12 CFR 6.4 - Capital measures and capital category definition.

§ 6.4 Capital measures and capital category definition. Link to an amendment published at 79 FR 24539, May 1, 2014.
(a) Capital measures
(1) Capital measures applicable before January 1, 2015. On or before December 31, 2014, for purposes of section 38 and this part, the relevant capital measures for all national banks and Federal savings associations are:
(i) Total Risk-Based Capital Measure: the total risk-based capital ratio;
(ii) Tier 1 Risk-Based Capital Measure: the tier 1 risk-based capital ratio; and
(iii) Leverage Measure: the leverage ratio.
(2) Capital measures applicable on and after January 1, 2015. On January 1, 2015 and thereafter, for purposes of section 38 and this part, the relevant capital measures are:
(i) Total Risk-Based Capital Measure: the total risk-based capital ratio;
(ii) Tier 1 Risk-Based Capital Measure: the tier 1 risk-based capital ratio;
(iii) Common Equity Tier 1 Capital Measure: the common equity tier 1 risk-based capital ratio; and
(iv) The Leverage Measure:
(A) The leverage ratio; and
(B) With respect to an advanced approaches national bank or advanced approaches Federal savings association, on January 1, 2018, and thereafter, the supplementary leverage ratio.
(b) Capital categories applicable before January 1, 2015. On or before December 31, 2014, for purposes of the provisions of section 38 and this part, a national bank or Federal savings association shall be deemed to be:
(1) Well capitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of 10.0 percent or greater;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of 6.0 percent or greater;
(iii) Leverage Ratio: the national bank or Federal savings association has a leverage ratio of 5.0 percent or greater; and
(iv) The national bank or Federal savings association is not subject toany written agreement, order or capital directive, or prompt corrective action directive issued by the OCC or the former OTS pursuant to section 8 of the FDI Act, the International Lending Supervision Act of 1983 (12 U.S.C. 3907), the Home Owners' Loan Act (12 U.S.C. 1464(t)(6)(A)(ii)), or section 38 of the FDI Act, or any regulation thereunder, to meet and maintain a specific capital level for any capital measure.
(2) Adequately capitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of 8.0 percent or greater;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of 4.0 percent or greater;
(iii) Leverage Ratio:
(A) The national bank or Federal savings association has a leverage ratio of 4.0 percent or greater; or
(B) The national bank or Federal savings association has a leverage ratio of 3.0 percent or greater if the national bank or Federal savings association is rated composite 1 under the CAMELS rating system in the most recent examination of the national bank and or Federal savings association; and
(iv) Does not meet the definition of a “well capitalized” national bank or Federal savings association.
(3) Undercapitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of less than 8.0 percent; or
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of less than 4.0 percent; or
(iii) Leverage Ratio:
(A) Except as provided in paragraph (b)(2)(iii)(B) of this section, the national bank or Federal savings association has a leverage ratio of less than 4.0 percent; or
(B) The national bank or Federal savings association has a leverage ratio of less than 3.0 percent, if the national bank or Federal savings association is rated composite 1 under the CAMELS rating system in the most recent examination of the national bank or Federal savings association.
(4) Significantly undercapitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of less than 6.0 percent; or
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of less than 3.0 percent; or
(iii) Leverage Ratio: the national bank or Federal savings association has a leverage ratio of less than 3.0 percent.
(5) Critically undercapitalized if the national bank or Federal savings association has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.
(c) Capital categories applicable on and after January 1, 2015. On January 1, 2015, and thereafter, for purposes of the provisions of section 38 and this part, a national bank or Federal savings association shall be deemed to be:
(1) Well capitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of 10.0 percent or greater;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of 8.0 percent or greater;
(iii) Common Equity Tier 1 Capital Measure: the national bank or Federal savings association has a common equity tier 1 risk-based capital ratio of 6.5 percent or greater;
(iv) Leverage Ratio: the national bank or Federal savings association has a leverage ratio of 5.0 or greater; and
(v) The national bank or Federal savings association is not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by the OCC pursuant tosection 8 of the FDI Act, the International Lending Supervision Act of 1983 (12 U.S.C. 3907), the Home Owners' Loan Act (12 U.S.C. 1464(t)(6)(A)(ii)), or section 38 of the FDI Act, or any regulation thereunder, to meet and maintain a specific capital level for any capital measure.
(2) Adequately capitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of 8.0 percent or greater;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of 6.0 percent or greater;
(iii) Common Equity Tier 1 Capital Measure: the national bank or Federal savings association has a common equity tier 1 risk-based capital ratio of 4.5 percent or greater;
(iv) Leverage Measure:
(A) The national bank or Federal savings association has a leverage ratio of 4.0 percent or greater; and
(B) With respect to an advanced approaches national bank or advanced approaches Federal savings association, on January 1, 2018 and thereafter, the national bank or Federal savings association has an supplementary leverage ratio of 3.0 percent or greater; and
(v) The national bank or Federal savings association does not meet the definition of a “well capitalized” national bank or Federal savings association.
