In this in-depth report, we begin our analysis of the 1089-page capital proposal released by the U.S. banking agencies not only to make U.S. standards more consistent with Basel’s 2017  “end-game” rules, but also to correct failings in the current capital framework the agencies believed were laid bare by recent bank failures. The new standards rewrite the 2019 “tailoring” rule with regard to application of the toughest capital standards, now covering all BHCs with assets over $100 billion along with their insured depository institutions (IDIs) regardless of size. For smaller BHCs, the most significant impact of the new approach requires recognition of accumulated other comprehensive income (AOCI) unrealized gains and losses related to available-for-sale (AFS) and held-to-maturity (HTM) securities; the agencies recognize this cost but believe the proposed three-year transition reduces any adverse impact.

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