US Agencies (FDIC, FED, and OCC) published an interim final rule that temporarily revises the supplementary leverage ratio calculation for depository institutions. The interim final rule permits depository institutions to choose to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the supplementary leverage ratio. This rule change will help institutions to alleviate challenges associated with the COVID-19 pandemic. The rule will be effective from June 01, 2020 and will be in effect through March 31, 2021. FED is also inviting feedback on three additional questions regarding the rule. Comments will be accepted until July 16, 2020. The associated revisions to the Call Reports and the FFIEC 101 report will be addressed in a separate Federal Register notice.
Under the interim final rule, any depository institution subsidiary of a U.S. global systemically important bank holding company or any depository institution subject to Category II or Category III capital standards may elect to temporarily exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the supplementary leverage ratio denominator. Additionally, any depository institution making this election must request approval from its primary Federal banking regulator prior to making certain capital distributions so long as the exclusion is in effect. The prior approval requirement applies to distributions to be paid beginning in the third quarter of 2020. The agencies are adopting this interim final rule to allow depository institutions that elect to opt into this treatment additional flexibility to act as financial intermediaries during this period of financial disruption. The tier 1 leverage ratio is not affected by this interim final rule.
Depository institutions subject to supplementary leverage ratio requirements report their supplementary leverage ratios in the Call Reports, Schedule RC-R, and FFIEC 101 report, Schedule A. In the near future, the agencies expect to make certain necessary revisions to the Call Reports and the FFIEC 101 report to implement the changes associated with this rule for electing depository institutions and to require such institutions to disclose the election publicly. The instructions for FR Y-9C report, Schedule HC-R, Line Item 45 (Advanced approaches holding companies only: Supplementary leverage ratio) state that respondents must report the supplementary leverage ratio from FFIEC 101 Schedule A, Table 2, Item 2.22. Therefore, revisions to the FFIEC 101 regarding how to report the supplementary leverage ratio would flow through to the FR Y-9C. Therefore, FED plans to amend the instructions for FR Y-9C as necessary. In addition, the interim final rule provides for the necessary modifications of the disclosure requirements of section 173 of the capital rule to reflect the optional temporary exclusion provided by the interim final rule.
Comment Due Date: July 16, 2020
Effective Date: June 01, 2020
Keywords: Americas, US, Banking, Leverage Ratio, Supplementary Leverage Ratio, Regulatory Capital, FFIEC 101, Basel, Call Reports, FR Y-9C, Reporting, COVID-19, US Agencies
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.
BIS announced that it will establish new Innovation Hub centers across Europe and in North America in cooperation with member central banks.
FED updated the reporting form for FR 2052a, which is used to monitor the overall liquidity profile of certain supervised institutions.
PRA published a statement that sets out its views on certain amendments made to Capital Requirements Regulations (CRR and CRR2) via EU Regulation 2020/873 (CRR "Quick Fix"), including some guidance for firms.
The Climate Financial Risk Forum (CFRF), which is a joint climate risk forum of FCA and PRA, published a guide written by the industry for the industry to help firms approach and address climate-related financial risks.
IAIS published an application paper on liquidity risk management for insurers.
EBA published its response to the EC consultation on a new Digital Finance Strategy for Europe.
EIOPA responded to the EC consultation on a new digital finance strategy for Europe.
ESMA published its response to the EC consultation on the new digital finance strategy for EU.
FSB published, for consultation, a report on evaluation of the too-big-to-fail (TBTF) reforms for systemically important banks.