US Agencies (FDIC, FED, and OCC) are proposing to revise the capital requirements for supplementary leverage ratio, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The proposal is to exclude, from the calculations, funds of a bank that have been deposited with central banks, if the banking organization is predominantly engaged in custody, safekeeping, and asset-servicing activities. This consultation ends on July 01, 2019. Based on data available at the time of the proposal, only The Bank of New York Mellon Corporation, Northern Trust Corporation, and State Street Corporation, together with their depository institution subsidiaries, would be able to exclude deposits at central banks from their supplementary leverage ratio.
Section 402 of the EGRRCP Act, which this proposal implements, defines a custodial bank as any depository institution holding company predominantly engaged in custody, safekeeping, and asset-servicing activities, including any insured depository institution subsidiary of such a holding company. The phrase “predominantly engaged in custodial, safekeeping, and asset servicing activities” suggests that the banking organization’s business model is primarily focused on custody, safekeeping, and asset-servicing activities, rather than the other commercial lending, investment banking, or other banking activities.
Under the proposal, a depository institution holding company would be considered predominantly engaged in custody, safekeeping, and asset-servicing activities if the U.S. top-tier depository institution holding company in the organization has a ratio of assets under custody (AUC)-to-total assets of at least 30:1. The proposal would define such a depository institution holding company, together with any subsidiary depository institution, as a “custodial banking organization.” Under the proposal, a custodial banking organization would exclude deposits placed at a “qualifying central bank” from the denominator of the supplementary leverage ratio. In this proposal, a qualifying central bank would mean a Federal Reserve Bank, ECB, or a central bank of a member country of the Organisation for Economic Co-operation and Development (OECD) if the country’s sovereign exposures qualify for a 0% risk-weight under section 32 of the capital rule and the sovereign debt of such member country is not in default or has not been in default during the previous five years.
The amount of central bank deposits that could be excluded from the denominator of the supplementary leverage ratio would be limited by the amount of deposit liabilities, on the consolidated balance sheet of the custodial banking organization, that are linked to fiduciary or custody and safekeeping accounts. The supplementary leverage ratio applies only to certain large or internationally active banking organizations.
Keywords: Americas, US, Banking, Supplementary Leverage Ratio, EGRRCP Act, Regulatory Capital, Leverage Ratio, Basel III, US Agencies
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).
The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.
The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.
The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.
The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.
US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.