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LINE ITEM INSTRUCTIONS FOR
Regulatory Capital
Schedule HC-R
Part I.B. Regulatory Capital Components and
Ratios
General Instructions for Part I.B
The instructions for Schedule HC-R, Part I.B, should be
read in conjunction with the revised regulatory capital
rules issued by the Federal Reserve Board on July 2,
2013.1
Advanced approaches holding companies:2 Advanced
approaches holding companies (except savings and loan
holding companies (SLHCs)) must complete Schedule
HC-R, Part I.B, starting on March 31, 2014. These
institutions may use the amounts reported in Schedule
HC-R, Part I.B to complete FFIEC 101, Schedule A, as
applicable. As described in the General Instructions for
FFIEC 101, an institution must begin reporting on the
FFIEC 101, Schedule A, except for a few specific line
items, at the end of the quarter after the quarter in which
the institution triggers one of the threshold criteria for
applying the advanced approaches rule or elects to use
1. See 78 FR 62018 (October 11, 2013).
2. An advanced approaches institution as defined in the revised regulatory capital rules (i) has consolidated total assets (excluding assets held by
an insurance underwriting subsidiary) on its most recent year-end regulatory report equal to $250 billion or more; (ii) has consolidated total
on-balance sheet foreign exposure on its most recent year-end regulatory
report equal to $10 billion or more (excluding exposures held by an
insurance underwriting subsidiary), as calculated in accordance with
FFIEC 009; (iii) is a subsidiary of a depository institution that uses the
advanced approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12
CFR part 217 (Board), or 12 CFR part 325 (FDIC) to calculate its total
risk-weighted assets; (iv) is a subsidiary of a bank holding company or
savings and loan holding company that uses the advanced approaches
pursuant to 12 CFR part 217 to calculate its total risk-weighted assets; or
(v) elects to use the advanced approaches to calculate its total riskweighted assets. As described in section 121 of the revised regulatory
capital rules, an institution must adopt a written implementation plan no
later than 6 months after the institution meets the criteria above and work
with its primary federal supervisor on implementing the parallel run
process.
FR Y-9C
Schedule HC-R
March 2014
the advanced approaches rule (an opt-in institution),3 and
it must begin reporting data on the remaining schedules
of the FFIEC 101 at the end of the first quarter in which it
has begun its parallel run period.
Advanced approaches holding companies should not
complete Schedule HC-R, Part I.A, for report dates in
2014.
An institution that is subject to the advanced approaches
rule remains subject to the rule unless its primary federal
supervisor determines in writing that application of the
rule is not appropriate in light of the institution’s asset
size, level of complexity, risk profile, or scope of operations.
Institutions not subject to advanced approaches rule:
Starting on March 31, 2015, all other holding companies4
must complete Schedule HC-R, Part I.B, using the
instructions below for line items 1 through 48.5 Holding
companies must complete the applicable items using the
mandatory transition provisions which are included in
certain items. Holding companies, except for advanced
approaches holding companies, must apply the transition
provisions starting with calendar year 2015. In general,
3. An institution is deemed to have elected to use the advanced approaches rule on the date that the Board receives from the institution a
board-approved implementation plan pursuant to section 121(b)(2) of the
revised regulatory capital rules. After that date, in addition to being
required to report on the FFIEC 101, Schedule A, the institution may no
longer apply the AOCI opt-out election in section 22(b)(2) of the revised
regulatory capital rules and it becomes subject to the supplementary
leverage ratio in section 10(c)(4) of the rules and its associated transition
provisions.
4. Institutions relying on the Board’s Supervision and Regulation Letter
(SR) 01-1 are not required to comply with the revised regulatory capital
rule until July 21, 2015. Thus, these institutions would be required to file
the FR Y-9C, including the proposed Schedule HC-R, in the first reporting
period following that date, which is the September 30, 2015.
5. Beginning with the March 31, 2015, reporting date, Schedule HC-R,
Part I.B will replace Schedule HC-R, Part I.A.
HC-R-1
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Schedule HC-R
transition provisions apply to the minimum regulatory
capital ratios; the capital conservation buffer; the regulatory capital adjustments and deductions; and nonqualifying capital instruments. For example, transition
provisions for the regulatory capital adjustments and
deductions specify that certain items that were deducted
from tier 1 capital previously will be deducted from
common equity tier 1 capital under the revised regulatory
capital rules, with the amount of the deduction changing
each calendar year until the transition period ends. For
some regulatory capital deductions and adjustments, the
non-deducted portion of the item is either risk-weighted
for the remainder of the transition period or deducted
from additional tier 1 capital, as described in the instructions for the applicable items below.
SLHCs: The revised regulatory capital rules apply to
top-tier SLHCs that are not substantially engaged in
insurance or commercial activities (covered SLHCs).
A top-tier SLHC is deemed to be substantially engaged in
insurance activities (insurance SLHC) if (i) the top-tier
SLHC is an insurance underwriting company;6 or (ii) as
of June 30 of the previous calendar year, it held 25
percent or more of its total consolidated assets in subsidiaries that are insurance underwriting companies (other
than assets associated with insurance for credit risk). For
purposes of determining the 25 percent threshold, the
SLHC must calculate its total consolidated assets in
accordance with generally accepted accounting principles (GAAP), or if the SLHC does not calculate its total
consolidated assets under GAAP for any regulatory
purpose (including compliance with applicable securities
laws), the SLHC may estimate its total consolidated
assets, subject to review and adjustment by the Board.
Thus, insurance SLHCs are not required to complete
Schedule HC-R, even if they complete other schedules of
FR Y-9C.
A top-tier SLHC is deemed to be substantially engaged in
commercial activities (commercial SLHC) if (i) the toptier SLHC is a grandfathered unitary SLHC (as defined in
section 10(c)(9)(A) of HOLA) and (ii) as of June 30 of
the previous calendar year, it derived 50 percent or more
of its total consolidated assets or 50 percent of its total
revenues on an enterprise-wide basis (as calculated under
GAAP) from activities that are not financial in nature
under section 4(k) of the Bank Holding Company Act (12
U.S.C. 1842(k)).
Item Instructions
Item No. Caption and Instructions
Common Equity Tier 1 Capital
Line Item 1 Common stock plus related surplus,
net of treasury stock and unearned employee stock
ownership plan (ESOP) shares.
Report the sum of Schedule HC, items 24 and 25, less
item 26(c) as follows:
(1) Common stock: report the amount of common stock
reported in Schedule HC, item 24, provided it meets
the criteria for common equity tier 1 capital based on
the revised regulatory capital rules of the Federal
Reserve. Include capital instruments issued by mutual
banking organizations that meet the criteria for common equity tier 1 capital.
(2) PLUS: related surplus: adjust the amount reported in
Schedule HC, item 25 as follows: include the net
amount formally transferred to the surplus account,
including capital contributions, and any amount
received for common stock in excess of its par or
stated value on or before the report date; exclude
adjustments arising from treasury stock transactions.
(3) LESS: treasury stock, unearned ESOP shares, and
any other contra-equity components: report the
amount of contra-equity components reported in
Schedule HC-R, item 26(c).
Line Item 2 Retained earnings.
Report the amount of the holding company’s retained
earnings as reported in Schedule HC, item 26(a).
Line Item 3 Accumulated other comprehensive
income (AOCI).
Report the amount of AOCI as reported under generally
accepted accounting principles (GAAP) in the U.S. that is
included in Schedule HC, item 26(b), subject to the
transition provisions described in section (ii) in item 3(a)
below, if applicable.
Line Item 3(a) AOCI opt-out election.
6. Insurance underwriting company means an insurance company as
defined in section 201 of the Dodd-Frank Act (12 U.S.C. 5381) that
engages in insurance underwriting activities.
HC-R-2
(i) Holding companies, except advanced approaches
holding companies:
Schedule HC-R
FR Y-9C
March 2014
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Schedule HC-R
A holding company that is not an advanced approaches
holding company may make a one-time election to
become subject to the AOCI-related adjustments in
Schedule HC-R, items 9(a) through 9(e). That is, such a
holding company may opt-out of the requirement to
include most components of AOCI in common equity tier
1 capital (with the exception of accumulated net gains
and losses on cash flow hedges related to items that are
not recognized at fair value on the balance sheet). A
holding company that makes an AOCI opt-out election
must enter ‘‘1’’ for ‘‘Yes’’ in item 3(a). There are no
transition provisions applicable to reporting Schedule
HC-R, item 3, if a holding company makes an AOCI
opt-out election.
Transition provisions: report AOCI adjusted for the
transition AOCI adjustment amount in Schedule HC-R,
item 3, as follows:
(i)
(1) Unrealized gains on available-for-sale securities
that are preferred stock classified as an equity
security under GAAP or available-for-sale equity
exposures, plus
(2) Net unrealized gains (losses) on available-forsale securities that are not preferred stock classified as an equity security under GAAP or
available-for-sale equity exposures, plus
A holding company (except an advanced approaches
holding company) must make its AOCI opt-out election
on the holding company’s March 31, 2015 FR Y-9C
report. For a holding company that comes into existence
after March 31, 2015, the AOCI opt-out election must be
made on the holding company’s first FR Y-9C report.
Each of the holding company’s depository institution
subsidiaries, if any, must elect the same option as the
holding company. With prior notice to the Federal
Reserve, a holding company resulting from a merger,
acquisition, or purchase transaction may make a new
AOCI opt-out election, as described in section 22(b)(2)
of the revised regulatory capital rules.
(3) Any amounts recorded in AOCI attributed to
defined benefit postretirement plans resulting
from the initial and subsequent application of
the relevant GAAP standards that pertain to
such plans (excluding, at the holding company’s
option, the portion relating to pension assets
deducted in Schedule HC-R, item 10(b)(2)),
plus
(4) Accumulated net gains (losses) on cash flow
hedges related to items that are reported on the
balance sheet at fair value included in AOCI,
plus
(ii) Holding companies that do not make an AOCI
opt-out election and all advanced approaches holding
companies:
A holding company that does not make an AOCI opt-out
election and enters ‘‘0’’ for ‘‘No’’ in item 3(a) and all
advanced approaches holding companies are subject to
the AOCI-related adjustment under Schedule HC-R, item
9(f). In addition, beginning January 1, 2014 for advanced
approaches holding companies and January 1, 2015 for
all other holding companies that report ‘‘No’’ in item 3(a)
and through December 31, 2017, these holding companies must report Schedule HC-R, item 3, subject to the
following transition provisions:
FR Y-9C
Schedule HC-R
March 2014
Determine the aggregate amount of the following
items:
(5) Net unrealized gains (losses) on held-tomaturity securities that are included in AOCI.
(ii)
Multiply the amount calculated in step (i) by the
appropriate percentage in Table 1 below. This
amount is the calendar-year transition AOCI adjustment amount.
(iii)
Report in Schedule HC-R, item 3, the amount of
AOCI reported in Schedule HC, item 26(b), minus
the calendar-year transition AOCI adjustment
amount calculated in step (ii).
HC-R-3
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Schedule HC-R
Table 1-Percentage of the transition AOCI adjustment amount to be applied to common equity tier 1 capital
Transition period
Percentage of the transition AOCI adjustment amount
to be applied to common equity tier 1 capital
Calendar year 2014
80
Calendar year 2015
60
Calendar year 2016
40
Calendar year 2017
20
Calendar year 2018 and thereafter
0
Line Item 4 Common equity tier 1 minority
interest includable in common equity tier 1 capital.
Report the aggregate amount of common equity tier 1
minority interest, calculated as described below and in
section 21 of the revised regulatory capital rules. Common equity tier 1 minority interest is the portion of equity
in a reporting institution’s subsidiary not attributable,
directly or indirectly, to the parent institution. Note that
an institution may only include common equity tier 1
minority interest if: (a) the subsidiary is a depository
institution or a foreign bank; and (b) the capital instruments issued by the subsidiary meet all of the criteria for
common equity tier 1 capital (qualifying common equity
tier 1 capital instruments).
