The new Basel III capital rules that went into effect for all banks on January 1, 2015 can be confusing. All Non-Advanced Approaches Banks (< $250 billion assets) are required to make a one-time, irrevocable election to opt-in or opt-out of the new accumulated other comprehensive income (AOCI) treatment for regulatory capital computations on their March 31, 2015 call report.
The general thinking is that most banks will want to opt-out, meaning they elect to continue neutralizing the unrealized gains or losses on available-for-sale debt securities in their regulatory capital ratio computations. However, you should consider your bank’s current capital position as well as its future strategies before determining the election. It is also advised to consult with your bank’s account and financial advisors. Additionally, the FDIC offers aresource to check multiple scenarios of your bank’s Basel III capital ratios.
If you’d like to learn more about the Basel III final rules and how they’ll affect your bank, register for one of IBAT’s Basel III & RC-R Webinars on January 23, 2015.
A special thanks to Padgett, Stratemann & Co., CPAs for providing this information.