US Agencies (FDIC, FED, and OCC) proposed a rule to limit the interconnectedness of large banking organizations and reduce the impact from failure of the largest banking organizations. The proposed rule would address an advanced approaches banking organization’s regulatory capital treatment of an investment in unsecured debt instruments issued by foreign or U.S. global systemically important banking organizations (G-SIBs) for the purpose of meeting minimum total loss-absorbing capacity (TLAC). Consequently, FED is also proposing changes to regulatory reporting requirements in form FR Y-9C. Comments must be received by June 07, 2019.
Under the proposal, investments by an advanced approaches banking organization in unsecured debt instruments would be subject to a deduction from the advanced approaches banking organization’s own regulatory capital. The proposal would also require the holding companies of G-SIBs to publicly report their TLAC debt outstanding. FED is also proposing to require that banking organizations subject to minimum TLAC and long-term debt requirements under its regulations publicly disclose their TLAC and long-term debt issuances in a manner described in this proposal. With respect to the reporting form FR Y-9C, FED is proposing to modify the instructions for tier 2 capital deductions. In a future interagency reporting proposal, US Agencies would propose to modify the Call Reports FFIEC 031, FFEIC 041, and FFIEC 101 in a manner consistent with the changes to form FR Y-9C.
US Agencies are issuing this proposal to recognize, for purpose of the capital rule, the systemic risks posed by banking organizations’ investments in “covered debt instruments” and to create an incentive for advanced approaches banking organizations to limit their exposure to G-SIBs. The deductions that would be required under the proposal would affect the capital ratios of advanced approaches banking organizations—that is, the risk-based capital ratios that include “standardized total risk-weighted assets” and “advanced approaches total risk-weighted assets” in the denominator of the ratios—along with the leverage ratio and the supplementary leverage ratio. US Agencies believe the proposed rule will have relatively small effects on advanced approaches banking organizations. The proposal is also expected to enhance resilience and resolvability of advanced approaches banking organizations if an entity required to issue long-term debt or TLAC fails, or encounters material financial distress.
Comment Due Date: June 07, 2019
Keywords: Americas, US, Banking, G-SIB, Regulatory Capital, TLAC, Systemic Risk, Advanced Approaches, Reporting, FR Y-9C, Unsecured Debt, Long-Term Debt, US Agencies
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.