Regulatory Capital: Common Stockholders' Equity

The Office of Thrift Supervision (OTS), consistent with the other Federal banking agencies (collectively, the Agencies), is amending its capital rule to conform its definition of ``common stockholders' equity'' with the terminology used in referring to available-for-sale equity securities in Statement of Financial Accounting Standard No. 115, ``Accounting for Certain Investments in Debt and Equity Securities'' (SFAS No. 115). Specifically, this rule substitutes the term ``available-for-sale equity securities with readily determinable fair values'' used in SFAS No. 115 for the current reference to ``marketable equity securities'' in the OTS definition of ``common stockholders' equity.'' The OTS has decided not to adopt other provisions of its June 1994 proposal that would include net unrealized gains and losses on all available-for-sale debt and equity securities in regulatory capital. The OTS and the other Agencies had initially issued proposed rules to change institutions' regulatory capital computations to be consistent with generally accepted accounting principles (GAAP), as amended by SFAS No. 115. Although the Agencies' regulatory capital rules will not conform with SFAS No. 115, institutions will continue to be required to comply with SFAS No. 115 for regulatory reporting purposes, as required by statute. The Agencies decided not to change their regulatory capital standards to conform with SFAS No. 115 after extensive interagency discussion and consideration of comments received, most of which opposed the Agencies' proposals. Those comments included concerns about capital volatility if institutions were required to compute regulatory capital in accordance with SFAS No. 115, which would also have a prompt corrective action effect. As a result of not amending the Agencies' capital rules to incorporate SFAS No. 115, available-for-sale debt securities will continue to be valued at amortized cost in computing regulatory capital. (This differs from their valuation a