The Federal Reserve Board today approved the publication of the long-awaited final regulatory capital rules (“Final Rules” ), which were proposed one year ago (the “Proposed Rules”). While today’s action was taken by the Federal Reserve Board, the OCC and the FDIC are expected to announce their approval of the Final Rules by no later than July 9. Therefore, rather than just referring to the actions of the Federal Reserve Board in this discussion, we will refer hereinafter to the actions of all three federal banking agencies (the “Agencies”).

As adopted, the Final Rules make major changes to the U.S. regulatory capital framework in a regulatory effort to strengthen the regulatory capital of U.S. banking organizations and bring the U.S. into compliance with the Basel Committee’s current international regulatory capital accord (“Basel III”). The Final rules will replace the Agencies’ general risk-based capital rules, advanced approaches rule, market risk rule, and leverage rules in accordance with the transition provisions described below.