Federal reserve rule regarding capital treatment of trust preferred securities

The Federal Reserve Board has adopted a rule that would continue to permit trust preferred securities, which are cumulative, to be treated as Tier 1 capital, subject however to stricter quantitative limits than under current Fed policy. Under the final rule, trust preferred securities will be includable in the Tier 1 capital of bank holding companies, but subject to tightened quantitative limits for trust preferred securities and a broader range of Tier 1 capital components defined as restricted core capital elements. There will be a 15 percent limit, which excludes mandatory convertible preferred securities, applicable to internationally active BHCs and certain others, and a new 25% limit, which counts mandatory convertible preferred securities.