(3) Undercapitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of less than 8.0 percent;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of less than 6.0 percent;
(iii) Common Equity Tier 1 Capital Measure: the national bank or Federal savings association has a common equity tier 1 risk-based capital ratio of less than 4.5 percent; or
(iv) Leverage Measure:
(A) The national bank or Federal savings association has a leverage ratio of less than 4.0 percent; or
(B) With respect to an advanced approaches national bank or advanced approaches Federal savings association, on January 1, 2018, and thereafter, the national bank or Federal savings association has a supplementary leverage ratio of less than 3.0 percent.
(4) Significantly undercapitalized if:
(i) Total Risk-Based Capital Measure: the national bank or Federal savings association has a total risk-based capital ratio of less than 6.0 percent;
(ii) Tier 1 Risk-Based Capital Measure: the national bank or Federal savings association has a tier 1 risk-based capital ratio of less than 4.0 percent;
(iii) Common Equity Tier 1 Capital Measure: the national bank or Federal savings association has a common equity tier 1 risk-based capital ratio of less than 3.0 percent; or
(iv) Leverage Ratio: the national bank or Federal savings association has a leverage ratio of less than 3.0 percent.
(5) Critically undercapitalized if the national bank or Federal savings association has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.
(d) Capital categories for insured Federal branches. For purposes of the provisions of section 38 of the FDI Act and this part, an insured Federal branch shall be deemed to be:
(1) Well capitalized if the insured Federal branch:
(i) Maintains the pledge of assets required under12 CFR 347.209; and
(ii) Maintains the eligible assets prescribed under12 CFR 347.210 at 108 percent or more of the preceding quarter's average book value of the insured branch's third-party liabilities; and
(iii) Has not received written notification from:
(A) The OCC to increase its capital equivalency deposit pursuant to§ 28.15 of this chapter, or to comply with asset maintenance requirements pursuant to § 28.20 of this chapter; or
(B) The FDIC to pledge additional assets pursuant to12 CFR 347.209 or to maintain a higher ratio of eligible assets pursuant to 12 CFR 347.210.
(2) Adequately capitalized if the insured Federal branch:
(i) Maintains the pledge of assets prescribed under12 CFR 347.209;
(ii) Maintains the eligible assets prescribed under12 CFR 347.210 at 106 percent or more of the preceding quarter's average book value of the insured branch's third-party liabilities; and
(iii) Does not meet the definition of a well capitalized insured Federal branch.
(3) Undercapitalized if the insured Federal branch:
(i) Fails to maintain the pledge of assets required under12 CFR 347.209; or
(ii) Fails to maintain the eligible assets prescribed under12 CFR 347.210 at 106 percent or more of the preceding quarter's average book value of the insured branch's third-party liabilities.
(4) Significantly undercapitalized if it fails to maintain the eligible assets prescribed under 12 CFR 347.210 at 104 percent or more of the preceding quarter's average book value of the insured Federal branch's third-party liabilities.
(5) Critically undercapitalized if it fails to maintain the eligible assets prescribed under 12 CFR 347.210 at 102 percent or more of the preceding quarter's average book value of the insured Federal branch's third-party liabilities.
(e) Reclassification based on supervisory criteria other than capital. The OCC may reclassify a well capitalized national bank or Federal savings association as adequately capitalized and may require an adequately capitalized or an undercapitalized national bank or Federal savings association to comply with certain mandatory or discretionary supervisory actions as if the national bank or Federal savings association were in the next lower capital category (except that the OCC may not reclassify a significantly undercapitalized national bank or Federal savings association as critically undercapitalized) (each of these actions are hereinafter referred to generally as reclassifications) in the following circumstances:
(1) Unsafe or unsound condition. The OCC has determined, after notice and opportunity for hearing pursuant to subpart M of part 19 of this chapter with respect to national banks and § 165.8 of this chapter with respect to Federal savings associations, that the national bank or Federal savings association is in unsafe or unsound condition; or
(2) Unsafe or unsound practice. The OCC has determined, after notice and opportunity for hearing pursuant to subpart M of part 19 of this chapter with respect to national banks and § 165.8 of this chapter with respect to Federal savings associations, that in the most recent examination of the national bank or Federal savings association, the national bank or Federal savings association received, and has not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings, or liquidity.
Effective Date Note:
At 79 FR 24539, May 1, 2014, § 6.4 was amended by revising paragraph (c)(1)(iv), effective Jan. 1, 2018. For the convenience of the user, the revised text is set forth as follows:
§ 6.4 Capital measures and capital category definition.
(c) * * *
(1) * * *
(iv) Leverage Measure:
(A) The national bank or Federal savings association has a leverage ratio of 5.0 percent or greater; and
(B) With respect to a national bank or Federal savings association that is a subsidiary of a U.S. top-tier bank holding company that has more than $700 billion in total assets as reported on the company's most recent Consolidated Financial Statement for Bank Holding Companies (FR Y-9C) or more than $10 trillion in assets under custody as reported on the company's most recent Banking Organization Systemic Risk Report (Y-15), on January 1, 2018 and thereafter, the national bank or Federal savings association has a supplementary leverage ratio of 6.0 percent or greater; and

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