(a) Mergers and acquisitions
of companies without advanced systems. If a Board-regulated institution
merges with or acquires a company that does not calculate its risk-based
capital requirements using advanced systems, the Board-regulated institution
may use subpart D of this part to determine the risk-weighted asset
amounts for the merged or acquired company's exposures for up to 24
months after the calendar quarter during which the merger or acquisition
consummates. The Board may extend this transition period for up to
an additional 12 months. Within 90 days of consummating the merger
or acquisition, the Board-regulated institution must submit to the
Board an implementation plan for using its advanced systems for the
acquired company. During the period in which subpart D of this part
applies to the merged or acquired company, any ALLL or AACL, as applicable,
net of allocated transfer risk reserves established pursuant to 12
U.S.C. 3904, associated with the merged or acquired company's exposures
may be included in the acquiring Board-regulated institution's tier
2 capital up to 1.25 percent of the acquired company's risk-weighted
assets. All general allowances of the merged or acquired company must
be excluded from the Board-regulated institution's eligible credit
reserves. In addition, the risk-weighted assets of the merged or acquired
company are not included in the Board-regulated institution's credit-risk-weighted
assets but are included in total risk-weighted assets. If a Board-regulated
institution relies on this paragraph (a), the Board-regulated institution
must disclose publicly the amounts of risk-weighted assets and qualifying
capital calculated under this subpart for the acquiring Board-regulated
institution and under subpart D of this part for the acquired company.
(b) Mergers and acquisitions of companies
with advanced systems.
(1) If a Board-regulated institution merges with or acquires a company
that calculates its risk-based capital requirements using advanced
systems, the Board-regulated institution may use the acquired company's
advanced systems to determine total risk-weighted assets for the merged
or acquired company's exposures for up to 24 months after the calendar
quarter during which the acquisition or merger consummates. The Board
may extend this transition period for up to an additional 12 months.
Within 90 days of consummating the merger or acquisition, the Board-regulated
institution must submit to the Board an implementation plan for using
its advanced systems for the merged or acquired company.
(2) If the acquiring Board-regulated institution
is not subject to the advanced approaches in this subpart at the time
of acquisition or merger, during the period when subpart D of this
part applies to the acquiring Board-regulated institution, the ALLL
or AACL, as applicable, associated with the exposures of the merged
or acquired company may not be directly included in tier 2 capital.
Rather, any excess eligible credit reserves associated with the merged
or acquired company's exposures may be included in the Board-regulated
institution's tier 2 capital up to 0.6 percent of the credit-risk-weighted
assets associated with those exposures.