In general, the minority interest limitation applies only if
a subsidiary has a surplus common equity tier 1 capital
(that is, in excess of the subsidiary’s minimum capital
requirements and the applicable capital conservation
buffer). For example, a subsidiary with a common equity
tier 1 capital ratio of 8 percent that needs to maintain a
common equity tier 1 capital ratio of more than 7 percent
to avoid limitations on capital distributions and discretionary bonus payments is considered to have ‘‘surplus’’
common equity tier 1 capital. Thus, at the consolidated
level, the holding company may not include the portion
(1)
of such surplus common equity tier 1 capital and is
required to phase out this surplus minority interest in
accordance with Table 2, as described below in this item
4.
In addition, a holding company is required to phase-out
regulatory capital instruments issued by the subsidiaries
that no longer qualify for inclusion in regulatory capital
in accordance with Table 2, as described below in this
Schedule HC-R, item 4.
The following example and a worksheet is intended to
assist holding companies in determining the amount of
common equity tier 1 minority interest includable in
common equity tier 1 capital.
Example: For each consolidated subsidiary that is a
depository institution or a foreign bank, calculate common equity tier 1 minority interest includable at the
holding company level as follows:
Assumptions:
• Risk-weighted assets of the consolidated subsidiary are
the same as the risk-weighted assets of the holding
company that relate to the subsidiary ($1,000);
• The subsidiary’s common equity tier 1 capital is $80;
• The subsidiary’s common equity tier 1 minority interest (that is, owned by minority shareholders) is $24.
Determine the risk-weighted assets of the subsidiary using the risk-based capital
framework applicable to that subsidiary.7
$1,000
7. For purposes of the minority interest calculations, if the consolidated subsidiary issuing the capital is not subject to capital adequacy standards similar to
those of the holding company, the holding company must assume that the capital adequacy standards of the holding company apply to the subsidiary.
HC-R-4
Schedule HC-R
FR Y-9C
March 2014
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Schedule HC-R
(2)
Determine the risk-weighted assets of the holding company that relate to the subsidiary. Note that the amount in this step (2) may differ from the amount in step (1)
due to intercompany transactions and eliminations in consolidation.
$1,000
(3)
Determine the lower of (1) or (2), and multiply that amount by 7.0%.8
$1,000 x 7% =
$70
(4)
Determine the dollar amount of the subsidiary’s common equity tier 1 capital
(assumed $80 in this example). If this amount is less than step (3), include this
amount in Schedule HC-R, item 4. Otherwise, continue to step (5).
$80
(5)
Subtract the amount in step (3) from the amount in step (4). This is the ‘‘surplus
common equity tier 1 capital of the subsidiary.’’
$80 - $70 = $10
(6)
Determine the percent of the subsidiary’s common equity tier 1 capital owned by
third parties (the minority shareholders).
$24/$80 = 30%
(7)
Multiply the percentage in step (6) by the dollar amount in step (5). This is the
‘‘surplus common equity tier 1 minority interest of the subsidiary,’’ Subject to the
transition provisions below.
30% x $10 = $3
(8)
Subtract the amount in step (7) from the subsidiary’s common equity tier 1 minority interest.
$24 - $3 = $21
(9)
This is the ‘‘common equity tier 1 minority interest includable at the holding company level’’ to be included in Schedule HC-R, item 4, for this subsidiary.
$21
8. The percentage multiplier in step (3) is the capital ratio necessary for the depository institution to avoid restrictions on distributions and discretionary
bonus payments. Advanced approaches holding companies must adjust this percentage to account for all the applicable buffers.
Transition provisions for surplus minority interest or
non-qualifying minority interest:
(iii) Include the amounts in (ii) in the corresponding line
items (that is, Schedule HC-R, item 4, item 22, or
item 29).
a. Surplus minority interest:
In the worksheet calculation above, the transition provisions for surplus minority interest would apply at step
(7). Specifically, if the holding company has $3 of
surplus common equity tier 1 minority interest of the
subsidiary as of January 1, 2014, it may include $2.40
(that is, $3 multiplied by 80%) in Schedule HC-R, item 4,
during calendar year 2014; $1.80 during calendar year
2015; $1.20 during calendar year 2016; $0.60 during
calendar year 2017; and $0 starting on January 1, 2018.
A holding company may include in common equity tier 1
capital, tier 1 capital, or total capital the percentage of the
common equity tier 1 minority interest, tier 1 minority
interest and total capital minority interest outstanding as
of January 1, 2014, that exceeds any common equity tier
1 minority interest, tier 1 minority interest or total capital
minority interest includable under section 21 of the
revised regulatory capital rules (surplus minority interest)
as follows:
(i) Determine the amounts of outstanding surplus minority interest (for the case of common equity tier 1, tier
1, and total capital).
(ii) Multiply the amounts in (i) by the appropriate percentage in Table 2 below.
FR Y-9C
Schedule HC-R
March 2014
b. Non-qualifying minority interest:
A holding company may include in tier 1 capital or total
capital the percentage of the tier 1 minority interest and
total capital minority interest outstanding as of January 1,
2014, that does not meet the criteria for additional tier 1
or tier 2 capital instruments in section 20 of the revised
HC-R-5
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Schedule HC-R
regulatory capital rules (non-qualifying minority interest). The holding company must phase-out nonqualifying minority interest in accordance with Table 2,
using the following steps for each subsidiary:
(i) Determine the amounts of the outstanding nonqualifying minority interest (in the form of additional
tier 1 and tier 2 capital).
(ii) Multiply the amounts in (i) by the appropriate percentage in Table 2 below.
(iii) Include the amounts in (ii) in the corresponding item
(that is, Schedule HC-R, item 22 or item 29).
For example, if a holding company has $10 of nonqualifying minority interest that previously qualified as
tier 1 capital, it may include $8 (that is, $10 multiplied by
80%) during calendar year 2014, $6 during calendar year
2015, $4 during calendar year 2016, $2 during calendar
year 2017 and $0 starting in January 1, 2018.
Table 2—Percentage of the amount of surplus or non-qualifying minority interest includable in regulatory capital
during the transition period
Transition period
Percentage of the amount of surplus or non-qualifying
minority interest that can be included in regulatory
capital during the transition period
Calendar year 2014
80
Calendar year 2015
60
Calendar year 2016
40
Calendar year 2017
20
Calendar year 2018 and thereafter
0
Line Item 5 Common equity tier 1 capital before
adjustments and deductions.
Report the sum of Schedule HC-R, items 1, 2, 3, and 4.
Common equity tier 1 capital:
adjustments and deductions
Note 1: As described in section 22(b) of the revised
regulatory capital rules, regulatory adjustments to common equity tier 1 capital must be made net of associated
deferred tax effects.
Note 2: As described in section 22(e) of the revised
regulatory capital rules, netting of deferred tax liabilities
(DTLs) against assets that are subject to deduction is
permitted if the following conditions are met:
(i) The DTL is associated with the asset;
(ii) The DTL would be extinguished if the associated
asset becomes impaired or is derecognized under
GAAP; and
HC-R-6
(iii) A DTL can only be netted against a single asset.
The amount of deferred tax assets (DTAs) that arise from
net operating loss and tax credit carryforwards, net of any
related valuation allowances, and of DTAs arising from
temporary differences that could not be realized through
net operating loss carrybacks, net of any related valuation
allowances, may be offset by DTLs (that have not been
netted against assets subject to deduction) if the following conditions are met:
(i) Only the DTAs and DTLs that relate to taxes levied
by the same taxation authority and that are eligible for
offsetting by that authority may be offset for purposes
of this deduction.
(ii) The amount of DTLs that the holding company nets
against DTAs that arise from net operating loss and
tax credit carryforwards, net of any related valuation
allowances, and against DTAs arising from temporary differences that could not be realized through
net operating loss carrybacks, net of any related
Schedule HC-R
FR Y-9C
March 2014
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Schedule HC-R
valuation allowances, must be allocated in proportion to the amount of DTAs that arise from net
operating loss and tax credit carryforwards (net of
any related valuation allowances, but before any
offsetting of DTLs) and of DTAs arising from temporary differences that could not be realized through
net operating loss carrybacks (net of any related
valuation allowances, but before any offsetting of
DTLs), respectively.
as if the investee were a consolidated subsidiary (which
may include imputed goodwill).
A holding company may offset DTLs embedded in the
carrying value of a leveraged lease portfolio acquired in a
business combination that are not recognized under
GAAP against DTAs that are subject to section 22(a) of
the revised regulatory capital rules in accordance with
section 22(e).
Report all intangible assets (other than goodwill and
MSAs) net of associated DTLs, included in Schedule
HC-M, items 12(b) and 12(c), that do not qualify for
inclusion in common equity tier 1 capital under the
regulatory capital rules. Generally, all purchased credit
card relationships (PCCRs) and non-mortgage servicing
assets, reported in Schedule HC-M, item 12(b), and all
other identifiable intangibles, reported in Schedule HC-M,
item 12(c), do not qualify for inclusion in common equity
tier 1 capital and should be included in this item.
A holding company must net DTLs against assets subject
to deduction in a consistent manner from reporting period
to reporting period. A holding company may change its
DTL netting preference only after obtaining the prior
written approval of the Federal Reserve.
In addition, note that even though certain deductions may
be net of associated DTLs, the risk-weighted portion of
those items may not be reduced by the associated DTLs.
Line Item 6 LESS: Goodwill net of associated
deferred tax liabilities (DTLs).
Report the amount of goodwill included in Schedule HC,
item 10(a).
However, if the holding company has a DTL that is
specifically related to goodwill acquired in a taxable
purchase business combination that it chooses to net
against the goodwill, the amount of disallowed goodwill
to be reported in this item should be reduced by the
amount of the associated DTL.
If a holding company has significant investments in the
capital of unconsolidated financial institutions in the
form of common stock, the holding company should
report in this item goodwill embedded in the valuation of
a significant investment in the capital of an unconsolidated financial institution in the form of common stock
(embedded goodwill). Such deduction of embedded
goodwill would apply to investments accounted for under
the equity method. Under GAAP, if there is a difference
between the initial cost basis of the investment and the
amount of underlying equity in the net assets of the
investee, the resulting difference should be accounted for
FR Y-9C
Schedule HC-R
March 2014
There are no transition provisions for this item.
Line Item 7 LESS: Intangible assets (other than
goodwill and mortgage servicing assets (MSAs)), net
of associated DTLs.
Further, if the holding company has a DTL that is
specifically related to an intangible asset (other than
servicing assets and PCCRs) acquired in a nontaxable
purchase business combination that it chooses to net
against the intangible asset for regulatory capital purposes, the amount of disallowed intangibles to be reported
in this item should be reduced by the amount of the
associated DTL. However, a DTL that the holding company chooses to net against the related intangible reported
in this item may not also be netted against DTAs when
the holding company determines the amount of DTAs
that are dependent upon future taxable income and
calculates the maximum allowable amount of such DTAs
for regulatory capital purposes.
If the amount reported for other identifiable intangible
assets in Schedule HC-M, item 12(c), includes intangible
assets that were recorded on the holding company’s
balance sheet on or before February 19, 1992, the
remaining book value as of the report date of these
intangible assets may be excluded from this item.
Transition provisions:
(i) Calculate the amount as described in the instructions
for this item 7.
(ii) Multiply the amount in (i) by the appropriate percentage in accordance with Table 3 below. Report the product
in this line item 7.
HC-R-7
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Schedule HC-R
(iii) Subtract (ii) from (i), without regard to any associated DTLs, to calculate the balance amount which
must be risk weighted during the transition period.
(iv) Multiply the amount in (iii) by 100 percent and
report the risk-weighted assets as part of ‘‘All other
assets’’ in Schedule HC-R, Part II.
