regulated institution's maximum payout ratio shall be determined as set forth in Table 1 to § 217.300.

Regulatory capital adjustments and deductions. Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches Board-regulated institution, and in each case through December 31, 2017, a Board-regulated institution must make the capital adjustments and deductions in § 217.22 in accordance with the transition requirements in this paragraph (b). Beginning January 1, 2018, a Board-regulated institution must make all regulatory capital adjustments and deductions in accordance with § 217.22.

Transition deductions from common equity tier 1 capital. Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches Board-regulated institution, and in each case through December 31, 2017, a Board-regulated institution, must make the deductions required under § 217.22(a)(1)-(7) from common equity tier 1 or tier 1 capital elements in accordance with the percentages set forth in Table 2 and Table 3 to § 217.300.

A Board-regulated institution must deduct the following items from common equity tier 1 and additional tier 1 capital in accordance with the percentages set forth in Table 2 to § 217.300: goodwill (§ 217.22(a)(1)), DTAs that arise from net operating loss and tax credit carryforwards (§ 217.22(a)(3)), a gain-on-sale in connection with a securitization exposure (§ 217.22(a)(4)), defined benefit pension fund assets (§ 217.22(a)(5)), expected credit loss that exceeds eligible credit reserves (for advanced approaches Board-regulated institutions that have completed the parallel run process and that have received notifications from the Board pursuant to § 217.121(d) of subpart E) (§ 217.22(a)(6)), and financial subsidiaries (§ 217.22(a)(7)).

A Board-regulated institution must deduct from common equity tier 1 capital any intangible assets other than goodwill and MSAs in accordance with the percentages set forth in Table 3 to § 217.300.

A Board-regulated institution must apply a 100 percent risk-weight to the aggregate amount of intangible assets other than goodwill and MSAs that are not required to be deducted from common equity tier 1 capital under this section.

Transition adjustments to common equity tier 1 capital. Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches Board-regulated institution, and in each case through December 31, 2017, a Board-regulated institution, must allocate the regulatory adjustments related to changes in the fair value of liabilities due to changes in the Board-regulated institution's own credit risk (§ 217.22(b)(1)(iii)) between common equity tier 1 capital and tier 1 capital in accordance with the percentages set forth in Table 4 to § 217.300.

If the aggregate amount of the adjustment is positive, the Board-regulated institution must allocate the deduction between common equity tier 1 and tier 1 capital in accordance with Table 4 to § 217.300.

If the aggregate amount of the adjustment is negative, the Board-regulated institution must add back the adjustment to common equity tier 1 capital or to tier 1 capital, in accordance with Table 4 to § 217.300.

Transition adjustments to AOCI for an advanced approaches Board-regulated institution and a Board-regulated institution that has not made an AOCI opt-out election under § 217.22(b)(2). Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches Board-regulated institution that has not made an AOCI opt-out election under § 217.22(b)(2), and in each case through December 31, 2017, a Board-regulated institution must adjust common equity tier 1 capital with respect to the transition AOCI adjustment amount (transition AOCI adjustment amount):

The transition AOCI adjustment amount is the aggregate amount of a Board-regulated institution's:

Unrealized gains on available-for-sale securities that are preferred stock classified as an equity security under GAAP or available-for-sale equity exposures, plus

Net unrealized gains or losses on available-for-sale securities that are not preferred stock classified as an equity security under GAAP or available-for-sale equity exposures, plus

Any amounts recorded in AOCI attributed to defined benefit postretirement plans resulting from the initial and subsequent application of the relevant GAAP standards that pertain to such plans (excluding, at the Board-regulated institution's option, the portion relating to pension assets deducted under section 22(a)(5)), plus

Accumulated net gains or losses on cash flow hedges related to items that are reported on the balance sheet at fair value included in AOCI, plus

Net unrealized gains or losses on held-to-maturity securities that are included in AOCI.

A Board-regulated institution must make the following adjustment to its common equity tier 1 capital:

If the transition AOCI adjustment amount is positive, the appropriate amount must be deducted from common equity tier 1 capital in accordance with Table 5 to § 217.300.

If the transition AOCI adjustment amount is negative, the appropriate amount must be added back to common equity tier 1 capital in accordance with Table 5 to § 217.300.

A Board-regulated institution may include in tier 2 capital the percentage of unrealized gains on available-for-sale preferred stock classified as an equity security under GAAP and available-for-sale equity exposures as set forth in Table 6 to § 217.300.

