(a) Covered IHC total loss-absorbing capacity requirement for a resolution
covered IHC. A resolution covered IHC must have an outstanding
covered IHC total loss-absorbing capacity amount that is no less than
the amount equal to the greatest of:
(1) 18 percent of the resolution covered
IHC’s total risk-weighted assets;
(2) If the Board requires the resolution
covered IHC to maintain a minimum supplementary leverage ratio, 6.75
percent of the resolution covered IHC’s total leverage exposure;
and
(3) Nine (9) percent
of the resolution covered IHC’s average total consolidated assets.
(b) Covered
IHC total loss-absorbing capacity requirement for a nonresolution
covered IHC. A nonresolution covered IHC must have an outstanding
covered IHC total loss-absorbing capacity amount that is no less than
the amount equal to the greatest of:
(1) 16 percent of the non-resolution covered
IHC’s total risk-weighted assets;
(2) If the Board requires the nonresolution
covered IHC to maintain a minimum supplementary leverage ratio, 6
percent of the non-resolution covered IHC’s total leverage exposure;
and
(3) Eight (8) percent
of the nonresolution covered IHC’s average total consolidated
assets.
(c) Covered IHC total loss-absorbing capacity amount.
(1) A non-resolution covered IHC’s
covered IHC total loss-absorbing capacity amount is equal to the sum
of:
(i) The covered IHC’s common equity
tier 1 capital (excluding any common equity tier 1 minority interest)
held by a company that is incorporated or organized outside of the
United States and that directly or indirectly controls the covered
IHC;
(ii) The covered
IHC’s additional tier 1 capital (excluding any tier 1 minority
interest) held by a company that is incorporated or organized outside
of the United States and that directly or indirectly controls the
covered IHC; and
(iii) The covered IHC’s outstanding eligible covered IHC long-term
debt amount, plus 50 percent of the amount of unpaid principal of
outstanding eligible covered IHC debt securities issued by the covered
IHC due to be paid in greater than or equal to 365 days (one year)
but less than 730 days (two years).
(2) A resolution covered IHC’s
covered IHC total loss-absorbing capacity amount is equal to the sum
of:
(i) The covered IHC’s common equity
tier 1 capital (excluding any common equity tier 1 minority interest);
(ii) The covered IHC’s
additional tier 1 capital (excluding any tier 1 minority interest);
and
(iii) The covered
IHC’s outstanding eligible covered IHC long-term debt amount,
plus 50 percent of the amount of unpaid principal of outstanding eligible
covered IHC debt securities issued by the covered IHC due to be paid
in greater than or equal to 365 days (one year) but less than 730
days (two years).
(d) Covered IHC TLAC buffer.
(1) Composition
of the covered IHC TLAC buffer. The covered IHC TLAC buffer is
composed solely of common equity tier 1 capital.
(2) Definitions. For purposes of this paragraph, the following definitions apply:
(i) Eligible retained income. The
eligible retained income of a covered IHC is the greater of:
(A) The covered
IHC’s net income, calculated in accordance with the instructions
to the FR Y-9C, for the four calendar quarters preceding the current
calendar quarter, net of any distributions and associated tax effects
not already reflected in net income; and
(B) The average of the covered IHC’s
net income, calculated in accordance with the instructions to the
FR Y-9C, for the four calendar quarters preceding the current calendar
quarter.
(ii) Maximum
covered IHC TLAC payout ratio. The maximum covered IHC TLAC payout
ratio is the percentage of eligible retained income that a covered
IHC can pay out in the form of distributions and discretionary bonus
payments during the current calendar quarter. The maximum covered
IHC TLAC payout ratio is based on the covered IHC’s covered
IHC TLAC buffer level, calculated as of the last day of the previous
calendar quarter, as set forth in Table 1 to section 252.165.
(iii) Maximum covered IHC TLAC payout amount. A covered IHC’s maximum covered IHC TLAC payout amount for
the current calendar quarter is equal to the covered IHC’s eligible
retained income, multiplied by the applicable maximum covered IHC
TLAC payout ratio, as set forth in Table 1 to section 252.165.
(3) Calculation of the covered IHC TLAC buffer level.
