(a) Adequately capitalized correspondents.1 For the purpose of this part, a correspondent is considered adequately capitalized if the correspondent has:
1As used in this part, the term “adequately capitalized” is similar but not identical to the definition of that term as used for the purposes of the prompt corrective action standards. See, e.g. 12 CFR part 208, subpart D.
(1) A total risk-based capital ratio, as defined in paragraph (e)(1) of this section, of 8.0 percent or greater;
(2) A Tier 1 risk-based capital ratio, as defined in paragraph (e)(2) of this section, of 4.0 percent or greater; and
(3) A leverage ratio, as defined in paragraph (e)(3) of this section, of 4.0 percent or greater.
(4) Notwithstanding paragraphs (a)(1) through (3) of this section, a qualifying community banking organization (as defined in §217.12 of this chapter) that is subject to the community bank leverage ratio (as defined in §217.12 of this chapter) is considered to have met the minimum capital requirements in this paragraph (a).
(b) Frequency of monitoring capital levels. A bank shall obtain information to demonstrate that a correspondent is at least adequately capitalized on a quarterly basis, either from the most recently available Report of Condition and Income, Thrift Financial Report, financial statement, or bank rating report for the correspondent. For a foreign bank correspondent for which quarterly financial statements or reports are not available, a bank shall obtain such information on as frequent a basis as such information is available. Information obtained directly from a correspondent for the purpose of this section should be based on the most recently available Report of Condition and Income, Thrift Financial Report, or financial statement of the correspondent.
(c) Foreign banks. A correspondent that is a foreign bank may be considered adequately capitalized under this section without regard to the minimum leverage ratio required under paragraph (a)(3) of this section.
(d) Reliance on information. A bank may rely on information as to the capital levels of a correspondent obtained from the correspondent, a bank rating agency, or other party that it reasonably believes to be accurate.
(e) Definitions. For the purposes of this section:
(1) Total risk-based capital ratio means the ratio of qualifying total capital to weighted risk assets.
(2) Tier 1 risk-based capital ratio means the ratio of Tier 1 capital to weighted risk assets.
(3) Leverage ratio means the ratio of Tier 1 capital to average total consolidated assets, as calculated in accordance with the capital adequacy guidelines of the correspondent's primary federal supervisor.
(f) Calculation of capital ratios.
(1) For a correspondent that is a U.S. depository institution, the ratios shall be calculated in accordance with the capital adequacy guidelines of the correspondent's primary federal supervisor.
(2) For a correspondent that is a foreign bank organized in a country that has adopted the risk-based framework of the Basel Capital Accord, the ratios shall be calculated in accordance with the capital adequacy guidelines of the appropriate supervisory authority of the country in which the correspondent is chartered.
(3) For a correspondent that is a foreign bank organized in a country that has not adopted the risk-based framework of the Basel Capital Accord, the ratios shall be calculated in accordance with the provisions of the Basel Capital Accord.
[Reg. F, 57 FR 60106, Dec. 18, 1992, as amended at 68 FR 53283, Sept. 10, 2003; 84 FR 61796, Nov. 13, 2019]
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