Dodd-Frank News Center

Agencies finalize rules on capital and liquidity requirements, resolution plans

This story appeared in Bank Digest.                                   

The Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency have jointly adopted a final rule to revise the criteria for determining the applicability of regulatory capital and liquidity requirements for large U.S. banking organizations and the U.S. intermediate holding companies of certain foreign banking organizations. The final rule establishes four risk-based categories for determining the applicability of requirements under the agencies’ regulatory capital rule and liquidity coverage ratio rule.

Separately, the Fed and FDIC have adopted a final rule implementing the resolution planning requirements of Section 165(d) of the Dodd-Frank Act. The final rule is intended to reflect improvements identified since the agencies finalized their joint resolution plan rule in November 2011 and to address amendments to the Dodd-Frank Act made by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rules take effect 60 days after publication in the Federal Register.

Fed proposes to extend, revise 'Capital Assessments and Stress Testing Reports' information collection

This story appeared in Bank Digest.                                   

The Federal Reserve Board is proposing to extend for three years, with revision, an existing information collection entitled "Capital Assessments and Stress Testing Reports." This collection includes three separate reports—the FR Y-14A, FR Y-14Q, and FR Y-14M—and provides the Fed with the information needed to help ensure that large firms have strong, firm‐wide risk measurement and management processes supporting their internal assessments of capital adequacy and that their capital resources are sufficient given their business focus, activities, and resulting risk exposures.

The Fed has issued two notices regarding the extension and renewal of this collection—one focusing on incorporating non-Current Expected Credit Loss (CECL) methodology revisions into the FR Y-14A/Q/M reports and a second notice focusing on incorporating the CECL methodology into these reports. Comments on both notices must be received by Sept. 30, 2019.

OCC seeks renewal of information collection on requirements for swap entities

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency is proposing to renew an existing information collection entitled “Margin and Capital Requirements for Covered Swap Entities. The OCC also is giving notice that it has sent the collection to the Office of Management and Budget for review. Comments on the current notice must be received by Aug. 8, 2019.This collection is related to regulations by the OCC and other federal agencies that require swap dealers and security based swap dealers (Swap Margin Rule) under the agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared. The OCC had issued an earlier notice, in March 2019, seeking comments on the information collection.

 

Agencies propose rule to limit impact of large bank failures

This story appeared in Bank Digest.                                     

The Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency have issued a proposed rule that would limit the interconnectedness of large banking organizations and reduce the impact from large bank failures. According to the joint press release, it would discourage certain firms (generally, those with $250 billion or more in assets or $10 billion in foreign exposure) from purchasing large amounts of total loss-absorbing capacity (TLAC) debt by requiring the organizations to hold additional capital against substantial holdings of TLAC debt. Comments on the proposed rule will be due 60 days after its publication in the Federal Register.

Brown comments on regulatory decisions

This story appeared in Bank Digest.                                   

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has issued statements on several recent regulatory decisions involving: (1) the countercyclical capital buffer, which requires big banks to set aside extra capital to absorb potential loan losses in the event of an economic downturn; (2) a proposed rewrite of the Volcker Rule; and (3) proposed interpretive guidance from the Financial Stability Oversight Council that would change the process for designating nonbank financial companies as systemically important financial institutions.

Regarding the Federal Reserve Board's decision to keep the countercyclical capital buffer at its current level of 0 percent, Brown said he was disappointed with the decision and added, "Banks are doing well, but there are certainly growing risks in the economy. Now is exactly when the buffer should be used to make sure that the banks have enough capital for those eventual bad times."

Commenting on a potential revision of the proposed Volcker Rule rewrite, Brown said it was "no surprise that when Wall Street banks complained that the proposed rewrite of the Volcker Rule wasn't weak enough, Trump regulators went to work watering it down further."

Finally, Brown said the FSOC's new proposed guidance "ignores the damage done to our financial system during the last crisis and the risks still posed by shadow banks and other financial institutions. FSOC is no longer protecting financial stability or taxpayers."

Fed to limit CCAR 'qualitative objection'; CCAR instructions released

This story appeared in Bank Digest.                                   

The Federal Reserve Board has issued a final rule that will limit the use of the "qualitative objection" in its Comprehensive Capital Analysis and Review exercise, effective for the 2019 cycle. The Fed has also released the instructions for this year's CCAR exercise.

The Fed said that for the largest and most complex firms, CCAR includes both a quantitative evaluation of a firm's capital adequacy under stress and a qualitative evaluation of its abilities to determine its capital needs on a forward-looking basis. As applicable, a firm must pass both the quantitative and qualitative evaluation or the Fed may object and restrict the firm's shareholder distributions.

 According to the Fed, the qualitative objection has been eliminated for most firms due to improvements in capital planning made by the largest firms.

FHFA adopts regulations on capital requirements for FHLBanks

This story appeared in Bank Digest.                                   

The Federal Housing Finance Agency is issuing a final rule to adopt as its own portions of the regulations of the Federal Housing Finance Board pertaining to the capital requirements for the Federal Home Loan Banks. The final rule carries over most of the existing Federal Housing Finance Board regulations without material change but substantively revises the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit. The rule takes effect Jan. 1, 2020.

Fed approves TLAC conversion trigger for IHCs

This story appeared in Bank Digest.

The Fed has sent letters to several intermediate bank holding company subsidiaries of foreign global systemically important banking organizations communicating the Fed’s approval, under Regulation YY, of a contractual provision that must be included in certain debt issued by U.S. intermediate holding companies of foreign GSIBs under the Fed’s regulation regarding total loss-absorbing capacity or TLAC Rule.

The letters were sent to UBS Americas Holding, LLC; MUFG Americas Holdings Corporation; HSBC North America Holdings, Inc.; DB USA Corporation; Credit Suisse Holdings U.S.A; BNP Paribas USA, Inc.; and Barclays US, LLC.

OCC seeks renewal of information collection on requirements for swap entities

This story appeared in Bank Digest.

The OCC is requesting renewal, without change, of an existing information collection entitled “Margin and Capital Requirements for Covered Swap Entities.” The OCC also is giving notice that it has sent the collection to the Office of Management and Budget for review. According to the agency’s notice, this collection concerns rules required by the Dodd-Frank Act for certain types of swap entities that are prudentially regulated by one of several regulatory agencies, including the OCC. On Nov. 6, 2018, the OCC published a Federal Register notice for 60 days of comment regarding this information collection but no comments were received. Comments on the current notice must be received by March 7, 2019.

Brainard speaks in Washington on assessing financial stability

This story appeared in Bank Digest.

Federal Reserve Board Governor Lael Brainard spoke at the Peterson Institute for International Economics in Washington, D.C., on Dec. 7, 2018. The subject of her prepared remarks was "Assessing Financial Stability over the Cycle."

In her prepared remarks, Brainard said that if anything has been learned from the financial crisis, "it is that we must be especially vigilant to safeguard the resilience of our financial system in good times when vulnerabilities may be building." She went on to describe the state of the economy, highlight areas where she saw financial imbalances building, and discuss the implications for policy.

According to Brainard, while the U.S. financial system is much more resilient than before the crisis, "the appetite for risk among financial market participants rose notably over 2017 and much of 2018, and corporate borrowing has reached new heights amid rapid growth and deteriorating underwriting standards in riskier segments, such as leveraged lending." She went on to say, "At a time when cyclical pressures have been building and bank profitability has been strong, it might be prudent to ask large banking organizations to fortify their capital buffers, which could subsequently be released if conditions warrant."