Accumulated Other Comprehensive Income (AOCI) Opt-Out Election

Corporate / Financial Institutions Alert

March 25, 2015
Corporate / Financial Institutions Alert

All financial institutions, other than advanced approaches financial institutions, may make a one-time permanent election to opt out of the requirement to include most components of Accumulated Other Comprehensive Income (AOCI) when calculating common equity tier 1 capital under the Basel III rules. This will allow financial institutions to continue to treat certain AOCI components as permitted under the prior risk-based capital rules.

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

A financial institution making the opt-out election must adjust common equity tier 1 capital as follows:

The AOCI opt-out election must be made on Schedule RC-R of the financial institution’s Call Report or on FR Y-9 for the March 31, 2015 report date.

A financial institution that is not an advanced approaches institution, but is a subsidiary of a banking organization subject to the regulatory capital requirements issued by the Fed, the OCC, or the FDIC, must make the same opt-out election as the banking organization of which it is a subsidiary.

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

Tax advice disclosure: To ensure compliance with the Internal Service Regulations governing the issuance of advice 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 & Culberston 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.