On July 2nd, the Federal Reserve Board adopted the Basel III capital requirements for banks. The new final rules establish an integrated regulatory capital framework that addresses shortcomings in capital requirements, particularly for larger, internationally active banking organizations. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistent with the Basel framework, the rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent for all banking organizations. In addition, for the largest, most internationally active banking organizations, the final rule includes a new minimum supplementary leverage ratio that takes into account off-balance sheet exposures. On the quality of capital side, the final rule emphasizes common equity tier 1 capital and implements strict eligibility criteria for regulatory capital instruments. The final rule also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. For community banks, the changes from current regulations target a few areas that are higher risk, but are otherwise minimal. See Community Bank Guide. See also Federal Reserve Board Press Release. On July 9th, the FDIC and OCC also approved the Basel III capital requirements. See FDIC Press Release; OCC Press Release.