Page 7 - Compliance Monthly 10-7-2019

Finalized Rules

FDIC Final Changes to Capital Rule
The final rule that provides for a simple measure of capital adequacy for certain community banking organizations, consistent with

section 201 of the Economic Growth, 2 Regulatory Relief, and Consumer Protection Act (final rule). Under the final rule, depository
institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other
qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9
percent, will be eligible to opt into the community bank leverage ratio framework (qualifying community banking organizations).
Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a
leverage ratio of greater than 9 percent will be considered to have satisfied the generally applicable risk-based and leverage capital
requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-
capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. The final rule includes a two-quarter
grace period during which a qualifying community banking organization that temporarily fails to meet any of the qualifying criteria,

including the greater than 9 percent leverage ratio requirement, generally would still be deemed well-capitalized so long as the
banking organization maintains a leverage ratio greater than 8 percent. At the end of the grace period, the banking organization
must meet all qualifying criteria to remain in the community bank leverage ratio framework or otherwise must comply with and

report under the generally applicable rule. Similarly, a banking organization that fails to maintain a leverage ratio greater than 8
percent would not be permitted to use the grace period and must comply with the capital rule’s generally applicable requirements
and file the appropriate regulatory reports.

Source: FDIC, Publication Date: September18, 2019

Appraisal Management Company Registration Requirements

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The Office of the Comptroller of the Currency (OCC) is issuing this bulletin to remind banks of the new registration requirement for
appraisal management companies (AMC) that became effective on August 10, 2019. Under this requirement, AMCs must register
with the state or states in which they do business and must be subject to state supervision. Federal law bars AMCs from providing
appraisal management services to financial institutions for consumer credit transactions secured by a consumer’s principal
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dwelling that are federally related transactions (covered FRT) if the AMCs are not registered as required. This bulletin discusses
considerations for banks with regard to confirming AMC registration as part of sound third-party risk management and suggests
alternatives that banks can use when no registered AMCs are available.

Bank management should be aware of the following:

• No AMC may perform services related to a covered FRT in a state unless the company is registered with that state or subject
to oversight by a federal financial institutions regulatory agency.
• Sound third-party risk management should include a process to confirm that AMCs engaged by the bank have registered
with the state.
• There are several options for obtaining appraisals for covered FRTs if a state is not registering AMCs.

Source: OCC, Publication Date: September 16, 2019

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