Led by the Federal Reserve Board on June 7, 2012, the three federal banking agencies are proposing a broad and comprehensive revision of the regulatory capital rules applicable to all U.S. national banks, state member and nonmember banks, state and federal savings associations, all U.S. bank holding companies except those with less than $500 million in total consolidated assets, and all U.S. savings and loan holding companies (regardless of size or whether they are primarily insurance holding companies) (collectively, “U.S. Banking Organizations”). The new rules represent the most complete overhaul of U.S. bank capital standards since the adoption of Basel I in 1989. Once they are fully implemented, the new rules will in fact completely replace the agencies’ existing Basel I-based capital requirements (“general capital rules”) and, compared to Basel I, will generally require U.S. Banking Organizations to hold higher amounts of capital, especially common equity, against their risk-weighted assets. Please refer to the diagram in Appendix A for a graphic representation of these new capital requirements. Please see Table 1 below for details regarding the scope of application of the new rules. The new rules are intended to implement the Basel III capital standards, although there are some differences in timing and scope of implementation, as well as revisions to the rules for calculating capital charges for market risk (commonly known as “Basel 2.5”).

They are also intended to comply with the Dodd-Frank Act’s requirements that all insured depository institutions (“IDIs”) and their holding companies be subject to the same generally applicable risk-based capital and leverage rules (Section 171, commonly referred to as the “Collins Amendment”) and that all references to external credit ratings be removed from federal agencies’ regulations and replaced with new standards of creditworthiness (“Section 939A”). The effectiveness of the new rules will be phased in according to different start dates, ranging from January 1, 2013 to January 1, 2018, and different phase-in periods, ranging from two years to nine years. Not until January 1, 2022 will the new rules be fully implemented for all U.S. Banking Organizations. Please refer to the timeline in Appendix B for details regarding transitional arrangements and effective dates.