Dodd-Frank News Center

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.

 

 

Fed releases 2018 CCAR and stress test scenarios

This story appeared in Bank Digest.                                     

The Federal Reserve Board has released the scenarios banks and supervisors will use for the 2018 Comprehensive Capital Analysis and Review and Dodd-Frank Act stress test exercises and has issued instructions to firms participating in CCAR. According to the Fed, stress tests help ensure that banks will be able to lend to households and businesses even in a serious recession by ensuring that they have adequate capital to absorb losses.                                   

CCAR evaluates the capital planning practices and capital adequacy of the largest U.S. bank holding companies and large U.S. operations of foreign firms. Firms participating in CCAR must submit their capital plans and stress testing results to the Fed on or before April 5, 2018. The Fed said it would announce the results of its supervisory stress tests by June 30, 2018, with the exact date to be announced later. 

• Comprehensive Capital Analysis and Review 2018 Summary Instructions
• 2018 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule
• Letter: 2018 Horizontal Capital Review for Large and Noncomplex Firms

Fed revises 'Capital Assessments and Stress Testing' information collection

This story appeared in Bank Digest.                                   

The Federal Reserve Board is adopting a proposal to extend for three years, with revision, its mandatory "Capital Assessments and Stress Testing" information collection applicable to bank holding companies with total consolidated assets of $50 billion or more and U.S. intermediate holding companies established by foreign banking organizations. According to the Fed, the data collected through this collection provide it with the information and perspective 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.

On June 9, 2017, the Fed published a notice in 82 Federal Register 26793 requesting public comment for 60 days on the proposal. The revisions to the collection are applicable as of either Dec. 31, 2017, or March 31, 2018.

Agencies extend transition provisions for nonadvanced approaches banking organizations

This story appeared in Bank Digest.                                   

The Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency are adopting a final rule, effective Jan. 1, 2018, to extend the regulatory capital treatment applicable during 2017 under the regulatory capital rules for certain items, including regulatory capital deductions, risk weights, and certain minority interest limitations. The final rule extends transition provisions in the agencies' capital rules that phase in certain requirements over several years to give banking organizations time to adjust and adapt to the new requirements.                                  

The relief provided under the final rule applies to nonadvanced approaches banking organizations--organizations not subject to the capital rules' advanced approaches. Advanced approaches banking organizations continue to be subject to the transition provisions established by the capital rules for the items affected by the final rule and must apply the capital rules' fully phased-in treatment for these capital items beginning Jan. 1, 2018.

Senators reach agreement on proposals to ease regulation

This story appeared in Bank Digest. 

Senate Banking Committee members have reached bipartisan agreement on proposed economic growth legislation that would raise the threshold for applying enhanced prudential standards to bank holding companies from $50 billion to $250 billion. Bank holding companies with total consolidated assets between $50 billion and $100 billion would be exempt from enhanced prudential standards immediately, and bank holding companies with total consolidated assets between $100 billion and $250 billion would be exempt 18 months after the effective date. The regulatory relief package also includes consumer protections for veterans, senior citizens, and victims of fraud. 

“The package is targeted toward helping community banks, credit unions, mid-sized banks, regional banks and custody banks,” according to the press release announcing the agreement.

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) issued a statement opposing the legislation, saying he disagreed “on the wisdom of rolling back so many of Dodd-Frank’s protections with almost no gains for working families.”

Fed releases Q&As on Capital Assessments and Stress Testing information collection

This story appeared in Bank Digest.                                  

The Federal Reserve Board has released questions and answers regarding the Capital Assessments and Stress Testing information collection (FR Y-14), which consists of the FR Y-14A, Q, and M reports. The FR Y-14 data are used to assess the capital adequacy of large bank holding companies and U.S. intermediate holding companies, to support supervisory stress test models, and in continuous monitoring efforts.                                  

The Fed said that in response to questions regarding the FR Y-14 information collection, its staff provides answers to firms on an ongoing basis to assist with the correct interpretation of reporting requirements and submission of the report data.