Additional transition deductions from regulatory capital. Except as provided in paragraph (b)(5) of this section:

Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches institution, and in each case through December 31, 2017, an institution, must use Table 7 to § 217.300 to determine the amount of investments in capital instruments and the items subject to the 10 and 15 percent common equity tier 1 capital deduction thresholds (§ 217.22(d)) (that is, MSAs, DTAs arising from temporary differences that the institution could not realize through net operating loss carrybacks, and significant investments in the capital of unconsolidated financial institutions in the form of common stock) that must be deducted from common equity tier 1 capital.

Beginning January 1, 2014 for an advanced approaches institution, and beginning January 1, 2015 for an institution that is not an advanced approaches institution, and in each case through December 31, 2017, an institution must apply a 100 percent risk weight to the aggregate amount of the items subject to the 10 and 15 percent common equity tier 1 capital deduction thresholds that are not deducted under this section. As set forth in § 217.22(d)(2), beginning January 1, 2018, a Board-regulated institution must apply a 250 percent risk weight to the aggregate amount of the items subject to the 10 and 15 percent common equity tier 1 capital deduction thresholds that are not deducted from common equity tier 1 capital.

For purposes of calculating the transition deductions in this paragraph (b)(4) beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for Board-regulated institution that is not an advanced approaches Board-regulated institution, and in each case through December 31, 2017, an institution's 15 percent common equity tier 1 capital deduction threshold for MSAs, DTAs arising from temporary differences that the institution could not realize through net operating loss carrybacks, and significant investments in the capital of unconsolidated financial institutions in the form of common stock is equal to 15 percent of the sum of the institution's common equity tier 1 elements, after regulatory adjustments and deductions required under § 217.22(a) through (c) (transition 15 percent common equity tier 1 capital deduction threshold).

Beginning January 1, 2018 a Board-regulated institution must calculate the 15 percent common equity tier 1 capital deduction threshold in accordance with § 217.22(d).

Special transition provisions for non-significant investments in the capital of unconsolidated financial institutions, significant investments in the capital of unconsolidated financial institutions that are not in the form of common stock, MSAs, DTAs arising from temporary differences that the Board-regulated institution could not realize through net operating loss carrybacks, and significant investments in the capital of unconsolidated financial institutions in the form of common stock. Beginning January 1, 2018, a Board-regulated institution that is not an advanced approaches Board-regulated institution must continue to apply the transition provisions described in paragraphs (b)(4)(i), (ii), and (iii) of this section applicable to calendar year 2017 to items that are subject to deduction under § 217.22(c)(4), (c)(5), and (d), respectively.

Non-qualifying capital instruments—(1) Depository institution holding companies with total consolidated assets of more than $15 billion as of December 31, 2009 that were not mutual holding companies prior to May 19, 2010. The transition provisions in this paragraph (c)(1) apply to debt or equity instruments that do not meet the criteria for additional tier 1 or tier 2 capital instruments in § 217.20, but that were issued and included in tier 1 or tier 2 capital, respectively (or, in the case of a savings and loan holding company, would have been included in tier 1 or tier 2 capital if the savings and loan holding company had been subject to the general risk-based capital rules under 12 CFR part 225, appendix A), prior to May 19, 2010 (non-qualifying capital instruments), and that were issued by a depository institution holding company with total consolidated assets greater than or equal to $15 billion as of December 31, 2009 that was not a mutual holding company prior to May 19, 2010 (2010 MHC) (depository institution holding company of $15 billion or more).

A depository institution holding company of $15 billion or more may include in tier 1 and tier 2 capital non-qualifying capital instruments up to the applicable percentage set forth in Table 8 to § 217.300 of the aggregate outstanding principal amounts of non-qualifying tier 1 and tier 2 capital instruments, respectively, that are outstanding as of January 1, 2014, beginning January 1, 2014, for a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution that is not a savings and loan holding company, and beginning January 1, 2015, for all other depository institution holding companies of $15 billion or more.

A depository institution holding company of $15 billion or more must apply the applicable percentages set forth in Table 8 to § 217.300 separately to the aggregate amounts of its tier 1 and tier 2 non-qualifying capital instruments.

The amount of non-qualifying capital instruments that must be excluded from additional tier 1 capital in accordance with this section may be included in tier 2 capital without limitation, provided the instruments meet the criteria for tier 2 capital set forth in § 217.20(d).

Non-qualifying capital instruments that do not meet the criteria for tier 2 capital set forth in § 217.20(d) may be included in tier 2 capital as follows:

A depository institution holding company of $15 billion or more that is not an advanced approaches Board-regulated institution may include non-qualifying capital instruments that have been phased-out of tier 1 capital in tier 2 capital, and

During calendar years 2014 and 2015, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8 to § 217.300. Beginning January 1, 2016, a depository institution holding company of $15 billion or more that is an advanced approaches Board-regulated institution may include non-qualifying capital instruments in tier 2 capital that have been phased out of tier 1 capital in accordance with Table 8, up to the applicable percentages set forth in Table 9 to § 217.300.

