Featured Product

    FDIC Proposes Rule to Resolve Double-Counting Associated with CECL

    December 07, 2020

    FDIC proposed a rule that would amend the risk-based deposit insurance assessment system applicable to all large insured depository institutions, including highly complex insured depository institutions. The proposal is aimed to address the effects of temporary deposit insurance assessment resulting from certain optional regulatory capital transition provisions related to the implementation of the current expected credit losses (CECL) methodology. The primary objective of this proposal is to remove a double-counting issue in several financial measures used to determine deposit insurance assessments for large and highly complex banks; the double-counting could result in a deposit insurance assessment rate for a large or highly complex bank that does not accurately reflect the risk of a bank to the deposit insurance fund, all else equal. Comments must be received no later than January 06, 2021.

    FDIC statutorily required to set deposit insurance assessments based on risk and, through this proposal, FDIC aims to ensure that banks are assessed in a manner that is fair and accurate. The proposal would amend the assessment regulations to remove the double-counting of a portion of the CECL transitional amounts, in certain financial measures used to determine deposit insurance assessments for large and highly complex banks. Certain financial measures are calculated by summing Tier 1 capital, which includes the CECL transitional amounts, and reserves, already reflecting the implementation of CECL. As a result, a portion of the CECL transitional amounts is being double-counted in these measures, which in turn affects assessment rates for large and highly complex banks. The proposal would also adjust the calculation of the loss severity measure to remove the double-counting of a portion of the CECL transitional amounts for a large or highly complex bank.

    This proposal would amend the deposit insurance system applicable to large and highly complex banks only and it would not affect regulatory capital or the regulatory capital relief provided in the form of transition provisions that allow banking organizations to phase in the effects of CECL on their regulatory capital ratios. In calculating another measure—that is, the Tier 1 leverage ratio—used to determine assessment rates for all insured depository institutions, FDIC would continue to apply the CECL regulatory capital transition provisions, consistent with the regulatory capital relief provided to address concerns that despite adequate capital planning, unexpected economic conditions at the time of CECL adoption could result in higher-than-anticipated increases in allowances. The proposed amendments to the deposit insurance assessment system and any changes to reporting requirements pursuant to this proposal would be required only while the regulatory capital relief is reflected in the regulatory reports of banks.

     

    Related Link: Federal Register Notice

    Comment Due Date: January 06, 2021

    Keywords: Americas, US, Banking, CECL, Regulatory Capital, Tier 1 Capital, Deposit Insurance, Leverage Ratio, Large Banks, FDIC

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    News

    HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26

    HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6821