View all text of Subpart D [§ 208.40 - § 208.45]
§ 208.43 - Capital measures and capital category definitions.
(a) Capital measures. (1) For purposes of section 38 of the FDI Act and this subpart, the relevant capital measures are:
(i) Total Risk-Based Capital Measure: The total risk-based capital ratio;
(ii) Tier 1 Risk-Based Capital Measure: The tier 1 risk-based capital ratio;
(iii) Common Equity Tier 1 Capital Measure: The common equity tier 1 risk-based capital ratio; and
(iv) Leverage Measure:
(A) The leverage ratio; and
(B) With respect to an advanced approaches bank, on January 1, 2018, and thereafter, the supplementary leverage ratio.
(C) With respect to any bank that is a subsidiary (as defined in § 217.2 of this chapter) of a global systemically important BHC, on Jan. 1, 2018, and thereafter, the supplementary leverage ratio.
(2) For a qualifying community banking organization (as defined in § 217.12 of this chapter), that has elected to use the community bank leverage ratio framework (as defined in § 217.12 of this chapter), the leverage ratio calculated in accordance with § 217.12(b) of this chapter is used to determine the well capitalized capital category under paragraph (b)(1)(i)(A) through (D) of this section.
(b) Capital categories. For purposes of section 38 of the FDI Act and this subpart, a member bank is deemed to be:
(1)(i) “Well capitalized” if:
(A) Total Risk-Based Capital Measure: The bank has a total risk-based capital ratio of 10.0 percent or greater; and
(B) Tier 1 Risk-Based Capital Measure: The bank has a tier 1 risk-based capital ratio of 8.0 percent or greater; and
(C) Common Equity Tier 1 Capital Measure: The bank has a common equity tier 1 risk-based capital ratio of 6.5 percent or greater; and
(D) Leverage Measure:
(1) The bank has a leverage ratio of 5.0 percent or greater; and
(2) Beginning on January 1, 2018, with respect to any bank that is a subsidiary of a global systemically important BHC under the definition of “subsidiary” in § 217.2 of this chapter, the bank has a supplementary leverage ratio of 6.0 percent or greater; and
(E) The bank is not subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Board pursuant to section 8 of the FDI Act, the International Lending Supervision Act of 1983 (12 U.S.C. 3907), or section 38 of the FDI Act, or any regulation thereunder, to meet and maintain a specific capital level for any capital measure.
(ii) A qualifying community banking organization, as defined in § 217.12 of this chapter, that has elected to use the community bank leverage ratio framework under § 217.12 of this chapter, shall be considered to have met the capital ratio requirements for the well capitalized capital category in paragraph (b)(1)(i)(A) through (D) of this section.
(2) “Adequately capitalized” if:
(i) Total Risk-Based Capital Measure: the bank has a total risk-based capital ratio of 8.0 percent or greater;
(ii) Tier 1 Risk-Based Capital Measure: the bank has a tier 1 risk-based capital ratio of 6.0 percent or greater;
(iii) Common Equity Tier 1 Capital Measure: the bank has a common equity tier 1 risk-based capital ratio of 4.5 percent or greater;
(iv) Leverage Measure:
(A) The bank has a leverage ratio of 4.0 percent or greater; and
(B) With respect to an advanced approaches bank or bank that is a Category III Board-regulated institution (as defined in § 217.2 of this chapter), the bank has a supplementary leverage ratio of 3.0 percent or greater; and
(v) The bank does not meet the definition of a “well capitalized” bank.
(3) “Undercapitalized” if:
(i) Total Risk-Based Capital Measure: the bank has a total risk-based capital ratio of less than 8.0 percent;
(ii) Tier 1 Risk-Based Capital Measure: the bank has a tier 1 risk-based capital ratio of less than 6.0 percent;
(iii) Common Equity Tier 1 Capital Measure: the bank has a common equity tier 1 risk-based capital ratio of less than 4.5 percent; or
(iv) Leverage Measure:
(A) The bank has a leverage ratio of less than 4.0 percent; or
(B) With respect to an advanced approaches bank or bank that is a Category III Board-regulated institution (as defined in § 217.2 of this chapter), the bank has a supplementary leverage ratio of less than 3.0 percent.
(4) “Significantly undercapitalized” if:
(i) Total Risk-Based Capital Measure: the bank has a total risk-based capital ratio of less than 6.0 percent;
(ii) Tier 1 Risk-Based Capital Measure: the bank has a tier 1 risk-based capital ratio of less than 4.0 percent;
(iii) Common Equity Tier 1 Capital Measure: the bank has a common equity tier 1 risk-based capital ratio of less than 3.0 percent; or
(iv) Leverage Measure: the bank has a leverage ratio of less than 3.0 percent.
(5) “Critically undercapitalized” if the bank has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.
(c) Reclassification based on supervisory criteria other than capital. The Board may reclassify a well capitalized member bank as adequately capitalized and may require an adequately-capitalized or an undercapitalized member bank to comply with certain mandatory or discretionary supervisory actions as if the bank were in the next lower capital category (except that the Board may not reclassify a significantly undercapitalized bank as critically undercapitalized) (each of these actions are hereinafter referred to generally as “reclassifications”) in the following circumstances:
(1) Unsafe or unsound condition. The Board has determined, after notice and opportunity for hearing pursuant to 12 CFR 263.203, that the bank is in unsafe or unsound condition; or
(2) Unsafe or unsound practice. The Board has determined, after notice and opportunity for hearing pursuant to 12 CFR 263.203, that, in the most recent examination of the bank, the bank received and has not corrected, a less-than-satisfactory rating for any of the categories of asset quality, management, earnings, liquidity, or sensitivity to market risk.