Table 3—Deduction of intangible assets other than goodwill and MSAs during the transition period
Transition period
Percentage of the deductions from common equity tier 1 capital
Calendar year 2014
20
Calendar year 2015
40
Calendar year 2016
60
Calendar year 2017
80
Calendar year 2018 and thereafter
100
For example, in calendar year 2014, a holding company
will deduct 20 percent of intangible assets (other than
goodwill and MSAs), net of associated DTLs, from
common equity tier 1 capital. The holding company must
apply a 100 percent risk weight to the remaining 80
percent of the intangible assets that are not deducted.
(i)
Determine the amount as described in the instructions for this line item 8.
(ii)
Multiply the amount in (i) by the appropriate
percent in column A of Table 4 below. Report this
product in Schedule HC-R, item 8.
Line Item 8 LESS: Deferred tax assets (DTAs)
that arise from net operating loss and tax credit
carryforwards, net of any related valuation
allowances and net of DTLs.
(iii)
Multiply the amount in (i) by the appropriate
percentage in column B of Table 4 below. Report
this product as part of Schedule HC-R, item 24,
‘‘Additional tier 1 capital deductions.’’ If the institution does not have enough additional tier 1
capital to effect the deduction, it must deduct any
shortfall from common equity tier 1 capital and
report such amount as part of this Schedule HC-R,
item 8, 10.a, or 10.b, as appropriate.
Report the amount of DTAs that arise from net operating
loss and tax credit carryforwards, net of associated
valuation allowances and net of associated DTLs.
Transition provisions:
Table 4—Deduction of DTAs, gain-on-sale, defined benefit pension fund assets, changes in fair value of liabilities,
and expected credit losses during the transition period
Column A: Percentage of the adjustment applied to common equity tier
1 capital
Column B: Percentage of the adjustment applied to tier 1 capital
Calendar year 2014
20
80
Calendar year 2015
40
60
Calendar year 2016
60
40
Transition period
HC-R-8
Schedule HC-R
FR Y-9C
March 2014
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Schedule HC-R
Calendar year 2017
80
20
Calendar year 2018
and thereafter
100
0
Line Item 9 AOCI-related adjustments.
Holding companies that entered ‘‘1’’ for ‘‘Yes’’ in item
Schedule HC-R, item 3(a), must complete Schedule
HC-R, items 9(a) through 9(e), only. Holding companies
that entered ‘‘0’’ for ‘‘No’’ in Schedule HC-R, item 3(a),
must complete Schedule HC-R, item 9(f), only.
Line Item 9(a) LESS: Net unrealized gains (losses)
on available-for-sale securities.
Report the amount of net unrealized gains (losses) on
available-for-sale securities, net of applicable taxes, that
is included in Schedule HC, item 26(b), ‘‘Accumulated
other comprehensive income.’’ If the amount is a net
gain, report it as a positive value in this item. If the
amount is a net loss, report it as a negative value in this
item.
Line Item 9(b) LESS: Net unrealized loss on
available-for-sale preferred stock classified as an
equity security under GAAP and available-for-sale
equity exposures.
Report as a positive value net unrealized loss on availablefor-sale preferred stock classified as an equity security
under GAAP and available-for-sale equity exposures that
is included in Schedule HC, item 26(b), ‘‘Accumulated
other comprehensive income.’’
Line Item 9(c) LESS: Accumulated net gains
(losses) on cash flow hedges.
Report the amount of accumulated net gains (losses) on
cash flow hedges that is included in Schedule HC, item
26(b), ‘‘Accumulated other comprehensive income.’’ If
the amount is a net gain, report it as a positive value in
this item. If the amount is a net loss, report it as a
negative value in this item.
Line Item 9(d) LESS: Amounts recorded in AOCI
attributed to defined benefit postretirement plans
resulting from the initial and subsequent application
of the relevant GAAP standards that pertain to
such plans.
Report the amounts recorded in AOCI and included in
Schedule HC, item 26(b), ‘‘Accumulated other compreFR Y-9C
Schedule HC-R
March 2014
hensive income,’’ resulting from the initial and subsequent application of ASC Subtopic 715-20 (formerly
FASB Statement No. 158, ‘‘Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans’’)
to defined benefit postretirement plans (a holding company may exclude the portion relating to pension assets
deducted in Schedule HC-R, item 10(b)). If the amount is
a net gain, report it as a positive value in this item. If the
amount is a net loss, report it as a negative value in this
item.
Line Item 9(e) LESS: Net unrealized gains (losses)
on held-to-maturity securities that are included in
AOCI.
Report the amount of net unrealized gains (losses) that
are not credit-related on held-to-maturity securities and
are included in AOCI as reported in Schedule HC, item
26(b), ‘‘Accumulated other comprehensive income.’’ If
the amount is a net gain, report it as a positive value. If
the amount is a net loss, report it as a negative value.
Include (i) the unamortized balance of the unrealized
gain (loss) that existed at the date of transfer of a debt
security transferred into the held-to-maturity category
from the available-for-sale category and (ii) the unaccreted portion of other-than-temporary impairment losses
on available-for-sale and held-to-maturity debt securities
that was not recognized in earnings in accordance with
ASC Topic 320, Investments-Debt and Equity Securities
(formerly FASB Statement No. 115, ‘‘Accounting for
Certain Investments in Debt and Equity Securities’’).
Line Item 9(f)—to be completed only by holding
companies that entered ‘‘0’’ for ‘‘No’’ in item 3(a):
LESS: Accumulated net gain (loss) on cash flow hedges
included in AOCI, net of applicable income taxes, that
relate to the hedging of items that are not recognized at
fair value on the balance sheet.
Report the amount of accumulated net gain (loss) on cash
flow hedges included in AOCI, net of applicable income
taxes, that relate to the hedging of items that are not
recognized at fair value on the balance sheet. If the
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Schedule HC-R
amount is a net gain, report it as a positive value. If the
amount is a net loss, report it as a negative value.
and unfettered access to the assets in that fund. For an
insured depository institution, no deduction is required.
Line Item 10 Other deductions from (additions to)
common equity tier 1 capital before threshold-based
deductions:
A holding company must risk weight any portion of the
defined benefit pension fund asset that is not deducted as
if the holding company directly holds a proportional
ownership share of each exposure in the defined benefit
pension fund.
Line Item 10(a) LESS: Unrealized net gain (loss)
related to changes in the fair value of liabilities that
are due to changes in own credit risk.
Report the amount of unrealized net gain (loss) related to
changes in the fair value of liabilities that are due to
changes in the holding company’s own credit risk. If the
amount is a net gain, report it as a positive value in this
item. If the amount is a net loss, report it as a negative
value in this item.
Advanced approaches holding companies only: include
the credit spread premium over the risk free rate for
derivatives that are liabilities.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 8.
Line Item 10(b) LESS: All other deductions from
(additions to) common equity tier 1 capital before
threshold-based deductions.
Report the amount of other deductions from (additions
to) common equity tier 1 capital that are not included in
Schedule HC-R, items 1 through 9, as described below.
(1) After-tax gain-on-sale in connection with a securitization exposure.
Include any after-tax gain-on-sale in connection with a
securitization exposure. Gain-on-sale means an increase
in the equity capital of a holding company resulting from
a securitization (other than an increase in equity capital
resulting from the holding company’s receipt of cash in
connection with the securitization or reporting of a
mortgage servicing asset on Schedule HC).
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 8.
(3) Investments in the holding company’s own shares
to the extent not excluded as part of treasury stock.
Include the holding company’s investments in (including
any contractual obligation to purchase) its own common
stock instruments, including direct, indirect, and synthetic exposures to such capital instruments (as defined in
the revised regulatory capital rules), to the extent such
capital instruments are not excluded as part of treasury
stock, reported in Schedule HC-R, item 1.
If a holding company already deducts its investment in its
own shares (for example, treasury stock) from its common equity tier 1 capital elements, it does not need to
make such deduction twice.
A holding company may deduct gross long positions net
of short positions in the same underlying instrument only
if the short positions involve no counterparty credit risk
and all other criteria in section 22(h) of the revised
regulatory capital rules are met.
The holding company must look through any holdings of
index securities to deduct investments in its own capital
instruments.
In addition:
(i)
Gross long positions in investments in a
holding company’s own regulatory capital
instruments resulting from holdings of index
securities may be netted against short positions in the same underlying index;
(ii)
(2) Defined benefit pension fund assets, net of associated DTLs.
Short positions in index securities to hedge
long cash or synthetic positions may be
decomposed to recognize the hedge; and
A holding company should include any defined benefit
pension fund assets, net of any associated DTLs. With
the prior approval of the Federal Reserve, this deduction
is not required for any defined benefit pension fund net
asset to the extent the holding company has unrestricted
(iii) The portion of the index composed of the
same underlying exposure that is being
hedged may be used to offset the long
position only if both the exposure being
hedged and the short position in the index
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 8.
HC-R-10
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Schedule HC-R
are covered positions under the market risk
rule, and the hedge is deemed effective by
the holding company’s internal control processes which would have been assessed by
the Federal Reserve.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
(4) Reciprocal cross-holdings in the capital of financial institutions in the form of common stock.
Include investments in the capital of other financial
institutions (in the form of common stock) that the
holding company holds reciprocally (this is the corresponding deduction approach). Such reciprocal crossholdings may result from a formal or informal arrangement to swap, exchange, or otherwise intend to hold each
other’s capital instruments.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
(5) Advanced approaches holding companies only
that exit parallel run.9
Include the amount of expected credit loss that exceeds
the holding company’s eligible credit reserves.
9. An advanced approaches holding company that exit the parallel run
is an advanced approaches holding company that has completed the
parallel run process and received notification from the Federal Reserve
pursuant to section 121(d) of subpart E of the revised regulatory capital
rules.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 8.
Line Item 11 LESS: Non-significant investments in
the capital of unconsolidated financial institutions in
the form of common stock that exceed the 10
percent threshold for non-significant investments.
A holding company has a non-significant investment in
the capital of an unconsolidated financial institution if it
owns 10 percent or less of the issued and outstanding
common shares of that institution.
Report the amount of non-significant investments in the
capital of unconsolidated financial institutions in the
form of common stock that, in the aggregate, exceed the
10 percent threshold for non-significant investments,
calculated as described below. The holding company
may apply associated DTLs to this deduction.
Example and a worksheet calculation:
Assumptions:
• A holding company has a total of $200 in nonsignificant investments in the capital of unconsolidated
financial institutions, of which $100 is in common
shares. For this example, all of the $100 in common
shares is in the common stock of a publicly traded
financial institution.
• The amount reported on Schedule HC-R, item 5 (common equity tier 1 capital before adjustments and deductions (sum of items 1 through 4)), is $1,000.
• Assume the amounts reported in Schedule HC-R, items
6 through 9(f), are all $0.
(1)
Determine the aggregate amount of non-significant investments in the capital of
unconsolidated financial institutions (including in the form of common stock, additional
tier 1, and tier 2 capital).
$200
(2)
Determine the amount of non-significant investments in the capital of unconsolidated
financial institutions in the form of common stock.
$100
(3)
Subtract from Schedule HC-R, item 5, the amounts in Schedule HC-R, items 6, 7, 8, 9,
and 10.
$1,000 - $0 =
$1,000
(4)
Multiply the amount in step (3) by 10%. This is ‘‘the 10 percent threshold for nonsignificant investments.’’
$1,000 x 10%=
$100
FR Y-9C
Schedule HC-R
March 2014
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Schedule HC-R
(5)
If (1) is greater than (4), subtract (4) from (1) and multiply the result by the ratio of (2)
divided by (1). Report this amount in this Schedule HC-R, item 11.
Line (1) is greater
than line (4);
therefore $200 $100 = $100.
Then ($100 x
100/200) = $50.
Report $50 in this
line item 11.
If (1) is less than (4), enter zero in this item 11.
(6)
Assign the applicable risk weight to the amount of non-significant investments in the capital of unconsolidated financial institutions that does not exceed the 10 percent threshold
for non-significant investments.
