The Federal Deposit Insurance Corp. voted Tuesday to make it easier for banks to meet Tier 2 capital requirements.
The FDIC was the last of the four banking and thrift agencies to adopt the rule, which will allow 45% of unrealized equity investment gains to count toward Tier 2 risk-based capital.
More than 630 banks had unrealized gains as of March and could be affected by the change, according to Steve G. Pfeifer, an FDIC examination specialist. But only 12 had gains that totaled at least 25% of their risk- based capital. The FDIC declined to name the 12 banks. Only a few thrifts are expected to benefit.
The rule takes effect Oct. 1, but banks may opt-in once the final regulation is published in the Federal Register this month.
The rule mirrors a provision in the 1988 Basel Accord, which serves as the basis for international capital standards. U.S. regulators, however, decided at the time not to implement the provision.
Also Tuesday, FDIC board member and Office of Thrift Supervision Director Ellen S. Seidman questioned the logic of second-quarter investments made for the insurance funds.
Ms. Seidman asked why the weighted average maturity of U.S. Treasury securities purchased during the quarter was 5.1 years for the bank fund and 5.9 years for the thrift fund, given the flatness of the yield curve.
Brett D. Edwards, the FDIC's chief of funding and investments, responded that the agency was "hedging our bets" that rates might trend downward over the long term. -Scott Barancik