Dodd-Frank News Center

FHFA to re-propose Enterprise Capital Rule in 2020

This story appeared in Bank Digest.                                   

The Federal Housing Finance Agency has announced plans to re-propose the entire regulation on capital requirements (Capital Rule) for Fannie Mae and Freddie Mac (the Enterprises) sometime in 2020. FHFA Director Mark Calabria said, "The 2018 Capital Rule was proposed before FHFA began the process of retaining capital at the Enterprises as a first step toward ending the conservatorships. In fairness to all interested parties, the comments submitted during the previous rulemaking were submitted under a different set of assumptions about the future of the Enterprises. During the process of the rulemaking, important issues were identified that will be addressed in the re-proposal."

Institutions notified of changed effective date for capital simplifications final rule

This story appeared in Bank Digest.                         

Federal Deposit Insurance Corporation-supervised institutions have been notified that the FDIC, Federal Reserve Board, and Office of the Comptroller of the Currency have jointly issued a final rule permitting certain insured depository institutions and depository institution holding companies to implement simplifications to the capital rule on Jan. 1, 2020, rather than the original effective date of April 1, 2020 (FIL-67-2019).

This revised effective date applies to the agencies' July 2019 final rule (see 2019 No. 2461) that simplified the regulatory capital treatment for mortgage servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, and the calculation of minority interest.

Affected banking organizations may elect to use the revised effective date of Jan. 1, 2020, or wait until the quarter beginning April 1, 2020.

FDIC-supervised institutions notified of community bank leverage ratio final rule

This story appeared in Bank Digest.                                   

The Federal Deposit Insurance Corporation has notified institutions it supervises that the federal banking agencies have jointly issued a final rule that provides for an optional, simplified measure of capital adequacy—the community bank leverage ratio framework—for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule will be effective on Jan. 1, 2020.

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.