Of the $100 in
common shares,
$50 are deducted
in this line item
11. The remaining $50 needs to
be included in
risk-weighted
assets in Schedule
HC-R, Part II.*
* In this case, $50 x 300% risk weight for publicly traded common shares = $150 in risk-weighted assets for the portion
of common shares in an unconsolidated financial institution that are not deducted. Include this amount in Schedule
HC-R, Part II, risk-weighted assets, ‘‘All other assets’’ item.
percent in Table 5 below. Report this product as this
item 11.
Transition provisions for investments in capital instruments:
(i)
Calculate the amount as described in the instructions
for this line item 11.
(ii)
Multiply the amount in (i) by the appropriate
(iii)
Subtract (ii) from (i); assign it the applicable risk
weight; and report it in Schedule HC-R, Part II, as
part of risk-weighted assets.
Table 5—Deductions related to investments in capital instruments during the transition period
HC-R-12
Transition period
Transition deductions - percentage of the deductions
from common equity tier 1 capital
Calendar year 2014
20
Calendar year 2015
40
Calendar year 2016
60
Calendar year 2017
80
Calendar year 2018 and thereafter
100
Schedule HC-R
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Schedule HC-R
Line Item 12 Subtotal.
Report the amount in Schedule HC-R, item 5, less the
amounts in Schedule HC-R, items 6 through 11.
This subtotal will be used in Schedule HC-R, items 13
through 16, to calculate the amounts of items subject to
the 10 and 15 percent common equity tier 1 capital
threshold deductions (threshold items):
• Significant investments in the capital of unconsolidated
financial institutions in the form of common stock, net
of DTLs,
• MSAs, net of associated DTLs; and
• DTAs arising from temporary differences that could
not be realized through net operating loss carrybacks,
net of related valuation allowances and net of DTLs.
Line Item 13 LESS: Significant investments in the
capital of unconsolidated financial institutions in the
form of common stock, net of associated DTLs, that
exceed the 10 percent common equity tier 1 capital
deduction threshold.
A holding company has a significant investment in the
capital of an unconsolidated financial institution when it
owns more than 10 percent of the issued and outstanding
common shares of that institution.
(3) If the amount in (2) is less than 10 percent of
Schedule HC-R, item 12, report zero.
If the holding company included embedded goodwill in
Schedule HC-R, item 6, to avoid double counting, the
holding company may net such embedded goodwill
already deducted against the exposure amount of the
significant investment. For example, if a holding company has deducted $10 of goodwill embedded in a $100
significant investment in the capital of an unconsolidated
financial institution in the form of common stock, the
holding company would be allowed to net such embedded goodwill against the exposure amount of such significant investment (that is, the value of the investment is
$90 for purposes of the calculation of the amount that
would be subject to deduction).
Transition provisions for items subject to the threshold
deductions:
(i)
Calculate the amount as described in the instructions for this line item 13.
(ii)
Multiply the amount in (i) by the appropriate
percent in Table 6 below. Report this product as
this item amount. In addition:
(iii)
From January 1, 2014, until January 1, 2018:
Subtract the amount in (ii) from the amount in (i);
assign it a 100 percent risk weight in accordance
with transition provisions in section 300 of the
revised regulatory capital rules; and report it in
Schedule HC-R, Part II, risk-weighted assets, in
‘‘All other assets’’ item.
(iv)
Starting on January 1, 2018: apply a 250 percent
risk-weight to the aggregate amount of the items
subject to the 10 and 15 percent common equity
tier 1 capital deduction thresholds that are not
deducted from common equity tier 1 capital.;
Report it in Schedule HC-R, Part II, risk-weighted
assets, in ‘‘All other assets’’ item.
Report the amount of significant investments in the
capital of unconsolidated financial institutions in the
form of common stock, net of associated DTLS, that
exceed the 10 percent common equity tier 1 capital
deduction threshold, calculated as follows:
(1) Determine the amount of significant investments in
the capital of unconsolidated financial institutions in
the form of common stock, net of associated DTLs.
(2) If the amount in (1) is greater than 10 percent of the
amount of Schedule HC-R, item 12, report the difference as this item 13.
FR Y-9C
Schedule HC-R
March 2014
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Schedule HC-R
Table 6—Transition provisions for items subject to the threshold deductions
Calendar year
2014
20
2015
40
2016
60
2017
80
2018 and thereafter
100
Line Item 14 LESS: MSAs, net of associated
DTLs, that exceed the 10 percent common equity
tier 1 capital deduction threshold.
Report the amount of MSAs included in Schedule HC-M,
item 12(a), net of associated DTLs, that exceed the 10
percent common equity tier 1 capital deduction threshold
as follows:
(1) Take the amount of MSAs as reported in Schedule
HC-M, item 12(a), net of associated DTLs.
(2) If the amount in (1) is higher than 10 percent of
Schedule HC-R, item 12, report the difference in this
item 14.
(3) If the amount in (1) is lower than 10 percent of
Schedule HC-R, item 12, enter zero.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 13 (that is, use table 6 in
Schedule HC-R, item 13).
Line Item 15 LESS: DTAs arising from
temporary differences that could not be realized
through net operating loss carrybacks, net of
related valuation allowances and net of DTLs, that
exceed the 10 percent common equity tier 1 capital
deduction threshold.
(1) Report the amount of DTAs arising from temporary
differences that the holding company could not realize through net operating loss carrybacks net of any
related valuation allowances and net of associated
DTLs (for example, DTAs resulting from the holding
company’s ALLL).
(2) If the amount in (1) is higher than 10 percent of
HC-R-14
Percentage of the deduction
Schedule HC-R, item 12, report the difference in this
item 15.
(3) If the amount in (1) is lower than 10 percent of
Schedule HC-R, item 12, enter zero.
DTAs arising from temporary differences that could be
realized through net operating loss carrybacks are not
subject to deduction, and instead must be assigned a 100
percent risk weight.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 13 (that is, use table 6 in item
13).
Line Item 16 LESS: Amount of significant
investments in the capital of unconsolidated
financial institutions in the form of common stock,
net of associated DTLs; MSAs, net of associated
DTLs; and DTAs arising from temporary
differences that could not be realized through net
operating loss carrybacks, net of related valuation
allowances and net of DTLs; that exceeds the 15
percent common equity tier 1 capital deduction
threshold.
The aggregate amount of the threshold items (that is,
significant investments in the capital of unconsolidated
financial institutions in the form of common stock, net of
associated DTLs; MSAs, net of associated DTLs; and
DTAs arising from temporary differences that could not
be realized through net operating loss carrybacks, net of
related valuation allowances and net of DTLs) may not
exceed 15 percent of the holding company’s common
equity tier 1 capital, net of applicable adjustments and
deductions (the 15 percent common equity tier 1 capital
deduction threshold).
Schedule HC-R
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Schedule HC-R
Transition provisions:
a.
From January 1, 2014 until January 1, 2018, calculate this item 16 as follows:
(i) Calculate the aggregate amount of the threshold items
before deductions:
• Significant investments in the capital of unconsolidated financial institutions in the form of common
stock net of associated DTLs (Schedule HC-R,
item 13, step 1);
• MSAs net of associated DTLs (Schedule HC-R,
item 14, step 1); and
• DTAs arising from temporary differences that could
not be realized through net operating loss carrybacks net of any related valuation allowance and
net of DTLs (Schedule HC-R, item 15, step 1).
(ii) Multiply the amount in Schedule HC-R, item 12
(Subtotal) by 15 percent. This is the 15 percent
common equity deduction threshold for transition
purposes.
(iii) Sum up the amounts reported in line Schedule HC-R,
items 13, 14, and 15.
(iv) Deduct (iii) from (i).
(v) Deduct (ii) from (iv).
(vi) Multiply the amount in (iv) by the percentage in
Table 6, in Schedule HC-R, item 13. Report the
resulting amount in this item 16.
Example and a worksheet calculation:
Assume the following balance sheet amounts prior to
deduction of these items:
o Common equity tier 1 capital subtotal amount
reported in Schedule HC-R, item 12 = $100
o Significant investments in the common shares of
unconsolidated financial institutions net of associated DTLs = $15
o MSAs net of associated DTLs = $7
o DTAs arising from temporary differences that could
not be realized through net operating loss carrybacks
net of any related valuation allowance and net of
DTLs = $6
o Amounts of each item that exceed the 10% limit
FR Y-9C
Schedule HC-R
March 2014
• Significant investments in the common shares of
unconsolidated financial institutions net of associated DTLs = $5 (reported in Schedule HC-R, item
13)
• MSAs net of associated DTLs = $0 (reported in
Schedule HC-R, item 14)
• DTAs arising from temporary differences that
could not be realized through net operating loss
carrybacks, net of any related valuation allowances and net of DTLs = $0 (reported in Schedule
HC-R, item 15).
Calculation steps:
(i) Sum of the significant investments in the common
shares of unconsolidated financial institutions,
MSAs, and DTAs (all net of associated DTLs)
before deductions: $15 + $7 + $6 = $28
(ii) 15% of the amount from Schedule HC-R, item 12:
15% x $100 = $15
(iii) Sum of the amounts reported in Schedule HC-R,
items 13, 14, and 15: $5
(iv) Deduct the amount in step (iii) from the amount in
step (i): $28 - $5 = $23 (This is the amount of
these three items that remains after the 10%
deductions are taken.)
(v) Deduct the amount in step (ii) from the amount in
step (iv): $23 - $15 = $8 (This is an additional
deduction that must be taken.)
(vi) Determine the amount of the deduction for the
applicable calendar year: $8 x 40% (amount that
applies in calendar year 2015) = $3.20
Report $3.20 in this item 16.
b. Starting on January 1, 2018, calculate this item 16 as
follows:
Example and a worksheet calculation:
Assumptions:
• The amount reported in Schedule HC-R, item 12 is
$130 (This amount is common equity tier 1 after all
deductions and adjustments, except for deduction of
the threshold items).
• Assume that the associated DTLs are zero; also assume
the following balance sheet amounts prior to deduction
of these items:
o Significant investments in the common shares of
unconsolidated financial institutions net of associated DTLs = $10.
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Schedule HC-R
o MSAs net of associated DTLs = $20
o DTAs arising from temporary differences that could
not be realized through net operating loss carrybacks
(1)
net of any related valuation allowances and net of
DTLs = $30.
Aggregate amount of threshold items before deductions Enter the sum of:
a.
Significant investments in the capital of unconsolidated financial institutions in the
form of common stock, net of associated DTLs (Schedule HC-R, item 13, step 1);
$10
b. MSAs net of associated DTLs (Schedule HC-R, item 14, step 1); and
$20
c.
$30
DTAs arising from temporary differences that could not be realized through net
operating loss carrybacks, net of any related valuation allowance and net of DTLs
(Schedule HC-R, item 15, step 1).
d. Total of a, b, and c:
(2)
$60
The 10 percent common equity tier 1 capital deduction threshold
Multiply the amount reported in Schedule HC-R, item 12 by 10 percent.
(3)
$130*10% = $13
Amount of threshold items deducted as a result of the 10 percent common equity tier
1 capital deduction threshold
$0
a.
Significant investments in the capital of unconsolidated financial institutions in the
form of common stock net of associated DTLs (as reported in Schedule HC-R, item
13)
b. MSAs net of associated DTLs (as reported in Schedule HC-R, item 14) c. DTAs
arising from temporary differences that could not be realized through net operating
loss carrybacks, net of related valuation allowances and net of DTLs (as reported in
Schedule HC-R, item 15)
(4)
$20 - $13 = $7
$30 - $13 = $17
Sum of threshold items not deducted as a result of the 10 percent common equity tier
1 capital deduction threshold
Enter the sum of:
a.
b. MSAs that are not deducted (that is, the difference between the amount in step (1)(b)
of this table and step 3(b) of this table)
$20-$7 = $13
c.
