US agencies address goodwill deductions from Tier I capital

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WASHINGTON, DC – The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision are proposing to allow banking organisations to reduce the amount of goodwill a banking organisation must deduct from Tier I capital by the amount of any deferred tax liability associated with that goodwill.

The proposed change would reduce the amount of goodwill a banking organisation must deduct from Tier I capital and would reflect its maximum exposure to loss if that goodwill is impaired or derecognised for financial reporting purposes.

Under the proposed rule, the regulatory capital deduction for goodwill would be equal to the maximum capital reduction that could occur as a result of a complete write-off of the goodwill, which is equal to the amount of goodwill reported on the balance sheet under generally accepted accounting principles, less any associated deferred tax liability.

Public comments are requested and are due 30 days after publication of the NPR in the Federal Register.

Click here for a copy of the NPR.