Fed proposes single-counterparty credit limits for large bank holding companies

This story appeared in Bank Digest.

The Federal Reserve Board has issued a notice of proposed rulemaking to address the risk associated with excessive credit exposures of large banking organizations to a single counterparty. According to the Fed's press release, the proposed rule would apply single-counterparty credit limits to bank holding companies with total consolidated assets of $50 billion or more, and the proposed limits are tailored to increase in stringency as the systemic footprint of a firm increases. The release stated that similarly tailored requirements would also be established for foreign banks operating in the United States. Comments on the proposed rule should be received by June 3, 2016.

In addition, the Fed has released a white paper explaining the analytical and quantitative reasoning for the proposed rule's tighter 15 percent limit for credit exposures between systemically important financial institutions.