$30 - $17 = $13
DTAs arising from temporary differences that could not be realized through net
operating loss carrybacks, net of related valuation allowances and net of DTLs that are
not deducted (that is, the difference between the amount in step (1)(c) of this table and
step (3)(c) of this table)
d. Total of a, b, and c
(5)
HC-R-16
$10
Significant investments in the capital of unconsolidated financial institutions in the
form of common stock net of associated DTLs that are not deducted (that is, the
difference between the amount in step (1)(a) of this table and step 3(a) of this table)
$10 + $13 + $13
= $36
The 15 percent common equity tier 1 capital deduction threshold
Calculate as follows:
Schedule HC-R
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Schedule HC-R
a.
Substract the amount calculated in step (1)(d) of this table from Schedule HC-R,
item 12.
b. Multiply the resulting amount by 17.65%
(6)
($130 - $60) x
17.65%=$12.36
Rounds to $12
Amount of threshold items that exceed the 15 percent common equity tier 1 capital
deduction threshold
Report as follows:
a.
If the amount in step (4)(d) is greater than the amount in step (5), then subtract (5)
from (4)(d) and report this number in Schedule HC-R, item 16. (In addition, the
holding company must risk-weight the items that are not deducted at 250 percent in
the risk-weighted asset section of this form.)
b. If the amount in step (4)(d) is less than the amount in step (5), report zero in Schedule
HC-R, item 16.
The amount in
step 4(d) ($36) is
greater than the
amount in step 5
($12).
Therefore:
$36 - $12 = $24
(7)
Advanced approaches institutions only need to complete this calculation: if the amount in
step (6) is above zero, then pro-rate the threshold items’ deductions as follows:
a.
Significant investments in the capital of unconsolidated financial institutions in the
form of common stock: multiply (6)(a) by the ratio of (1)(a) over (1)(d).
b. MSAs net of associated DTAs: multiply (6)(a) by the ratio of (1)(b) over (1)(d).
c. DTAs arising from temporary differences that could not be realized through net
operating loss carrybacks: multiply (6)(a) by the ratio of (1)(c) over (1)(d).
a. $12 x (10/60)
= $2
b. $12 x (20/60)
= $4
c. $12 x (30/60)
= $6.
Line Item 17 LESS: Deductions applied to
common equity tier 1 capital due to insufficient
amounts of additional tier 1 capital and tier 2
capital to cover deductions.
Line Item 19 Common equity tier 1 capital.
Report the total amount of deductions related to reciprocal cross holdings, non-significant investments in the
capital of unconsolidated financial institutions, and noncommon stock significant investments in the capital of
unconsolidated financial institutions if the holding company does not have a sufficient amount of additional tier
1 capital and tier 2 capital to cover these deductions in
Schedule HC-R, items 24 and 33.
Additional tier 1 capital
Line Item 18 Total adjustments and deductions
for common equity tier 1 capital.
Report the sum of Schedule HC-R, items 13 through 17.
FR Y-9C
Schedule HC-R
March 2014
Report Schedule HC-R, item 12 less item 18. The amount
reported in this item is the numerator of the holding
company’s common equity tier 1 risk-based capital ratio.
Line Item 20 Additional tier 1 capital instruments
plus related surplus.
Starting on January 1, 2014 for the case of advanced
approaches holding companies and on January 1, 2015
for non-advanced holding companies, report the portion
of noncumulative perpetual preferred stock and related
surplus included in Schedule HC, item 23, that satisfy all
the criteria in the revised regulatory capital rules of the
Federal Reserve.
Include instruments that were (i) issued under the Small
Business Jobs Act of 2010, or, prior to October 4, 2010,
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under the Emergency Economic Stabilization Act of
2008 and (ii) were included in the tier 1 capital under the
Federal Reserve’s general risk-based capital rules (12
CFR part 225, appendix A, and, if applicable, appendix
E) (for example, tier 1 instruments issued under the
TARP program that are grandfathered permanently).
Also include additional tier 1 capital instruments issued
as part of an ESOP, provided that the repurchase of such
instruments is required solely by virtue of ERISA for a
banking organization that is not publicly-traded.
a. Depository institution holding companies10 with total
consolidated assets of less than $15 billion as of December 31, 2009 and holding companies that were mutual
holding companies as of May 19, 2010 (2010 MHCs)
only:
Depository institution holding companies with total consolidated assets of less than $15 billion as of December
31, 2009 and holding companies that were mutual holding companies prior to May 19, 2010 (2010 MHCs) may
include non-qualifying capital instruments (e.g., TruPS
and cumulative perpetual preferred stock) issued prior to
May 19, 2010 in additional tier 1 or tier 2 capital if the
instrument will be included in tier 1 or tier 2 capital,
respectively, as of January 1, 2014. Such non-qualifying
capital instruments includable in tier 1 capital are subject
to a limit of 25 percent of tier 1 capital elements,
excluding any non-qualifying capital instruments and
after all regulatory capital deductions and adjustments
have been applied to tier 1 capital.
Line Item 21 Non-qualifying capital instruments
subject to phase out from additional tier 1 capital.
Starting on January 1, 2014 for the case of advanced
approaches holding companies and on January 1, 2015
for non-advanced holding companies, report the total
amount of non-qualifying capital instruments that were
included in tier 1 capital and outstanding as of January 1,
2014 as follows:
of less than $15 billion and 2010 MHCs prior to May 19,
2010 because these institutions may include nonqualifying regulatory capital instruments in additional
tier 1 capital as described in Schedule HC-R, item 20.
If these institutions have non-qualifying regulatory capital instruments in excess of 25 percent of tier 1 capital
elements, excluding any non-qualifying capital instruments and after all regulatory capital deductions and
adjustments have been applied to tier 1 capital, such
instruments must be phased out in accordance with Table
7 below. In addition, the amount of non-qualifying
capital instruments that are excluded from additional tier
1 capital in accordance with Table 7 may be included in
tier 2 capital.
b. Depository institution holding companies with total
consolidated assets of $15 billion or more as of December 31, 2009 that are not 2010 MHCs:
Depository institution holding companies with total consolidated assets of $15 billion or more as of December
31, 2009 that are not 2010 MHCs must phase out
non-qualifying capital instruments (that is, debt or equity
instruments that do not meet the criteria for additional
tier 1 or tier 2 capital instruments in section 20 of the
revised regulatory capital rules, but that were issued and
included in tier 1 or tier 2 capital, respectively, prior to
May 19, 2010) as set forth in Table 7, starting on January
1, 2014 for an advanced approaches holding company
that is not an SLHC and starting January 1, 2015 for a
non-advanced approaches holding company.
If non-advanced approaches holding companies have
non-qualifying capital instruments that are excluded from
tier 1 capital, such non-qualifying capital instruments can
be included in tier 2 capital, without limitation, provided
the instruments meet the criteria for tier 2 capital set forth
in section 20(d) of the revised regulatory capital rules..
This line item is generally not applicable to nonqualifying capital instruments issued by depository institution holding companies with total consolidated assets
For the case of advanced approaches holding companies,
non-qualifying capital instruments that are phased out of
tier 1 capital under Table 7 are fully includable in tier 2
capital until December 31, 2015. From January 1, 2016,
until December 31, 2021, these holding companies are
required to phase out such non-qualifying capital instruments from tier 2 capital in accordance with the percentage in Table 8.
10. Depository institution holding company means a bank holding
company or savings and loan holding company.
Transition provisions for non-qualifying capital instruments includable in additional tier 1 or tier 2 capital:
a. Depository institution holding companies with
total consolidated assets of less than $15 billion as of
December 31, 2009 and 2010 MHCs:
10
HC-R-18
Schedule HC-R
FR Y-9C
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Table 7 applies separately to additional tier 1 and tier 2
non-qualifying capital instruments. For example, an
advanced approaches holding company that has $100 in
non-qualifying tier 1 instruments may include up to $80
in additional tier 1 capital in 2014, and $70 in 2015. If
that same institution has $100 in non-qualifying tier 2
instruments, it may include up to $80 in tier 2 capital in
2014 and $70 in 2015.
If the institution is involved in a merger or acquisition, it
should treat its non-qualifying capital instruments following the requirements in section 300 of the Federal
Reserve’s revised regulatory capital rules.
Table 7—Percentage of non-qualifying capital instruments includable in additional tier 1 or tier 2 capital during
the transition period
Transition period
Percentage of non-qualifying capital instruments includable in
additional tier 1 or tier 2 capital
Calendar year 2014
80
Calendar year 2015
70
Calendar year 2016
60
Calendar year 2017
50
Calendar year 2018
40
Calendar year 2019
30
Calendar year 2020
20
Calendar year 2021
10
Calendar year 2022 and
thereafter
0
Line Item 22 Tier 1 minority interest not
included in common equity tier 1 capital.
Report the amount of tier 1 minority interest not included
in common equity tier 1 capital that is includable at the
consolidated level, as described below.
For each consolidated subsidiary, perform the calculations in steps (1) through (10) of the worksheet below.
Sum up the results from step 10 for each consolidated
subsidiary and report the aggregate number in this item
22.
For tier 1 minority interest, there is no requirement that
the subsidiary be a depository institution or a foreign
bank. However, the instrument that gives rise to tier 1
minority interest must meet all the criteria for either
common equity tier 1 capital or additional tier 1 capital
instrument.
FR Y-9C
Schedule HC-R
March 2014
Example and a worksheet calculation: calculate tier 1
minority interest not included in common equity tier 1
capital includable at the holding company level as follows:
Assumptions:
• This is a continuation of the example used for common
equity tier 1 minority interest from Schedule HC,
item 4.
• Assume that risk-weighted assets of the subsidiary are
the same as the risk-weighted assets of the holding
company that relate to the subsidiary: $1,000 in each
case.
• Subsidiary’s tier 1 capital: $110, which is composed of
subsidiary’s common equity tier 1 capital of $80 and
additional tier 1 capital of $30.
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• Subsidiary’s common equity tier 1 owned by minority
shareholders: $24.
• Other relevant numbers are taken from the example in
Schedule HC-R, item 4.
• Subsidiary’s additional tier 1 capital owned by minority shareholders: $15.
(1)
Determine the risk-weighted assets of the subsidiary.
$1,000
(2)
Determine the risk-weighted assets of the holding company that relate to the subsidiary.
Note that the amount in this step (2) may differ from the amount in step (1) due to intercompany transactions and eliminations in consolidation.
$1,000
(3)
Multiply the lower of (1) or (2) by 8.5%.11
$1,000 x 8.5
= $85
(4)
Determine the dollar amount of tier 1 capital for the subsidiary. If this amount is less than
step (3), go directly to step (9). Otherwise continue on to step (5).
$110
(5)
Subtract the amount in step (3) from the amount in step (4). This is the ‘‘surplus tier 1
capital of the subsidiary.’’
$110 - $85 = $25
(6)
Determine the percent of the subsidiary’s qualifying capital instruments that are owned by
third parties (the minority shareholders).
$24 + 15 = $39.
Then $39/$110 =
35.45
(7)
Multiply the percentage from step (6) by the dollar amount in step (5). This is the ‘‘surplus
tier 1 minority interest of the subsidiary.’’
35.45
(8)
Determine the total amount of tier 1 minority interest of the subsidiary. Then subtract the
surplus tier 1 minority interest of the subsidiary (step 7) from this amount.
$24 + $15 = $39.
Then $39 - $8.86
= $30.14
(9)
The ‘‘tier 1 minority interest includable at the holding company level’’ is the amount from
step (8) (or from step (4) when there is no surplus tier 1 minority interest of the subsidiary).
$30.14
Subtract any minority interest that is included in common equity tier 1 capital (from
Schedule HC-R, item 4). The result is the minority interest included in additional tier 1
capital.
$30.14 - $21
(from example in
item 4) = $9.14.
