FED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms. Additionally, FED published a notice stating that it will apply the RFI/C(D) rating system to certain savings and loan holding companies (SLHCs). SLHCs with USD 100 billion or more in assets will receive ratings under the RFI/C(D) rating system until FED applies the LFI rating system to them. Under the RFI rating system, BHCs are assigned individual component ratings for risk management (R), financial condition (F), and impact (I) of nondepository entities on subsidiary depository institutions. The final rule on LFI rating system and the application of the RFI/C(D) rating system to SLHCs will become effective from February 01, 2019.
The LFI rating system applies to bank holding companies and non-insurance, non-commercial savings, and loan holding companies with total consolidated assets of USD 100 billion or more, which is a change from the originally proposed USD 50 billion threshold. It will also apply to the U.S. intermediate holding companies of foreign banking organizations established under Regulation YY with total consolidated assets of USD 50 billion or more, as proposed. The rating system introduces a new rating scale and will assign component ratings for capital planning and positions, liquidity risk management and positions, and governance and controls. FED will assign initial ratings under the new system in 2019 for bank holding companies and U.S. intermediate holding companies subject to the Large Institution Supervision Coordinating Committee framework and in 2020 for all other large financial institutions. FED is also revising provisions in Regulation K and Regulation LL to ensure consistency with certain features of the new rating system.
FED will continue to apply the existing rating system for bank holding companies with less than USD 100 billion in total consolidated assets. The existing rating system will also be adopted for non-insurance, non-commercial savings, and loan holding companies with less than USD 100 billion in total consolidated assets.
Effective Date: February 01, 2019
Keywords: Americas, US, Banking, Rating System, LFI Rating System, RFI Rating System, FED
Previous ArticleSBIF Proposes Updates to Measurement of Liquidity Position Standards
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.
FINMA published guidance (06/2020) on extending or discontinuing various exemptions that were granted due to the COVID-19 crisis.
SRB launched a consultation on the minimum data needed for valuation of a bank in resolution.