Mergers and acquisitions. (i) A depository institution holding company of $15 billion or more that acquires either a depository institution holding company with total consolidated assets of less than $15 billion as of December 31, 2009 (depository institution holding company under $15 billion) or a depository institution holding company that is a 2010 MHC, may include in regulatory capital the non-qualifying capital instruments issued by the acquired organization up to the applicable percentages set forth in Table 8 to § 217.300.

If a depository institution holding company under $15 billion acquires a depository institution holding company under $15 billion or a 2010 MHC, and the resulting organization has total consolidated assets of $15 billion or more as reported on the resulting organization's FR Y-9C for the period in which the transaction occurred, the resulting organization may include in regulatory capital non-qualifying instruments of the resulting organization up to the applicable percentages set forth in Table 8 to § 217.300.

Depository institution holding companies under $15 billion and 2010 MHCs. (i) Non-qualifying capital instruments issued by depository institution holding companies under $15 billion and 2010 MHCs prior to May 19, 2010, may be included in additional tier 1 or tier 2 capital if the instrument was included in tier 1 or tier 2 capital, respectively, as of January 1, 2014.

Non-qualifying capital instruments includable in tier 1 capital are subject to a limit of 25 percent of tier 1 capital elements, excluding any nonqualifying capital instruments and after applying all regulatory capital deductions and adjustments to tier 1 capital.

Non-qualifying capital instruments that are not included in tier 1 as a result of the limitation in paragraph (c)(3)(ii) of this section are includable in tier 2 capital.

Depository institutions. (i) Beginning on January 1, 2014, a depository institution that is an advanced approaches Board-regulated institution, and beginning on January 1, 2015, all other depository institutions, may include in regulatory capital debt or equity instruments issued prior to September 12, 2010 that do not meet the criteria for additional tier 1 or tier 2 capital instruments in § 217.20 but that were included in tier 1 or tier 2 capital respectively as of September 12, 2010 (non-qualifying capital instruments issued prior to September 12, 2010) up to the percentage of the outstanding principal amount of such non-qualifying capital instruments as of January 1, 2014 in accordance with Table 9 to § 217.300.

Table 9 to § 217.300 applies separately to tier 1 and tier 2 non-qualifying capital instruments.

The amount of non-qualifying capital instruments that cannot be included in additional tier 1 capital under this section may be included in tier 2 capital without limitation, provided that the instruments meet the criteria for tier 2 capital instruments under § 217.20(d).

Minority interest—(1) Surplus minority interest—(i) Advanced approaches institution surplus minority interest. Beginning January 1, 2014 through December 31, 2017, an advanced approaches Board-regulated institution may include in common equity tier 1 capital, tier 1 capital, or total capital the percentage of the common equity tier 1 minority interest, tier 1 minority interest and total capital minority interest outstanding as of January 1, 2014 that exceeds any common equity tier 1 minority interest, tier 1 minority interest or total capital minority interest includable under § 217.21 (surplus minority interest), respectively, as set forth in Table 10 to § 217.300.

Non-advanced approaches institution surplus minority interest. A Board-regulated institution that is not an advanced approaches Board-regulated institution may include in common equity tier 1 capital, tier 1 capital, or total capital 20 percent of the common equity tier 1 minority interest, tier 1 minority interest and total capital minority interest outstanding as of January 1, 2014, that exceeds any common equity tier 1 minority interest, tier 1 minority interest or total capital minority interest includable under § 217.21 (surplus minority interest), respectively.

Non-qualifying minority interest. Beginning January 1, 2014 for an advanced approaches Board-regulated institution, and beginning January 1, 2015 for a Board-regulated institution that is not an advanced approaches Board-regulated institution, and in each case through December 31, 2017, a Board-regulated institution may include in tier 1 capital or total capital the percentage of the tier 1 minority interest and total capital minority interest outstanding as of January 1, 2014 that does not meet the criteria for additional tier 1 or tier 2 capital instruments in § 217.20 (non-qualifying minority interest), as set forth in Table 10 to § 217.300.

Prompt corrective action. For purposes of 12 CFR part 208, subpart D, a Board-regulated institution must calculate its capital measures and tangible equity ratio in accordance with the transition provisions in this section.

Until July 21, 2015, this part will not apply to any bank holding company subsidiary of a foreign banking organization that is currently relying on Supervision and Regulation Letter SR 01-01 issued by the Board (as in effect on May 19, 2010).