FED proposed to revise and extend, for three years, FR 4201, which is the information collection under the market risk capital rule. The comment period on this consultation ends on March 17, 2020. Also published was a draft supporting statement on the market risk capital rule. The reporting frequency of FR 4201 is annual, quarterly, and occasional and there are no reporting forms associated with this information collection.
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 market risk capital rule applies to any banking organization with aggregate trading assets and trading liabilities equal to 10% or more of quarter-end total assets, or USD 1 billion or more. FED may exclude a banking organization that meets these thresholds if it determines that the exclusion is appropriate based on the level of market risk of the banking organization and is consistent with safe and sound banking practices.
The subject banking organizations must conduct and document an analysis of the risk characteristics of each securitization position prior to acquiring the position, considering structural features of the securitization that would materially impact the performance of the position; relevant information regarding the performance of underlying credit exposure(s); relevant market data of the securitization; and, for resecuritization positions, performance information on the underlying securitization exposure. On an ongoing basis (but no less frequently than quarterly), subject banking organizations must evaluate, review, and update, as appropriate, the analysis required for each securitization position.
In August 2019, FED had extended the FR 4201 for three years, with revision, and a notice was published in the Federal Register. The proposed revisions in this notice included removal of references to provisions in the market risk capital rule concerning securitizations. This revision was in error, as the market risk capital rule contains a recordkeeping requirement concerning securitizations above. Therefore, FED is now proposing to reinstate this recordkeeping requirement. Additionally, FED is proposing to revise the FR 4201 to account for the general recordkeeping requirement in section 217.203(f) of the market risk capital rule, which was not previously accounted for.
Comment Due Date: March 17, 2020
Keywords: Americas, US, Banking, Market Risk Capital Rule, FR 4201, Market Risk, Information Collection, Regulatory Capital, Securitization, FED
Previous ArticleEBA Consults on the Future of Stress Test Framework for Banks in EU
US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.
EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.
APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.
BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.
Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.
PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).
FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.