Dodd-Frank News Center

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.

 

Fed calculates financial sector liabilities at more than $20 trillion

This story appeared in Bank Digest.                                     

The Federal Reserve Board has determined that, as of July 1, 2018, the aggregate consolidated liabilities of all financial companies were equal to $20,283,121,945,000. The number constitutes the average of the year-end financial sector liabilities of the preceding two years and will be the measure of aggregate consolidated liabilities for purposes of Section 622 of the Dodd-Frank Act from July 1, 2018, through June 30, 2019, according to the Fed's announcement and accompanying press release. 

Sec. 622 of the Dodd-Frank Act, implemented by the Fed's Regulation XX, prohibits any financial company from combining with another company if the resulting company's liabilities exceed 10 percent of the aggregate consolidated liabilities of all financial companies. The Fed's regulation also requires that the Fed publish the aggregate consolidated liabilities of all financial companies by July 1 of each year.

 

Fed releases CCAR results

This story appeared in Bank Digest.                           

The Federal Reserve Board has released the results of its Comprehensive Capital Analysis and Review, which evaluates the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies, including the firms' planned capital actions, such as dividend payments and share buybacks. Of the 35 companies subject to the CCAR, the Fed objected to the capital plan of only one firm, DB USA Corporation, due to qualitative concerns such as material weaknesses in the firm's data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress. 

The Fed issued conditional non-objections to the capital plans of Goldman Sachs, Morgan Stanley, and State Street Corporation.

Fed limits credit exposure of large bank holding companies and foreign banking organizations

This story appeared in Bank Digest.                                  

The Federal Reserve Board has approved a final rule to establish single-counterparty credit limits for large U.S. bank holding companies and foreign banking organizations pursuant to Sec. 165(e) of the Dodd-Frank Act. The Fed's release said that consistent with the recently passed Economic Growth, Regulatory Reform, and Consumer Protection Act, the limits in the final rule will apply only to global systemically important bank holding companies (GSIBs) and bank holding companies with at least $250 billion in total consolidated assets. The final rule is effective 60 days after its publication in the Federal Register, but compliance will not be required until Jan. 1, 2020, for GSIBs and until July 1, 2020, for all other firms.

Under the rule, a GSIB will be limited to a credit exposure of no more than 15 percent of its tier 1 capital to another systemically important financial firm, while a bank holding company with $250 billion or more in total consolidated assets will be restricted to a credit exposure of no more than 25 percent of its tier 1 capital to a counterparty. 

Foreign banks operating in the U.S. with $250 billion or more in total global consolidated assets, and their intermediate holding companies with $50 billion or more in total U.S. consolidated assets, will be subject to limits similar to those applicable to bank holding companies with $250 billion or more in assets, the Fed said.an foreclosure.

Fed proposes simplifying capital rules for large banks

This story appeared in Bank Digest.                                     

The Federal Reserve Board is proposing to simplify its capital rules for large banks while preserving strong capital levels that would maintain the banks' ability to lend to households and businesses under stressful conditions. According to the Fed's press release, the proposal would introduce a "stress capital buffer" (or SCB) that would in part integrate the forward-looking stress test results with the Fed's non-stress capital requirements to produce capital requirements for large banking organization that are firm-specific and risk-sensitive.                                

The Fed estimates that, relative to current requirements, the proposed changes would generally maintain or somewhat increase the amount of capital required for global systemically important banks and generally decrease modestly the amount of capital required for most non-GSIBs.                                   

The proposal would also modify several assumptions in the Comprehensive Capital Analysis and Review process to better align them with a firm's expected actions under stress. Comments on the proposed rule must be received within 60 days of its publication in the Federal Register.

House passes bill limiting operational risk capital requirements

This story appeared in Bank Digest.                                     

The House of Representatives has passed H.R. 4296--which a Financial Services Committee press release describes as "a bill that addresses the burden that unnecessary operational capital requirements have imposed on financial institutions"--by a vote of 245 to 169. According to the release, the bill would ensure that existing capital standards are appropriately tailored and do not needlessly lock up capital by limiting the imposition of operational risk capital requirements on a bank's current activities and businesses and permitting adjustments to mitigate operational risk. 

Committee chairman Jeb Hensarling (R-Texas) said, "H.R. 4296 simply amends the method of how reserve capital is calculated by establishing standards based on an organization's current business activities, making the requirements more accurate and tailored to a bank's current risk profile. That means banks would still retain sufficient reserves to weather an economic storm, but they would also be able to put the billions of dollars currently sitting on the sidelines to work to help fuel the economy."

But in a prepared floor statement opposing the bill, Ranking Member Maxine Waters (D-Calif) said the bill was "simply another rollback of rules put in place after the financial crisis. It would undermine the stability of our country's largest banks by restricting the way regulators set capital requirements for those institutions."         

House passes Small Bank Holding Company Relief Act

This story appeared in Bank Digest.                                     

The House of Representatives has passed the Small Bank Holding Company Relief Act of 2018 (H.R. 4771), which would direct the Federal Reserve Board to raise the consolidated asset threshold for its Small Bank Holding Company Policy Statement from $1 billion to $3 billion. According to a press release issued by the bill's sponsor, Rep. Mia Love (R-Utah), the bill would ease overregulation on small banks and savings and loans, which would help these institutions raise capital so they can make loans in their community. 

But House Financial Services Committee Ranking Member Maxine Waters (D-Calif) made a statement on the House floor opposing the bill. In her prepared statement, Waters called the current $1 billion threshold "sensible and reasonable" and warned, "If the threshold is raised too high, it will encourage more mergers and acquisitions, riskier banking activities, and reduce a [sic] banking services and credit availability to rural, low-income, minority, and underserved communities."

Agencies propose amending swap margin requirements

This story appeared in Bank Digest.   

Five federal agencies--the Federal Reserve Board, Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, and Office of the Comptroller of the Currency--are proposing to amend swap margin requirements to conform with recent rule changes that impose new restrictions on certain qualified financial contracts of systemically important banking organizations. The Swap Margin Rule was issued in November 2015 by the agencies and established minimum margin requirements for swaps and security-based swaps that are not cleared through a clearinghouse. 

The agencies' joint release said that under the proposed amendments, legacy swaps entered into before the applicable compliance date would not become subject to the margin requirements if they are amended solely to comply with the requirements of the QFC Rules. 

In addition, the proposed amendments would also harmonize the definition of "Eligible Master Netting Agreement" in the Swap Margin Rule with recent changes to the definition of "Qualifying Master Netting Agreement" in the respective capital and liquidity regulations of the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency. Comments on the proposed rule should be received within 60 days of its publication in the Federal Register.

OCC releases 2018 Dodd-Frank Act stress test scenarios

This story appeared in Bank Digest.                                     

The Office of the Comptroller of the Currency has released economic and financial market scenarios for use in the 2018 Dodd-Frank Act stress tests for covered institutions with more than $10 billion in assets. The Dodd-Frank Act requires certain financial companies, including national banks and federal savings associations with total consolidated assets of more than $10 billion, to conduct annual stress tests.                                  

According to the OCC, the results of the company-run stress tests provide the agency with forward-looking information used in bank supervision and will assist the OCC in assessing each company's risk profile and capital adequacy.