April 09, 2019

FED proposed to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314). FED also published a draft supporting statement on information collection under the market risk capital rule. Comments must be submitted by June 10, 2019. There are no required reporting forms associated with the information collection and the FR 4201 designation is for internal purposes only.

The market risk rule requires banking organizations to hold capital to cover their exposure to market risk and is an important component of the regulatory capital framework. The respondents for this collection of information are bank holding companies, savings and loan holding companies, intermediate holding companies, and state member banks that meet certain risk thresholds. The information collections allow FED to assess the levels and components of each reporting institution's risk-based capital requirements for market risk and the adequacy of the institution's capital under the market risk rule. Additionally, these collections of information ensure capital adequacy of banking organizations according to their level of market risk and assist FED in implementing and validating the market risk framework. The current annual burden for the FR 4201 is estimated to be 70,704 hours and the proposed revisions would result in a net decrease in burden of 57,556 hours.

The market risk rule requires a subject banking organization to obtain the FED approval prior to using any internal model to calculate its risk-based capital requirements. The market risk rule also requires subject banking organizations to:

  • Have clearly defined policies and procedures for determining which trading assets and trading liabilities are trading positions and which trading positions are correlation trading positions
  • Have clearly defined trading and hedging strategies for trading positions
  • Retain certain financial and statistical information regarding the institution's FED-approved subportfolios of its portfolio exposures subject to the market risk rule
  • Have a formal disclosure policy that addresses the banking organization's approach for determining the market risk disclosures
  • Make certain public quantitative disclosures

 

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Comment Due Date: June 10, 2019

Keywords: Americas, US, Banking, Market Risk Capital Rule, FR 4201, Regulatory Capital, Regulation Q, Market Risk, FED

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