Mergers and acquisitions of companies without advanced systems. If a Board-regulated institution merges with or acquires a company that does not calculate its risk-based capital requirements using advanced systems, the Board-regulated institution may use subpart D of this part to determine the risk-weighted asset amounts for the merged or acquired company's exposures for up to 24 months after the calendar quarter during which the merger or acquisition consummates. The Board may extend this transition period for up to an additional 12 months. Within 90 days of consummating the merger or acquisition, the Board-regulated institution must submit to the Board an implementation plan for using its advanced systems for the acquired company. During the period in which subpart D of this part applies to the merged or acquired company, any ALLL, net of allocated transfer risk reserves established pursuant to 12 U.S.C. 3904, associated with the merged or acquired company's exposures may be included in the acquiring Board-regulated institution's tier 2 capital up to 1.25 percent of the acquired company's risk-weighted assets. All general allowances of the merged or acquired company must be excluded from the Board-regulated institution's eligible credit reserves. In addition, the risk-weighted assets of the merged or acquired company are not included in the Board-regulated institution's credit-risk-weighted assets but are included in total risk-weighted assets. If a Board-regulated institution relies on this paragraph (a), the Board-regulated institution must disclose publicly the amounts of risk-weighted assets and qualifying capital calculated under this subpart for the acquiring Board-regulated institution and under subpart D of this part for the acquired company.

Mergers and acquisitions of companies with advanced systems. (1) If a Board-regulated institution merges with or acquires a company that calculates its risk-based capital requirements using advanced systems, the Board-regulated institution may use the acquired company's advanced systems to determine total risk-weighted assets for the merged or acquired company's exposures for up to 24 months after the calendar quarter during which the acquisition or merger consummates. The Board may extend this transition period for up to an additional 12 months. Within 90 days of consummating the merger or acquisition, the Board-regulated institution must submit to the Board an implementation plan for using its advanced systems for the merged or acquired company.

If the acquiring Board-regulated institution is not subject to the advanced approaches in this subpart at the time of acquisition or merger, during the period when subpart D of this part applies to the acquiring Board-regulated institution, the ALLL associated with the exposures of the merged or acquired company may not be directly included in tier 2 capital. Rather, any excess eligible credit reserves associated with the merged or acquired company's exposures may be included in the Board-regulated institution's tier 2 capital up to 0.6 percent of the credit-risk-weighted assets associated with those exposures.