November 21, 2018

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.

 

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Effective Date: February 01, 2019

Keywords: Americas, US, Banking, Rating System, LFI Rating System, RFI Rating System, FED