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    FED Consults on Criteria to Include Foreign Banks in LISCC Program

    November 06, 2020

    FED published supervision and regulation report, which summarizes banking conditions and information about the bank regulatory and supervisory activities of FED. The current edition includes detailed information on the strength of the banking system in light of the economic and financial stresses from the COVID-19 containment measures. FED is also seeking input on the appropriate criteria for including foreign banking organizations in the Large Institution Supervision Coordinating Committee (LISCC) supervisory program in the future, should the risk of their U.S. operations increase. In this regard, FED has published a draft Supervision and Regulation Letter and intends to update the letter to include such criteria prior to March 31, 2021. FED will accept input until December 07, 2020. The provisions of the letter are intended to become effective on January 01, 2021.

    However, the FED letter defines the financial institutions subject to LISCC supervisory program as any firm subject to Category I standards under FED's tailoring framework, any non-commercial, non-insurance savings and loan holding company that would be identified for Category I standards if it were a bank holding company, and any nonbank financial institution designated as systemically important by the FSOC. The letter only applies to bank holding companies, savings and loan holding companies, and nonbank financial companies subject to the LISCC supervisory program. LISCC is tasked with overseeing the supervision of the largest, most systemically important financial institutions in the United States. 

    FED also announced that it is updating the list of firms supervised by its LISCC Program. FED clarified that the "Category 1" firms will be supervised in the LISCC portfolio and that it will accept input on the update. Certain foreign banks with U.S. operations that have substantially decreased in size and risk over the past decade will move to the Large and Foreign Banking Organization supervision portfolio, where they will be supervised with other banks of similar size and risk. The portfolio move will have no effect on the regulatory capital or liquidity requirements of any firm. Views of affected institutions and other interested parties will be considered in determining the appropriate criteria for including foreign banking organizations in the LISCC supervisory program in the future. Firms in the LISCC portfolio are financial institutions that may pose elevated risks to U.S. financial stability and are supervised by FED. The current list of LISCC portfolio firms include Bank of America Corporation, The Bank of New York Mellon Corporation, Barclays PLC, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, The Goldman Sachs Group, Inc, JP Morgan Chase & Co, Morgan Stanley, State Street Corporation, and Wells Fargo & Company. The list of firms in the LISCC portfolio may be modified based on a review of the systemic importance of financial institutions conducting business in the United States.

    The supervision and regulation report begins by providing an overview of the current conditions in the banking sector based on data collected by FED and other federal financial regulatory agencies as well as market indicators of the industry conditions. The report then provides an overview of the current areas of focus of the regulatory policy work of FED, including proposed rules. Finally, the report provides information on supervisory programs and approaches in light of recent events. The report distinguishes between large financial institutions and community and regional banking organizations, as supervisory approaches and priorities for these institutions frequently differ.

     

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    Comment Due Date: December 07, 2020

    Effective Date: January 01, 2021

    Keywords: Americas, US, Banking, LISCC, Regulatory Capital, COVID-19, Foreign Banks, Systemic Risk, FSOC, Category 1 Firms, FED

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