(10)
x $25 = $8.86
11. The percentage multiplier in step (3) is the capital ratio necessary for the subsidiary to avoid restrictions on distributions and discretionary bonus
payments. Advanced approaches holding companies must adjust this percentage to account for all applicable buffers.
Note: As indicated, this example built onto the example
under the instructions for item 4, where the subsidiary
was a depository institution, and where its common
equity tier 1 minority interest was includable in common
equity tier 1 capital. However, if this were a subsidiary
HC-R-20
other than a depository institution, none of its minority
interest arising from common equity tier 1 would have
been includable in common equity tier 1 capital. If the
subsidiary in the example were not a depository institution, the full calculated amount of minority interest
Schedule HC-R
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($30.14) would be includable in additional tier 1 capital
of the reporting holding company since none of it would
have been includable in common equity tier 1 capital.
Transition provisions: For surplus minority interest and
non-qualifying minority interest that can be included in
additional tier 1 capital during the transition period,
follow the transition provisions in Schedule HC-R, item
4 after taking into consideration (that is, excluding) any
amount of surplus common equity tier 1 minority interest
(see step 7 of the worksheet in item 4). In the example
(and assuming no outstanding amounts of non-qualifying
minority interest), the institution has $5.86 of surplus tier
1 minority interest available to be included during the
transition period in additional tier 1 capital ($8.86 (see
step 7 of the worksheet in item 22) of surplus tier 1
minority interest minus $3.0 (see step 7 of the worksheet
in item 4) of common equity tier 1 minority interest). In
2015, the institution would include an additional $3.52 in
item 22 (60
of $5.86) and starting in 2018 the institution would not
include any surplus minority interest in regulatory capital.
Line Item 23 Additional tier 1 capital before
deductions.
Report the sum of Schedule HC-R, items 20, 21, and 22.
Line Item 24 LESS: Additional tier 1 capital
deductions.
Report additional tier 1 capital deductions as the sum of
the following elements:
Note that if a holding company does not have a sufficient
amount of additional tier 1 capital to reflect these deductions, then the holding company must deduct the shortfall
from common equity tier 1 capital (Schedule HC-R, item
17).
(1) Investments in own additional tier 1 capital instruments:
Report the holding company’s investments in (including
any contractual obligation to purchase) its own additional
tier 1 instruments, whether held directly or indirectly.
A holding company may deduct gross long positions net
of short positions in the same underlying instrument only
if the short positions involve no counterparty risk.
FR Y-9C
Schedule HC-R
March 2014
The holding company must look through any holdings of
index securities to deduct investments in its own capital
instruments. In addition:
(i)
Gross long positions in investments in a holding
company’s own regulatory capital instruments
resulting from holdings of index securities may be
netted against short positions in the same index;
(ii) Short positions in index securities that are hedging long cash or synthetic positions can be decomposed to recognize the hedge; and
(iii) The portion of the index that is composed of the
same underlying exposure that is being hedged
may be used to offset the long position if both the
exposure being hedged and the short position in
the index are covered positions under the market
risk capital rule, and the hedge is deemed effective by the holding company’s internal control
processes.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
(2) Reciprocal cross-holdings in the capital of financial institutions.
Include investments in the additional tier 1 capital instruments of other financial institutions that the holding
company holds reciprocally, where such reciprocal crossholdings result from a formal or informal arrangement to
swap, exchange, or otherwise intend to hold each other’s
capital instruments. If the holding company does not
have a sufficient amount of a specific component of
capital to effect the required deduction, the shortfall must
be deducted from the next higher (that is, more subordinated) component of regulatory capital.
For example, if a holding company is required to deduct a
certain amount from additional tier 1 capital and it does
not have additional tier 1 capital, then the deduction
should be from common equity tier 1 capital in Schedule
HC-R, item 17.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
(3) Non-significant investments in additional tier 1
capital of unconsolidated financial institutions
that exceed the 10 percent threshold for nonsignificant investments.
As noted in the instructions for HC-R, item 11 above, a
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Schedule HC-R
holding company has a non-significant investment in the
capital of an unconsolidated financial institution if it
owns 10 percent or less of the issued and outstanding
common shares of that institution.
Calculate this amount as follows:
(1) Determine the aggregate amount of non-significant
investments in the capital of unconsolidated financial
institutions in the form of common stock, additional
tier 1, and tier 2 capital.
(2) Determine the amount of non-significant investments
in the capital of unconsolidated financial institutions
in the form of additional tier 1 capital.
(3) If the amount in (1) is greater than the 10 percent
threshold for non-significant investments (Schedules
HC-R, item 11, step (4)), then multiply the difference
by the ratio of (2) over (1). Report this product in this
item 24.
(4) If the amount in (1) is less than the 10 percent
threshold for non-significant investments, report zero.
For example, assume a holding company has a total of
$200 in non-significant investments (step 1), including
$60 in the form of additional tier 1 capital (step 2), and its
10 percent threshold for non-significant investments is
$100 (as calculated in step 4 of item 11). Since the
aggregate amount of non-significant investments exceeds
the 10 percent threshold for non-significant investments
by $100 ($200-$100), the holding company must multiply $100 by the ratio of 60/200 (step 3). Thus, the
holding company would need to deduct $30 from its
additional tier 1 capital.
Transition provisions: Follow the transition provisions in
Schedule HC-R, item 11.
(4) Significant investments in the capital of unconsolidated financial institutions not in the form of
common stock to be deducted from additional tier
1 capital.
Report the total amount of significant investments in the
capital of unconsolidated financial institutions in the
form of additional tier 1 capital.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
(5) Other adjustments and deductions.
HC-R-22
Include adjustments and deductions applied to additional
tier 1 capital due to insufficient tier 2 capital to cover
deductions (related to reciprocal cross holdings, nonsignificant investments in the tier 2 capital of unconsolidated financial institutions, and significant investments in
the tier 2 capital of unconsolidated financial institutions).
Also include adjustments and deductions related to the
calculation of DTAs, gain-on-sale, defined benefit pension fund assets, changes in fair value of liabilities due to
changes in own credit risk, and expected credit losses
during the transition period as described in Schedule
HC-R, item 8.
Line Item 25 Additional tier 1 capital.
Report the greater of Schedule HC-R, item 23 minus item
24, or zero.
Tier 1 capital
Line Item 26 Tier 1 capital.
Report the sum of Schedule HC-R, items 19 and 25.
Tier 2 capital
Line Item 27 Tier 2 capital instruments plus
related surplus.
Starting on January 1, 2014 for the case of advanced
approaches holding companies and on January 1, 2015
for non-advanced holding companies, report tier 2 capital
instruments (that satisfy all eligibility criteria under the
revised regulatory capital rules of the Federal Reserve)
and related surplus.
Include instruments that were (i) issued under the Small
Business Jobs Act of 2010, or, prior to October 4, 2010,
under the Emergency Economic Stabilization Act of
2008 and (ii) were included in the tier 2 capital nonqualifying capital instruments (e.g., TruPS and cumulative perpetual preferred) under the Federal Reserve’s
general risk-based capital rules.
In addition, a depository institution holding company that
is not an advanced approaches holding company may
include in tier 2 capital non-qualifying capital instruments (e.g., TruPS and cumulative perpetual preferred)
that have been phased-out of tier 1 capital in accordance
with Table 7 in Schedule HC-R, item 21.
Schedule HC-R
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Schedule HC-R
Line Item 28 Non-qualifying capital instruments
subject to phase out from tier 2 capital.
Starting on January 1, 2014, for the case of advanced
approaches holding companies and on January 1, 2015,
for non-advanced holding companies, report the total
amount of non-qualifying capital instruments that were
included in tier 2 capital and outstanding as of January 1,
2014, and that are subject to phase out
Holding companies may include in regulatory capital
debt or equity instruments issued prior to September 12,
2010, that do not meet the criteria for additional tier 1 or
tier 2 capital instruments in section 20 of the revised
regulatory capital rules but that were included in tier 1 or
tier 2 capital respectively as of September 12, 2010
(non-qualifying capital instruments issued prior to September 12, 2010) up to the percentage of the outstanding
principal amount of such non-qualifying capital instruments as of January 1, 2014, in accordance with Table 7
in Schedule HC-R, item 21.
a. Depository institution holding companies with total
consolidated assets of less than $15 billion as of
December 31, 2009 and 2010 MHCs:
This item is generally not applicable to depository institution holding companies with total consolidated assets
of less than $15 billion and 2010 MHCs that issued and
included non-qualifying capital instruments prior to May
19, 2010, because these institutions may include such
instruments in additional tier 1 and tier 2 capital as
described in Schedule HC-R, item 20 and 27, respectively.
b. Depository institution holding companies with
total consolidated assets of $15 billion or more as of
December 31, 2009 that are not 2010 MHCs:
Depository institution holding companies with total consolidated assets of $15 billion or more as of December
31, 2009 that are not 2010 MHCs must phase out
non-qualifying capital instruments from tier 2 capital as
set forth in Table 7, in Schedule HC-R, item 21, starting
January 1, 2014 if it is an advanced approaches holding
company that is not an SLHC and starting January 1,
2015 if it is a non-advanced approaches holding company.
A depository institution holding company of $15 billion
or more that is not an advanced approaches holding
company may include in tier 2 capital non-qualifying
capital instruments that have been phased-out of tier 1
capital in accordance with Table 7.
For the case of advanced approaches holding companies,
non-qualifying capital instruments that are phased out of
tier 1 capital under Table 7 are fully includable in tier 2
capital until December 31, 2015. From January 1, 2016,
until December 31, 2021, these holding companies are
required to phase out such non-qualifying capital instruments from tier 2 capital in accordance with the percentage in Table 8.
Table 8—Percentage of non-qualifying capital instruments includable in additional tier 1 or tier 2 capital for a
depository institution holding company of $15 billion or more
Transition period
FR Y-9C
Schedule HC-R
March 2014
Percentage of non-qualifying capital instruments
includable in additional tier 1 or tier 2 capital
Calendar year 2014
80
Calendar year 2015
70
Calendar year 2016
60
Calendar year 2017
50
Calendar year 2018
40
Calendar year 2019
30
Calendar year 2020
20
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Schedule HC-R
Calendar year 2021
10
Calendar year 2022 and thereafter
0
Line Item 29 Total capital minority interest that
is not included in tier 1 capital.
• This is a continuation of the example used in the
instructions for Schedule HC-R, items 4 and 22.
Starting on January 1, 2014, for the case of advanced
approaches holding companies and on January 1, 2015
for non-advanced holding companies, report the amount
of total capital minority interest not included in tier 1
capital, as described below. For each consolidated subsidiary, perform the calculations in steps (1) through (10)
below. Sum up the results for each consolidated subsidiary and report the aggregate number in this item 29.
• Assume that risk-weighted assets of the subsidiary are
the same as the risk-weighted assets of the holding
company that relate to the subsidiary: $1,000.
Example and a worksheet calculation: calculate total
capital minority interest that is not included in tier 1
capital includable at the holding company level as follows:
Assumptions:
• Subsidiary’s total capital: $130, which is composed of
subsidiary’s common equity tier 1 capital of $80, and
additional tier 1 capital of $30, and tier 2 capital of $20.
• Subsidiary’s common equity tier 1 capital owned by
minority shareholders: $24.
• Subsidiary’s additional tier 1 capital owned by minority shareholders: $15.
• Subsidiary’s tier 2 capital instruments owned by minority shareholders: $15.
(1)
Determine the risk-weighted assets of the subsidiary.
$1,000
(2)
Determine the risk-weighted assets of the holding company that relate to the subsidiary.
Note that the amount in this step (2) may differ from the amount in step (1) due to intercompany transactions and eliminations in consolidation.
$1,000
(3)
Determine the lower of (1) or (2), and multiply that amount by 10.5%.12
$1,000 x 10.5%
= $105
(4)
Determine the dollar amount of total capital for the subsidiary. If this amount is less than
step (3), go directly to step (9). Otherwise continue on to step (5).
