(a) Computation of regulatory capital ratios. A System institution‘s regulatory capital ratios are determined on the basis of the financial statements of the institution prepared in accordance with GAAP using average daily balances for the most recent 3 months.

Terms Used In 12 CFR 628.10

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Call Report: means reports of condition and performance, as described in subpart D of part 621 of this chapter. See 12 CFR 628.2
  • GAAP: means generally accepted accounting principles as used in the United States. See 12 CFR 628.2
  • System institution: means a System bank, an association of the Farm Credit System, Farm Credit Leasing Services Corporation, and their successors, and any other institution chartered by the FCA that the FCA determines should be considered a System institution for the purposes of this part. See 12 CFR 628.2
  • Total capital: means the sum of tier 1 capital and tier 2 capital. See 12 CFR 628.2

(b) Minimum capital requirements. A System institution must maintain the following minimum capital ratios:

(1) A common equity tier 1 (CET1) capital ratio of 4.5 percent.

(2) A tier 1 capital ratio of 6 percent.

(3) A total capital ratio of 8 percent.

(4) A tier 1 leverage ratio of 4 percent, of which at least 1.5 percent must be composed of URE and URE equivalents.

(5) [Reserved]

(6) A permanent capital ratio of 7 percent.

(c) Capital ratio calculations. A System institution’s regulatory capital ratios are as follows:

(1) CET1 capital ratio. A System institution’s CET1 capital ratio is the ratio of the System institution’s CET1 capital to total risk-weighted assets;

(2) Tier 1 capital ratio. A System institution’s tier 1 capital ratio is the ratio of the System institution’s tier 1 capital to total risk-weighted assets;

(3) Total capital ratio. A System institution’s total capital ratio is the ratio of the System institution’s total (tier 1 and tier 2) capital to total risk-weighted assets; and

(4) Tier 1 leverage ratio. A System institution’s leverage ratio is the ratio of the institution’s tier 1 capital to the institution’s average total consolidated assets as reported on the institution’s Call Report minus amounts deducted from tier 1 capital under §§628.22(a) and (c) and 628.23.

(5) Permanent capital ratio. A System institution’s permanent capital ratio is the ratio of the institution’s permanent capital to its total risk-adjusted asset base as reported on the institution’s Call Report, calculated in accordance with the regulations in part 615, subpart H, of this chapter.

(d) [Reserved]

(e) Capital adequacy. (1) Notwithstanding the minimum requirements in this part, a System institution must maintain capital commensurate with the level and nature of all risks to which the System institution is exposed. FCA may evaluate a System institution’s capital adequacy and require the institution to maintain higher minimum regulatory capital ratios using the factors listed in §615.5350 of this chapter.

(2) A System institution must have a process for assessing its overall capital adequacy in relation to its risk profile and a comprehensive strategy for maintaining an appropriate level of capital under §615.5200 of this chapter.