AOCI Opt-Out Election Must be Made on Call Report or FR Y-9C (if applicable) for the Quarter Ending March 31, 2015

Corporate / Financial Institutions Alert

January 20, 2015
Corporate / Financial Institutions Alert

All banks, other than advanced approaches banks, have a one-time irrevocable option to opt-out of the requirement to include all components of Accumulated Other Comprehensive Income (other than accumulated net gains and losses on cash flow hedges related to items that are not fair valued on the balance sheet) when calculating common equity tier 1 capital under the Basel III rules (the opt-out election). This will allow banks to continue to treat certain AOCI components as permitted under the prior risk-based capital rules.

Banks should review the AOCI opt-out election with their accountants.

The opt-out election must be made on the Call Report or FR Y-9C (if applicable) for the quarter ending March 31, 2015.

A bank that makes the opt-out election must adjust common equity tier 1 capital as follows:

For further information on this issue, please contact Tim Sullivan, Michael D. Morehead or  your regular Hinshaw attorney.

Tax advice disclosure: To ensure compliance with the Internal Service Regulations governing the issuance of advise on Federal Tax issues, we advise you that any tax advice in this communication (and any attachments) is not written with the intent that it be used, and cannot be used, to avoid penalties that may be imposed under the Internal Revenue Code.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.