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Product Updates December 2019

Product Updates for December 2019

The Product Updates for December 2019 from BankPolicies.com feature the following revised policy template products:

Acquisition, Development and Construction (ADC) Loan Policy Template
Commercial Real Estate Loan Policy Template

The update to these products is in response to the Joint Press Release entitled “Federal Bank Regulatory Agencies Issue Final Rule on Treatment of High Volatility Commercial Real Estate” dated 11/19/19 that finalized a rule to modify the treatment of high volatility commercial real estate (HVCRE) exposures as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The final rule clarifies certain terms contained in the HVCRE exposure definition, generally consistent with their usage in the Call Report instructions. The final rule also clarifies the treatment of credit facilities that finance one- to four-family residential properties and the development of land, which is substantially similar to the proposal issued in July.

Additionally, in response to the comments, the final rule provides banking organizations with the option to maintain their current capital treatment for acquisition, development, or construction loans originated between January 1, 2015, and the effective date of the final rule, April 1, 2020.

As a reminder, the complete contents of the Acquisition, Development and Construction Loan Policy Template are included within the Commercial Real Estate Loan Policy Template as Topic 9.


Capital Planning Program Policy Template
Corporate Governance Policy Template
Regulation F Policy Template
Regulation K Policy Template
Regulation O and Insider Activity Policy Template
Regulation W Policy Template

The update to these products is in response to the Joint Release entitled “Federal Bank Regulatory Agencies Issue Final Rule to Simplify Capital Calculation for Community Banks” dated 10/29/19 that announced a final rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy. The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework.

To qualify for the framework, a community bank must have less than $10 billion in total consolidated assets, limited amounts of off-balance-sheet exposures and trading assets and liabilities, and a leverage ratio greater than 9 percent.

In particular, the community bank leverage ratio incorporates tier 1 capital as the numerator. In addition, a community bank that falls out of compliance with the framework will have a two-quarter grace period to come back into full compliance, provided its leverage ratio remains above 8 percent. A bank will be deemed well-capitalized during the grace period.

The community bank leverage ratio framework will first be available for banking organizations to use in their March 31, 2020, Call Report or Form FR Y-9C, as applicable. Banking organizations can opt into or out of the community bank leverage ratio framework in a subsequent Call Report or Form FR Y-9C, as applicable.

In addition, the agencies finalized a rule to allow non-advanced approaches banks, including community banks, to elect to adopt simplifying changes to the capital rule beginning on January 1, 2020, a quarter earlier than the mandatory compliance date of April 1, 2020. The agencies issued the simplifying changes in July 2019.

As a reminder, the completed contents of the Capital Planning Program Policy Template are included within the Corporate Governance Policy Template as topic 17.


Regulation A Policy Template

The update to this product is in response to the Federal Reserve’s Final Rule issued on 11/07/19 that adopted final amendments to its Regulation A to reflect the Federal Reserve Board’s approval of an increase in the rate for primary credit at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Federal Reserve Board’s primary credit rate action.


Regulation D Policy Template

The update to this product is in response to the Federal Reserve’s Final Rule issued on 11/07/19 that revises the rate of interest paid on balances maintained to satisfy reserve balance requirements (“IORR”) and the rate of interest paid on excess balances (“IOER”) maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORR is 1.55 percent and IOER is 1.55 percent, a 0.30 percentage point increase from their prior levels.

In addition, the update to this product is in response to the Federal Reserve’s Press Release dated 11/20/19 that announced the annual indexing of two amounts used in determining reserve requirements of depository institutions. These amounts are the reserve requirement exemption amount and the low reserve tranche.


Keeping You Informed

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