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.

Quarles speaks at European Banking Summit on work of Financial Stability Board

This story appeared in Bank Digest.                                   

Federal Reserve Board Vice Chair for Supervision and Financial Stability Board Chair Randal K. Quarles spoke at the European Banking Federation’s European Banking Summit in Brussels, Belgium, on Oct. 3, 2019. The subject of his prepared remarks was “The Financial Stability Board at 10 Years—Looking Back and Looking Ahead.”

Noting that 2019 marks the 10th anniversary of the founding of the Financial Stability Board, Quarles said he wanted to “look back on the experiences of the past 10 years, what the FSB has accomplished, and also offer some perspective on just how it contributed to the construction of the post-crisis global financial architecture.” He also discussed “the new challenges facing the global regulatory community, such as innovations in financial technology, shifts in financial globalization and integration, and increasing nonbank financial intermediation.”

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.

Fed extends 'Pillar 2 Guidance' information collection

This story appeared in Bank Digest.

The Federal Reserve Board is adopting a proposal to extend for three years, without revision, an existing information collection entitled "Basel II Interagency Pillar 2 Supervisory Guidance (Pillar 2 Guidance)." According to the Fed's notice, this collection concerns the maintenance of documentation by banks and bank holding companies in connection with their use of the advanced approaches framework.

On Oct. 22, 2018, the Fed published a notice at 83 Federal Register 53248 requesting public comment on the proposal, but it did not receive any comments.

 

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."

Quarles speaks at Harvard Law School on future of stress testing

This story appeared in Bank Digest.  

Federal Reserve Board Vice Chairman for Supervision Randal K. Quarles spoke at a symposium sponsored by the Harvard Law School Program on International Financial Systems, entitled "An International Perspective on the Future of Bank Stress Testing," at Harvard Law School on Nov. 16, 2018. The subject of his prepared remarks was "Beginning Stress Testing's New Chapter."

In his prepared remarks, Quarles said that "stress testing has meaningfully increased the post-stress resiliency of large financial institutions, and become a critical tool" in keeping the banking system strong. He went on to review proposed changes to the Fed's stress testing program, which he said "are intended to improve the program, maintaining its dynamism and flexibility while providing adequate notice to regulated firms, without altering materially the stringency of the tests or the overall level of capital in the system."

Fed proposals would align prudential standards with risk profiles

This story appeared in Bank Digest.                                   

The Federal Reserve Board has published two proposals to establish a revised framework for applying prudential standards to large U.S. banking organizations based on risk, consistent with Section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Comments on both proposals, which were announced at the Fed's Oct. 30, 2018, open meeting, must be received by Jan. 22, 2019. 

The first notice--Prudential standards for large bank holding companies and savings and loan holding companies--is a Fed-only proposal that would tailor the application of prudential standards to U.S. bank holding companies and apply enhanced standards to certain large savings and loan holding companies. The second notice--Proposed changes to applicability thresholds for regulatory capital and liquidity requirements--which would be issued jointly with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation, is a proposal to tailor the application of the agencies' capital and liquidity rules. 

The proposals seek to more closely align the regulatory requirements that apply to large banking organizations with their risk profiles. The proposed framework would not apply to the U.S. operations of foreign banking organizations.

Banking agencies announce support for reforms to Basel III agreement

This story appeared in Bank Digest.                                   

The Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corporation have announced their support for the conclusion of efforts to reform the international bank capital standards initiated in response to the global financial crisis. According to the agencies' joint release, the Governors and Heads of Supervision and the Basel Committee on Banking Supervision have announced the finalization of the reforms to the Basel III agreement on bank capital standards, and with this agreement the committee will conclude the international reforms.                                  

Treasury Secretary Steven Mnuchin issued a statement saying, "The reforms standardize the approach, improve the quality and consistency of bank capital requirements, and will help level the playing field for U.S. firms and businesses operating internationally."

Hoenig speaks on strengthening global capital at Risk USA Conference in New York

Federal Deposit Insurance Corporation Vice Chairman Thomas M. Hoenig spoke at the 22nd Annual Risk USA Conference in New York, N.Y., on Nov. 9, 2016. The subject of his prepared remarks was "Strengthening Global Capital: An Opportunity Not To Be Lost." Hoenig discussed key factors at the core of the debate over what defines adequate capital.

Specifically, he discussed the controversy over alternative measurements for judging adequate capital; changes he said the Basel Committee appears to be considering that he believes will weaken current standards and why he thinks these changes are ill-advised; and his concerns regarding Total Loss-Absorbing Capacity and its use as a means to justify lower levels of capital and require firms to issue more debt.

According to Hoenig, "Momentum is developing within the Basel Committee to undermine measures that could increase bank capital levels, and some jurisdictions are threatening to walk away if the measures are thought too strict." He said the United States "should avoid joining this race to the bottom."

Fed proposes single-counterparty credit limits for large bank holding companies

This story appeared in Bank Digest.

The Federal Reserve Board has issued a notice of proposed rulemaking to address the risk associated with excessive credit exposures of large banking organizations to a single counterparty. According to the Fed's press release, the proposed rule would apply single-counterparty credit limits to bank holding companies with total consolidated assets of $50 billion or more, and the proposed limits are tailored to increase in stringency as the systemic footprint of a firm increases. The release stated that similarly tailored requirements would also be established for foreign banks operating in the United States. Comments on the proposed rule should be received by June 3, 2016.

In addition, the Fed has released a white paper explaining the analytical and quantitative reasoning for the proposed rule's tighter 15 percent limit for credit exposures between systemically important financial institutions.