$130
(5)
Subtract the amount in step (3) from the amount in step (4). This is the ‘‘surplus total capital of the subsidiary.’’
$130 -$105
Determine the percent of the subsidiary’s total capital instruments that are owned by third
parties (the minority shareholders).
$24 + $15 + $15
= $54. Then,
$54/$130 =
41.54%
(6)
= $25
12. The percentage multiplier in step (3) is the capital ratio necessary for a subsidiary depository institution to avoid restrictions on distributions and
discretionary bonus payments. Advanced approaches holding companies must adjust this amount for all applicable buffers.
HC-R-24
Schedule HC-R
FR Y-9C
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(7)
Multiply the percentage from step (6) by the dollar amount in step (5). This is the ‘‘surplus
total capital minority interest of the subsidiary’’
41.54% x $25 =
$10.39
(8)
Determine the total amount of total capital minority interest of the subsidiary. Then subtract the surplus total capital minority interest of the subsidiary (step 7) from this amount.
$24 + $15 + $15
= $54. Then $54 $10.39 = $43.62.
(9)
The ‘‘total capital minority interest includable at holding company level’’ is the amount
from step (8) or step (4) where there is no surplus total capital minority interest of the subsidiary.
$43.62 (report the
lesser of $43.62
or $54; therefore
$43.62).
(10)
Subtract from (9) any minority interest that is included in common equity tier 1 and additional tier 1 capital. The result is the total capital minority interest not included in tier 1
capital includable in total capital.
$43.62 - ($21 +
$9.14) = $13.48.
Transition provisions: For surplus minority interest and
non-qualifying minority interest that can be included in
tier 2 capital during the transition period, follow the
transition provisions in Schedule HC-R, item 4 after
taking into consideration (that is, excluding) any amount
of surplus tier 1 minority interest (see step 7 of the
worksheet in item 22). In the example (and assuming no
outstanding amounts of non-qualifying minority interest), the institution has $1.53 of surplus total capital
minority interest available to be included during the
transition period in tier 2 capital ($10.39 (see step 7 of the
worksheet in item 29) of surplus total capital minority
interest minus $8.86 (see step 7 of the worksheet in item
22) of tier 1 minority interest). In 2015, the institution
would include an additional $.92 in item 29 (60
of $1.53) and starting in 2018 the institution would not
include any surplus minority interest in regulatory capital.
Line Item 30(a) Allowance for loan and lease
losses includable in tier 2 capital.
Report the portion of the holding company’s allowance
for loan and lease losses that is includable in tier 2
capital. None of the holding company’s allocated transfer
risk reserve, if any, is includable in tier 2 capital.
Advanced approaches holding companies only:
During the reporting periods in 2014, the amount
reported in this item cannot exceed 1.25 percent of
the institution’s gross risk-weighted assets as determined under sections 20(d) and 22 of the revised
regulatory capital rules. The starting point for this
calculation is risk-weighted assets calculated under
FR Y-9C
Schedule HC-R
March 2014
the general risk-based capital rules reported in
Schedule HC-R, Part II, item 59, less market risk
equivalent assets reported in Schedule HC-R, Part
II, item 58. The resulting amount must be adjusted
as follows:
(a) Add the amount of the following items reported
in item 42, column B (All other assets) of Schedule HC-R, Part II: any disallowed goodwill and
other intangible assets reported; disallowed servicing assets and purchased credit card relationships; disallowed deferred tax that are reported in
Schedule HC, item 8, and are deducted for riskbased capital purposes in Schedule HC-R, Part
I.B, item 10.b; and
(b) Subtract amounts deducted under section 22(a) of
the revised regulatory capital rules (Schedule
HC-R, Part I.B, items 6 through 8, and the
amounts reported in 10.b for after-tax gain-onsale in connection with a securitization exposure;
defined benefit pension fund assets, net of associated DTLs, and, for advanced approaches institutions only that exit parallel run, the amount of
expected credit loss that exceeds the institution’s
eligible credit reserves). These subtractions must
be done in accordance with the applicable transition provisions of the revised regulatory capital
rules.
The allowance for loan and lease losses equals Schedule
RC, item 4.c, ‘‘Allowance for loan and lease losses,’’ less
Schedule RI-B, part II, Memorandum item 1, ‘‘Allocated
transfer risk reserve included in Schedule RI-B, part II,
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Schedule HC-R
item 7, above,’’ plus Schedule HC-G, item 3, ‘‘Allowance
for credit losses on off-balance sheet credit exposures.’’
All institutions: Starting on January 1, 2015, the amount
reported in this item cannot exceed 1.25 percent of the
institution’s risk-weighted assets base for the ALLL
calculation reported in Schedule HC-R, Part II. In calculating the risk-weighted assets base for this purpose, an
institution would not include items that are deducted
from capital under section 22(a). However, an institution
would include risk-weighted asset amounts of items
deducted from capital under sections 22(c) through (f) of
the revised regulatory capital rule, in accordance with the
applicable transition provisions. While amounts deducted
from capital under section 22(c) through (f) are included
in the risk-weighted asset base for the ALLL calculation,
such amounts are excluded from standardized total riskweighted assets used in the denominator of the risk-based
capital ratios.
The allowance for loan and lease losses equals Schedule
RC, item 4.c, ‘‘Allowance for loan and lease losses,’’ less
Schedule RI-B, part II, Memorandum item 1, ‘‘Allocated
transfer risk reserve included in Schedule RI-B, part II,
item 7, above,’’ plus Schedule HC-G, item 3, ‘‘Allowance
for credit losses on off-balance sheet credit exposures.’’
Line Item 30(b)—Advanced approaches holding
companies that exit parallel run only: eligible credit
reserves includable in tier 2 capital.
Report the amount of eligible credit reserves includable
in tier 2 capital as reported in FFIEC 101 Schedule A,
item 50.
HC-R-26
Line Item 31 Unrealized gains on
available-for-sale preferred stock classified as an
equity security under GAAP and available-for-sale
equity exposures includable in Tier 2 capital.
(i) Holding companies that entered ‘‘1’’ for ‘‘Yes’’ in
Schedule HC-R, item 3(a):
Report the pretax net unrealized holding gain (i.e., the
excess of fair value as reported in Schedule HC-B, item
7, column D, over historical cost as reported in Schedule
HC-B, item 7, column C), if any, on available-for-sale
preferred stock classified as an equity security under
GAAP and available-for-sale equity exposures includable in tier 2 capital, subject to the limits specified in the
revised regulatory capital rules. The amount reported in
this item cannot exceed 45 percent of the holding
company’s pretax net unrealized gain on available-forsale preferred stock classified as an equity security under
GAAP and available-for-sale equity exposures.
(ii) Holding companies that entered ‘‘0’’ for ‘‘No’’ in
Schedule HC-R, item 3(a):
Transition provisions for phasing out unrealized gains
on available-for-sale preferred stock classified as an
equity security under GAAP and available-for-sale
equity exposures:
(i) Determine the amount of unrealized gains on
available-for-sale preferred stock classified as an
equity security under GAAP and available-forsale equity exposures that an institution currently
includes in tier 2 capital.
(ii) Multiply (i) by the percentage in Table 9 and
include this amount in tier 2 capital.
Schedule HC-R
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Schedule HC-R
Table 9—Percentage of unrealized gains on available-for-sale preferred stock classified as an equity security under
GAAP and available-for-sale equity exposures that may be included in tier 2 capital
Transition period
Percentage of unrealized gains on available-forsale preferred stock classified as an equity security
under GAAP and available-for-sale equity exposures that may be included in tier 2 capital
Calendar year 2014
36
Calendar year 2015
27
Calendar year 2016
18
Calendar year 2017
9
Calendar year 2018 and thereafter
0
For example, during calendar year 2014, include up to 36
percent of unrealized gains on available-for-sale preferred stock classified as an equity security under GAAP
and available-for-sale equity exposures in tier 2 capital.
During calendar years 2015, 2016, 2017, and 2018 (and
thereafter), these percentages go down to 27, 18, 9 and
zero, respectively.
Line Item 32(a) Tier 2 capital before deductions.
Report the sum of Schedule HC-R, items 27 through
30(a), plus item 31.
Line Item 32(b)—Advanced approaches holding
companies that exit parallel run only: tier 2 capital
before deductions.
Report the sum of Schedule HC-R, items 27 through 29,
plus items 30(b) and 31.
Line Item 33 LESS: Tier 2 capital deductions.
Report total tier 2 capital deductions as the sum of the
following elements:
If a holding company does not have a sufficient amount
of tier 2 capital to reflect these deductions, then the
holding company must deduct the shortfall from additional tier 1 capital (Schedule HC-R, item 24) or, if there
is not enough additional tier 1 capital, from common
equity tier 1 capital (Schedule HC-R, item 17).
For example, if tier 2 capital is $98, and if the holding
company must make $110 in tier 2 deductions, it would
FR Y-9C
Schedule HC-R
March 2014
report $98 in this item 33, and would take the additional
$12 deduction in Schedule HC-R, item 24 (and in
Schedule HC-R, item 17, in the case of insufficient
additional tier 1 capital to make the deduction in Schedule HC-R, item 24).
In addition, advanced approaches holding companies
with insufficient tier 2 capital for deductions will make
the following adjustments: an advanced approaches holding company will make deductions on this schedule
under the generally applicable rules that apply to all
holding companies. It will use FFIEC 101, Schedule A,
to calculate its capital requirements under the advanced
approaches rule. Therefore, in the case of an advanced
approaches holding company with insufficient tier 2
capital to make tier 2 deductions, it will use the corresponding deduction approach and the generally applicable rules to take excess tier 2 deductions from additional
tier 1 capital in Schedule HC-R, item 24, and if necessary
from common equity tier 1 capital in Schedule HC-R,
item 17. It will use the advanced approaches rules to take
deductions on the FFIEC 101 form.
For example, assume tier 2 capital is $100 under the
advanced approaches rule and $98 under the generally
applicable rules (due to the difference between the
amount of eligible credit reserves includable in tier 2
capital under the advanced approaches, and ALLL includable in tier 2 capital under the standardized approach). If
the required deduction from tier 2 capital is $110, then
the advanced approaches holding company would add
$10 to the required additional tier 1 capital deductions
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Schedule HC-R
(on FFIEC 101, Schedule A, line 42, and FFIEC 101,
Schedule A, line 27, if necessary), and would add $12 to
its required additional tier 1 capital deductions for the
calculation of the standardized approach regulatory capital ratios in this schedule (Schedule HC-R, item 24, and
Schedule HC-R, item 17, if necessary).
c. Non-significant investments in tier 2 capital of
unconsolidated financial institutions that exceed the
10 percent threshold for non-significant investments.
a. Investments in own additional tier 2 capital instruments.
(1) Determine the aggregate amount of non-significant
investments in the capital of unconsolidated financial
institutions in the form of common stock, additional
tier 1, and tier 2 capital.
Report the holding company’s investments in (including
any contractual obligation to purchase) its own tier 2
instruments, whether held directly or indirectly.
A holding company may deduct gross long positions net
of short positions in the same underlying instrument only
if the short positions involve no counterparty risk.
The holding company must look through any holdings of
index securities to deduct investments in its own capital
instruments. In addition:
(i)
Gross long positions in investments in a holding
company’s own regulatory capital instruments
resulting from holdings of index securities may be
netted against short positions in the same index;
(ii) Short positions in index securities that are hedging long cash or synthetic positions can be decomposed to recognize the hedge; and
(iii) The portion of the index that is composed of the
same underlying exposure that is being hedged
may be used to offset the long position if both the
exposure being hedged and the short position in
the index are covered positions under the market
risk capital rule, and the hedge is deemed effective by the holding company’s internal control
processes.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
b. Reciprocal cross-holdings in the capital of financial
institutions.
