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.
- 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
Previous ArticleSNB Announces Measures to Address Impact of COVID-19 Crisis
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.