capital/ consumer affairs /DeNovo /earnings Flashcards
Tier 2 Capital
Tier 2 = supplementary Capital + ALLL (subject to limitation of 1.25% of RWA) + perpetual preferred stock + unrealized gains on AFS equity securities + other tier 2 capital components
Tier 1 Capital
common stock + surplus + retained earnings + AOCI +Other equity capital (treasury stk and employee stock ownership plan shares) + minority interest in consolidated subsidiaries - Net unrealized gains/losses on AFS securities - Net unrealized loss on AFS EQUITY securities - Cumulative perpetual preferred stk + noncontrolling minority interest in consol subs - disallowed goodwill, servicing assets and deferred tax assets + disallowed credit enhancing interest only strips
Tier 1 Risk-Based Capital Ratio
Tier 1 Capital / Risk Weighted Assets Min Amount is 4%
Total Risk-Based Capital Ratio
Total Capital / Risk Weighted Assets Min Amount is 8%
Tier 1 Leverage Ratio
Tier 1 Capital / Average Total Assets Min Amount is 3%
Capital Restoration
if capital falls to undercapitalized level, bank must submit written capital restoration plans with the FRB within 45 days of the date the bank receives notice of being undercaptialized.
3 Primary consideration in evaluating the Capital rating
- asset quality 2. earning 3. growth prospects
Risk based capital measures what kind of risk?
Credit Risk - off balance sheet
How can management increase capital levels?
Invest in assets that carry a lower risk weight
Capital purpose
- absorb losses after earnings 2. promote public confidence 3. give mgmt ability to adjust to changing environment 4. provide measure of protection for the FDIC insurance fund
Leverage Ratio
Readily available to absorb losses. Does not take into account the risk profile
Risk-Based Capital
addresses the credit risk in different assets and takes into account off-balance sheet items
Section 5199 - Dividend Restrictions
Cannot declare until: surplus fund is equal to common captial, at least 10% of NI of preceding half year or year carried into surplus.
Section 208.5 of Reg H - Dividends and Other distributions
May not declare: if total of all dividends declared and proposed exceeds NI for the current calender year and retained NI of prior two years; if dividends exceed undivided profits, unless approved by BOG and 2/3 shareholders May not permit any portion of permenant capital to be withdrawn, unless approved by board and 2/3 of shareholders
Tier 3 Capital
Applies to only banks subject to market risk capital guidelines
What to look at in Asset Growth Rate?
Look @ change in risk weighted assets
Risk-weight Asset Categories
0%: Cash, Due From Federal Reserve, Gov’t and Agency Securities, Fed Stock 20%: Cash in process of collection, Due from banks, General obligations, Gov’t sponsored agency securities 50%: Loans secured by 1-4 Residential property, Revenue Bonds 100%: Industrial bonds, ORE, Fixed assets, All other loans, all stripped MBS, and corporate stock
Components of Compliance Risk Mgmt Rating
- Board/Sr Mgmt Oversight 2. Consumer Compliance Program Structure 3. Policies and Procedures 4. Compliance Audits/Reviews 5. Internal Controls 6. Training RATING SCALE is 1 to 5
Components of Consumer Affairs Supervision
- Risk-focused compliance exam (compliance risk profile / compliance risk mgmt rating/risk-focused exams . Monitoring . Outreach) 2. Fair Lending Exam (compliance ratings from 1 to 5) 3. CRA exam (rating outstanding to non-compliance)
Key characteristic used in evaluating products on a CA exam
product materiality
Only rating mandated by law
CRA (rating is not numerical, as are others)