(i) A covered IHC’s covered IHC
TLAC buffer level is equal to the covered IHC’s common equity
tier 1 capital ratio (expressed as a percentage) minus the
greater of zero and the following amount:
(A) 16 percent for a non-resolution
covered IHC, and 18 percent for a resolution covered IHC; minus
(B) (1) For
a non-resolution covered IHC, the ratio (expressed as a percentage)
of the covered IHC’s additional tier 1 capital (excluding any
tier 1 minority interest) held by a company that is incorporated or
organized outside of the United States and that directly or indirectly
controls the covered IHC to the covered IHC’s total risk-weighted
assets;
(2) For
a resolution covered IHC, the ratio (expressed as a percentage of
the covered IHC’s additional tier 1 capital (excluding any tier
1 minority interest) to the covered IHC’s total-risk weighted
assets; and minus
(C) The ratio (expressed as a percentage)
of the Covered IHC’s outstanding eligible Covered IHC long-term
debt amount plus 50 percent of the amount of unpaid principal of outstanding
eligible Covered IHC debt securities issued by the Covered IHC due
to be paid in, as calculated in section 252.162(b)(2), greater than
or equal to 365 days (one year) but less than 730 days (two years)
to total risk-weighted assets.
(ii) (A)
Notwithstanding paragraph (d)(3)(i) of this section, with respect
to a resolution covered IHC, if the ratio (expressed as a percentage)
of the resolution covered IHC’s covered IHC total loss-absorbing
capacity amount, as calculated under section 252.165(a), to
the resolution covered IHC’s risk-weighted assets is less than
or equal to, 18 percent, the covered IHC’s covered IHC TLAC
buffer level is zero.
(B) Notwithstanding paragraph (d)(3)(i) of this section, with respect
to a non-resolution covered IHC, if the ratio (expressed as a percentage)
of the non-resolution covered IHC’s covered IHC total loss-absorbing
capacity amount, as calculated under section 252.165(b), to the covered
IHC’s risk-weighted assets is less than or equal to 16 percent,
the non-resolution covered IHC’s covered IHC TLAC buffer level
is zero.
(4) Limits on
distributions and discretionary bonus payments.
(i) A covered
IHC shall not make distributions or discretionary bonus payments or
create an obligation to make such distributions or payments during
the current calendar quarter that, in the aggregate, exceed the maximum
covered IHC TLAC payout amount.
(ii) A covered IHC with a covered IHC
TLAC buffer level that is greater than the covered IHC TLAC buffer
is not subject to a maximum covered IHC TLAC payout amount.
(iii) Except as provided
in paragraph (d)(4)(iv) of this section, a covered IHC may not make
distributions or discretionary bonus payments during the current calendar
quarter if the covered IHC’s:
(A) Eligible retained income
is negative; and
(B) Covered
IHC TLAC buffer level was less than the covered IHC TLAC buffer as
of the end of the previous calendar quarter.
(iv) Notwithstanding the
limitations in paragraphs (d)(4)(i) through (iii) of this section,
the Board may permit a covered IHC to make a distribution or discretionary
bonus payment upon a request of the covered IHC, 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 covered IHC. 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.
(v) (A) A covered IHC is subject
to the lowest of the maximum payout amounts as determined under 12
CFR 217.11(a)(2) and the maximum covered IHC TLAC payout amount as
determined under this paragraph.
(B) Additional limitations on distributions
may apply to a covered IHC under 12 CFR 225.4, 225.8, and 263.202.
Table 1 to section 252.165—Calculation of maximum covered IHC
TLAC payout amount
Table 1 to section
252.165—Calculation of maximum covered IHC TLAC payout amount
| Covered IHC TLAC
buffer level |
Maximum covered IHC TLAC payout ratio (as
a percentage of eligible retained income) |
| Greater
than the covered IHC TLAC buffer |
No payout ratio limitation applies |
| Less
than or equal to the covered IHC TLAC buffer, and greater than
75 percent of the covered IHC TLAC buffer |
60 percent |
| Less than
or equal to 75 percent of the covered IHC TLAC buffer, and greater
than 50 percent of the covered IHC TLAC buffer |
40 percent |
| Less than
or equal to 50 percent of the covered IHC TLAC buffer, and greater
than 25 percent of the covered IHC TLAC buffer |
20 percent |
| Less than or equal to 25 percent of the
covered IHC TLAC buffer |
0
percent |
