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
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.