US Agencies Issue Interim MMLF Rule, FED Updates FR Y-14 Forms
In an effort to mitigate the impact of economic disruptions due to the COVID-19 outbreak, Money Market Mutual Fund Liquidity Facility (MMLF) was launched in the US to enhance the liquidity and functioning of money markets and to support the economy. To this end, US Agencies (FDIC, FED, and OCC) are adopting an interim final rule to allow banking organizations to neutralize the regulatory capital effects of participating in the Money Market Mutual Fund Liquidity Facility (MMLF). This treatment would extend to the community bank leverage ratio. This rule impacts the three FFIEC Call Reports and the FR Y-9C. The interim final rule is effective on March 23, 2020. Comments on the interim final rule must be received no later than May 07, 2020. FED also posted updated reporting forms and instructions for monthly and quarterly capital assessments and stress testing reports (FR Y-14M/Q). Additionally, FED published supporting statement for the reporting, recordkeeping, and disclosure requirements associated with Regulation WW, Regulation Q (FR Q), and Regulation VV (FR VV).
The interim final rule modifies the agencies' capital rules so that financial institutions receive credit for the low risk of their MMLF activities, reflecting the fact that institutions would be taking no credit or market risk in association with such activities. The change only applies to activities with the MMLF. To provide liquidity to the money market sector to help stabilize the financial system, FED authorized the Federal Reserve Bank of Boston to establish the MMLF. Under the MMLF, the Federal Reserve Bank of Boston will extend non-recourse loans to eligible financial institutions to purchase certain types of assets from money market mutual funds. A banking organization that participates in the MMLF could potentially be subject to increased capital requirements. The agencies have determined that the current leverage and risk-based capital requirements for the assets acquired by a banking organization as part of the MMLF do not reflect the substantial protections provided to the organization by the Federal Reserve Bank of Boston in connection with the facility.
The agencies believe that it would be appropriate to exclude the effects of purchasing assets through the MMLF from the regulatory capital of a banking organization. This interim final rule would permit banking organizations to exclude non-recourse exposures acquired as part of the MMLF from a banking organization's total leverage exposure, average total consolidated assets, advanced approaches-total risk-weighted assets, and standardized total risk-weighted assets, as applicable. The agencies seek comment on all aspects of the interim final rule. The interim final rule affects the agencies' current information collections for the Call Reports FFIEC 031, FFIEC 041, and FFIEC 051. The changes to the Call Reports and their related instructions will be addressed in a separate Federal Register notice. Similarly, FED will address corresponding changes to the information collected on the FR Y-9C as part of a separate Federal Register notice.
Related Links
- Joint Press Release
- Interim Final Rule
- FR Y-14M: Reporting Forms and Instructions
- FR Y-14Q: Reporting Forms and Instructions
- Supporting Statement for FR WW
- Supporting Statement for FR Q
- Supporting Statement FR VV
- Reporting Form Updates
Comment Due Date: March 23, 2020
Effective Date: May 07, 2020
Keywords: Americas, US, Banking, Reporting, Regulatory Capital, MMLF, Call Reports, FR Y-9C, FR Y-14, Credit Risk, Market Risk, Liquidity Risk, Stress Testing, CBLR Framework, COVID-19, Boston FED, US Agencies
Featured Experts
Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
SNB Announces Measures to Address Impact of COVID-19 CrisisRelated Articles
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
ECB to Consider Climate Risks When Reviewing Collateral Framework
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
ACPR Publishes Corrective Version of RUBA Taxonomy
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
