(1) Composition
of the capital conservation buffer. The capital conservation
buffer is composed solely of building block available capital excluding
tier 2 capital instruments and additional tier 1 capital instruments.
(2) Definitions. For purposes of this section,
the following definitions apply:
(i) Distribution means:
(A) A reduction of tier 1 capital through the repurchase of a tier
1 capital instrument or by other means, except when a Board-regulated
institution, within the same quarter when the repurchase is announced,
fully replaces a tier 1 capital instrument it has repurchased by issuing
another capital instrument that meets the eligibility criteria for:
(1) A common equity tier 1 capital
instrument if the instrument being repurchased was part of the Board-regulated
institution’s common equity tier 1 capital; or
(2) A common equity tier 1 or additional
tier 1 capital instrument if the instrument being repurchased was
part of the Board-regulated institution’s tier 1 capital;
(B) A reduction of tier
2 capital through the repurchase, or redemption prior to maturity,
of a tier 2 capital instrument or by other means, except when a Board-regulated
institution, within the same quarter when the repurchase or redemption
is announced, fully replaces a tier 2 capital instrument it has repurchased
by issuing another capital instrument that meets the eligibility criteria
for a tier 1 or tier 2 capital instrument;
(C) A dividend declaration or payment on any
tier 1 capital instrument;
(D) A dividend declaration or interest payment on any tier 2 capital
instrument if the Board-regulated institution has full discretion
to permanently or temporarily suspend such payments without triggering
an event of default;
(E)
A discretionary dividend payment on participating insurance policies;
or
(F) Any similar transaction
that the Board determines to be in substance a distribution of capital.
(ii) Eligible retained income means, for a depository institution
holding company in a supervised insurance organization, the annual
change in the company’s building block available capital, calculated
as of the last day of the current and immediately preceding calendar
years based on the supervised insurance organization’s most recent
form FR Q-1, net of any distributions and accretion to building block
available capital from capital instruments issued in the current or
immediately preceding calendar year, excluding issuances corresponding
with retirement of capital instruments under paragraph (a)(2)(i)(A)
of this section.
(iii) Maximum payout amount means, for the current calendar
year, is equal to the Board-regulated institution’s eligible retained
income, multiplied by its maximum payout ratio.
(iv) Maximum payout ratio means
the percentage of eligible retained income that a Board-regulated
institution can pay out in the form of distributions and discretionary
bonus payments during the current calendar year. The maximum payout
ratio is determined by the Board-regulated institution’s capital conservation
buffer, calculated as of the last day of the previous calendar year,
as set forth in table 1 to this section.
(3) Calculation
of capital conservation buffer. The capital conservation buffer
for a depository institution holding company in a supervised insurance
organization is the greater of its BBA ratio, calculated as of the
last day of the previous calendar year based on the supervised insurance
organization’s most recent form FR Q-1, minus the minimum capital
requirement under section 217.603(c), and zero.
(4) Limits on
distributions and discretionary bonus payments.
(i) A top-tier
depository institution holding company in a supervised insurance organization
shall not make distributions or discretionary bonus payments or create
an obligation to make such distributions or payments during the current
calendar year that, in the aggregate, exceed its maximum payout amount.
(ii) A top-tier depository
institution holding company in a supervised insurance organization
and that has a capital conservation buffer that is greater than 150
percent is not subject to a maximum payout amount under this section.
(iii) Except as provided
in paragraph (a)(4)(iv) of this section, a top-tier depository institution
holding company in a supervised insurance organization may not make
distributions or discretionary bonus payments during the current calendar
year if the Board-regulated institution’s:
(A) Eligible retained income
is negative; and
(B) Capital
conservation buffer was less than 150 percent as of the end of the
previous calendar year.
(iv) Notwithstanding the limitations
in paragraphs (a)(4)(i) through (iii) of this section, the Board may
permit a top-tier depository institution holding company in a supervised
insurance organization to make a distribution or discretionary bonus
payment upon a request of the depository institution holding company,
if the Board determines that the distribution or discretionary bonus
payment would not be contrary to the purposes of this section, or
to the safety and soundness of the depository institution holding
company. In making such a determination, the Board will consider the
nature and extent of the request and the particular circumstances
giving rise to the request.