Include investments in the tier 2 capital instruments of
other financial institutions that the holding company
holds reciprocally, where such reciprocal crossholdings
result from a formal or informal arrangement to swap,
exchange, or otherwise intend to hold each other’s capital
instruments.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
HC-R-28
Calculate this amount as follows (similar to Schedule
HC-R, item 11):
(2) Determine the amount of non-significant investments
in the capital of unconsolidated financial institutions
in the form of tier 2 capital.
(3) If (1) is greater than the 10 percent threshold for
non-significant investments (Schedule HC-R, item
11, step (4)), then, multiply the difference by the ratio
of (2) over (1). Report this product in this line item.
(4) If (1) is less than the 10 percent threshold for
non-significant investments, enter zero.
For example, if a holding company has a total of $200 in
non-significant investments (step 1), including $40 in the
form of tier 2 capital (step 2), and its 10 percent threshold
for non-significant investments is $100 (as calculated in
Schedule HC-R, item 11, step 4). Since the aggregate
amount of non-significant investments exceeds the 10
percent threshold for non-significant investments by $100
($200-$100), the holding company would multiply $100
by the ratio of 40/200 (step 3). Thus, the holding
company would need to deduct $20 from its tier 2 capital.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
d. Significant investments in the capital of unconsolidated financial institutions not in the form of common
stock to be deducted from tier 2 capital.
Report the total amount of significant investments in the
capital of unconsolidated financial institutions in the
form of tier 2 capital.
Transition provisions: Follow the transition provisions
in Schedule HC-R, item 11.
e. Other adjustments and deductions.
Include any other applicable adjustments and deductions
applied to tier 2 capital in accordance with the revised
regulatory capital rules.
Schedule HC-R
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Schedule HC-R
Line Item 34(a) Tier 2 capital.
Report the greater of Schedule HC-R, item 32(a) less
item 33, or zero.
Line Item 34(b)—Advanced approaches holding
companies that exit parallel run only: Tier 2 capital.
Report the greater of Schedule HC-R, item 32(b) less
item 33, or zero.
Total capital
Line Item 35(a) Total capital.
Report the sum of Schedule HC-R, items 26 and 34(a).
Line Item 35(b)--Advanced approaches holding
companies that exit parallel run only: Total capital.
Report the sum of Schedule HC-R, items 26 and 34(b).
Total assets for the leverage ratio
Line Item 36 Average total consolidated assets.
All holding companies must report the amount of average
total consolidated assets as reported in Schedule HC-K,
item 9.
Line Item 37 LESS: Deductions from common
equity tier 1 capital and additional tier 1.
Report the sum of the amounts deducted from common
equity tier 1 capital and additional tier 1 capital in
Schedule HC-R, items 6, 7, 8, 10(b), 11, 13 through 17,
and item 24.
Line Item 38 LESS: Other deductions from
(additions to) assets for leverage ratio purposes.
Based on the revised regulatory capital rules, report the
amount of any deductions from (additions to) total assets
for leverage capital purposes that are not included in
Schedule HC-R, item 37, as well as the items below, if
applicable. If the amount is a net deduction, report it as a
positive value in this item. If the amount is a net addition,
report it as a negative value in this item.
(i) Holding companies that do not make an AOCI
opt-out election and all advanced approaches holding
companies:
Available-for-sale debt securities and available-for-sale
equity securities are reflected at amortized cost and at the
FR Y-9C
Schedule HC-R
March 2014
lower of cost or fair value, respectively, when calculating
average total consolidated assets for Schedule HC-K,
item 9. Therefore, include in this item as deductions from
(additions to) assets for leverage ratio purposes the
amounts needed to adjust (i) the quarterly average for
available-for-sale debt securities included in Schedule
HC-K, item 9, from an average based on amortized cost
to an average based on fair value, and (ii) the quarterly
average for available-for-sale equity securities included
in Schedule HC-K, item 9, from an average based on the
lower of cost or fair value to an average based on fair
value. If the deferred tax effects of any net unrealized
gains (losses) on available-for-sale debt securities were
excluded from the determination of average total consolidated assets for Schedule HC-K, item 9, also include in
this item as a deduction from (addition to) assets for
leverage ratio purposes the quarterly average amount
necessary to reverse the effect of this exclusion on the
quarterly average amount of net deferred tax assets
included in Schedule HC-K, item 9.
Transition provisions for holding companies that do not
make an AOCI opt-out election and all advanced
approaches holding companies: Include in this item 38
the amount of deductions from (additions to) assets for
leverage ratio purposes for available-for-sale debt and
equity securities and deferred tax effects as determined
above reduced by the appropriate percentage in Table 1
in Schedule HC-R, item 3(a). For example, in 2015, if the
amount of these deductions (additions) is a $10,000
deduction, include $4,000 in this item 38[$10,000 ($10,000 x 60%) = $4,000].
Line Item 39 Total assets for the leverage ratio.
Report Schedule HC-R, item 36 less items 37 and 38.
Total risk-weighted assets
Line Item 40 (a) Total risk-weighted assets.
Report the amount of total risk-weighted assets using the
general risk-based capital rules (as reported in Schedule
HC-R, Part II, item 62), until January 1, 2015. Starting on
January 1, 2015, report total risk-weighted assets calculated under the standardized approach in the revised
regulatory capital rules.
Advanced approaches holding companies only: in 2014,
adjust the reported amount of the risk-weighted assets by
the amounts deducted from regulatory capital.
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Schedule HC-R
Line Item 40(b)—Advanced approaches holding
companies that exit parallel run only: Total
risk-weighted assets using advanced approaches
rules.
Report the amount from FFIEC 101 Schedule A, item 60.
Capital ratios
Holding companies that are not advanced approaches
holding companies that have exited parallel run must
report Schedule HC-R, items 41 through 44, Column A,
only. Column B does not apply to these institutions.
Advanced approaches holding companies that exit parallel run only: must report Schedule HC-R, items 41
through 44, Columns A and B, as described below.
All advanced approaches holding companies must complete Schedule HC-R, item 45, as described below.
Line Item 41 Common equity tier 1 capital ratio.
Report the institution’s common equity tier 1 risk-based
capital ratio as a percentage, rounded to two decimal
places.
Column A: divide Schedule HC-R, item 19 by item
40(a).
Advanced approaches holding companies that exit parallel run only: Column B: divide Schedule HC-R, item 19
by item 40(b). The lower of the reported capital ratios in
column A and Column B will apply for prompt corrective
action purposes.
Line Item 42 Tier 1 capital ratio.
Column A: divide Schedule HC-R, item 35(a) by item
40(a).
Advanced approaches holding companies that exit parallel run only: Column B: divide Schedule HC-R, item
35(b) by item 40(b). The lower of the reported capital
ratios in column A and Column B will apply for prompt
corrective action purposes.
Line Item 44 Tier 1 leverage ratio.
Report the institution’s tier 1 leverage ratio as a percentage, rounded to two decimal places.
Column A: divide Schedule HC-R, item 26 by item 39.
Advanced approaches holding companies that exit parallel run only: Column B: divide Schedule HC-R, item 26
by item 39. Report zero in Column A.
Line Item 45 Advanced approaches holding
companies only: Supplementary leverage ratio.
Starting on January 1, 2015, report supplementary leverage ratio, as calculated for purposes of the FFIEC 101,
Schedule A, item 98. Advanced approaches holding
companies must complete this item even if they are in the
parallel run process and have additional time to file the
FFIEC 101 report.
Capital buffer
Line Item 46 Institution-specific capital buffer
necessary to avoid limitations on distributions and
discretionary bonus payments.
Report the holding company’s tier 1 risk-based capital
ratio as a percentage, rounded to two decimal places.
Starting on January 1, 2016, report this item as follows.
Column A: divide Schedule HC-R, item 26 by item
40(a).
Line Item 46(a) Capital conservation buffer.
Line Item 43 Total capital ratio.
Capital conservation buffer is equal to the lowest of the
following ratios: (i) Schedule HC-R, item 41, less the
applicable percentage in the column titled ‘‘Common
equity tier 1 capital ratio percentage’’ in Table 10 below;
(ii) Schedule HC-R, item 42, less the applicable percentage in the column titled ‘‘Tier 1 capital ratio percentage’’
in Table 10 below; and (iii) Schedule HC-R, item 43, less
8 percent.
Report the holding company’s total risk-based capital
ratio as a percentage, rounded to two decimal places.
Transition provisions: Common equity tier 1 and tier 1
minimum capital requirements are:
Advanced approaches holding companies that exit parallel run only: Column B: divide Schedule HC-R, item 26
by item 40(b). The lower of the reported capital ratios in
column A and Column B will apply for prompt corrective
action purposes.
HC-R-30
Schedule HC-R
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Schedule HC-R
Table 10—Transition provisions for regulatory capital ratios
Transition Period
Common equity tier 1 capital
ratio percentage
Tier 1 capital ratio
percentage
Calendar year 2014
4.0
5.5
Calendar year 2015
and thereafter
4.5
6.0
Line Item 46(b)—Advanced approaches holding
companies that exit parallel run only.
Report the total applicable capital buffer, as reported in
FFIEC 101, Schedule A, item 64.
Transition provisions for the capital conservation buffer:
In order to avoid limitations on distributions, including
dividend payments, and certain discretionary bonus payments to executive officers, a holding company must hold
a capital conservation buffer above its minimum riskbased capital requirements.
The amount reported in Schedule HC-R, item 46(a) (or
the lower of Schedule HC-R, items 46(a) and 46(b), if an
advanced approaches holding company has exited parallel run) must be greater than the following phased-in
capital conservation buffer. Otherwise, the holding company will face limitations on distributions and certain
discretionary bonus payments and will be required to
complete Schedule HC-R, items 47 and 48.
Table 11—Transition provisions for capital conservation buffer
Transition Period
Capital conservation buffer percentage above which holding
companies avoid limitations on distributions and certain
discretionary bonuses
Calendar year 2016
0.625
Calendar year 2017
1.25
Calendar year 2018
1.875
Calendar year 2019 and
thereafter
2.5
Note: Advanced approaches holding companies, including those that have not exited parallel run, will need to
consult the regulation for the transition period if the
countercyclical buffer is in place or if the institution is
subject to countercyclical buffers in other jurisdictions.
Starting on January 1, 2016, any countercyclical buffer
amount applicable to an advanced approaches holding
company should be added to the amount applicable in
Table 11, in order for that holding company to determine
if it will need to complete Schedule HC-R, items 47 and
48.
FR Y-9C
Schedule HC-R
March 2014
Starting on January 1, 2016, holding companies must
complete items 47 and 48 if the amount in item 46(a)
(or the lower of items 46(a) and 46(b)for an advanced
approaches holding company that has exited parallel
run) is less than or equal to the applicable minimum
capital conservation buffer:
Holding companies must complete Schedule HC-R, items
47 and 48, if the amount reported in Schedule HC-R,
46(a) (or the lower of Schedule HC-R, items 46(a) and
46(b), if an advanced approaches holding company has
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Schedule HC-R
exited parallel run) is less than or equal to the applicable
capital conservation buffer described above in Table 11
of Schedule HC-R, item 46 (plus any other applicable
capital buffers, if the institution is an advanced approaches
holding company).
Line Item 47 Eligible retained income.
Report the amount of eligible retained income as the net
income attributable to the holding company for the four
calendar quarters preceding the current calendar quarter,
based on the holding company’s most recent quarterly
regulatory report or reports, as appropriate, net of any
HC-R-32
distributions and associated tax effects not already
reflected in net income.
For example, the amount of eligible retained income to
be reported in this item 47 for the June 30 report date
would be based on the net income attributable to the
holding company for the four calendar quarters ending on
the preceding March 31.
Line Item 48 Distributions and discretionary
bonus payments during the quarter.
Report the amount of distributions and discretionary
bonus payments during the quarter.
Schedule HC-R
FR Y-9C
March 2014
| File Type | application/pdf |
| File Modified | 2014-03-25 |
| File Created | 2014-03-21 |