Dodd-Frank News Center

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."

Perdue introduces bill to provide relief from costs of 'duplicative capital buffers'

This story appeared in Bank Digest.                                   

Senator David Perdue (R-Ga) has introduced a bill (S. 3682) intended to provide relief from financial regulatory burdens and extra costs that are passed down to small business owners, farmers, and consumers. According to Perdue's press release, after the 2008-2009 financial crisis, federal bank regulators increased the amount of capital held by banks for certain "risky" activities. This included the supplemental leverage ratio (SLR), which requires banks to hold a certain amount of capital.

But according to the release, the SLR did not account for the initial margin that customers pay, and as a result, duplicative capital buffers were built as banks had to hold additional capital aside. The cost of this trapped capital was ultimately passed on to the end users, such as farmers and business owners.

FDIC-supervised institutions notified of proposed simplified measure of capital adequacy

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 notice of proposed rulemaking that would provide for an optional, simplified measure of capital adequacy for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. 

Specifically, according to the FDIC's guidance, the community bank leverage ratio would allow qualifying community banking organizations the option of calculating a simple on-balance sheet leverage ratio to measure capital adequacy. Banks using the CBLR would complete a simpler reporting schedule, which the agencies intend to propose at a later date, the FDIC said. Comments on the proposal must be received within 60 days of its publication in the Federal Register.

 

Agencies propose modifying capital rules for high volatility commercial real estate exposures

This story appeared in Bank Digest.                                     

The Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency are requesting comment on a proposal to modify their capital rules for high volatility commercial real estate exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The proposal would revise the definition of "high volatility commercial real estate (HVCRE) exposure" to conform to the statutory definition of "high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan," in accordance with the EGRRCPA. 

The proposal would also establish principles for interpretation of certain terms in the revised definition, and the agencies request comment on whether any other terms in the revised definition would also require interpretation. Comments on the proposed rule must be received within 60 days of its publicatin in the Federal Register.

Gruenberg speaks in Washington on enhanced supplementary leverage capital ratio

This story appeared in Bank Digest.                                     

Federal Deposit Insurance Corporation Board member Martin J. Gruenberg spoke at the Peterson Institute for International Economics in Washington, D.C., on Sept. 6, 2018. The subject of his prepared remarks was "An Essential Post-Crisis Reform Should Not Be Weakened: The Enhanced Supplementary Leverage Capital Ratio." 

In his prepared remarks, Gruenberg said, "A central lesson of the financial crisis of 2008 was that the buildup of leverage--in other words, reliance on debt--at the largest financial institutions in the United States increased the vulnerability of the financial system and was a critical contributor to the crisis." He said the enhanced supplementary leverage capital ratio, which he described as "an unweighted measure of equity as a percentage of an institution's exposures designed to constrain reliance on debt," was the key post-crisis reform that addressed the issue of reliance on debt by these large financial institutions. 

Gruenberg also discussed changes that have been proposed to the enhanced supplementary leverage capital ratio, as well as his "serious concerns" with these proposed changes.

Fed proposes revision of 'Capital Assessments and Stress Testing' information collection

This story appeared in Bank Digest.   

The Federal Reserve Board is proposing to revise, without extension, an existing information collection entitled "Capital Assessments and Stress Testing," which is applicable to top-tier bank holding companies with total consolidated assets of $100 billion or more and U.S. intermediate holding companies. According to the Fed's notice, this collection helps 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 is proposing to revise sub-schedule L.5 (Derivatives and SFT Profile) for the FR Y-14Q report by adding items that were mistakenly omitted in a prior revision. Comments on the proposed revision must be submitted by Oct. 9, 2018.

House Subcommittee examines capital regimes for financial institutions

This story appeared in Bank Digest.                                     

The House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled "Examining Capital Regimes for Financial Institutions" on July 17, 2018. The hearing was held to examine the existing regulatory structure for prudentially regulated financial institutions and explore avenues that Congress and regulators can address through legislative and regulatory policy changes. 

The Dodd-Frank Act imposed a series of new capital regimes on financial institutions with more than $10 billion in total consolidated assets, but the Economic Growth, Regulatory Relief, and Consumer Protection Act (signed in May 2018) exempts certain financial institutions from the enhanced supervisory standards of Dodd-Frank.