FED revised and extended, for three years, the interagency policy statement on funding and liquidity risk management (FR 4198; OMB No. 7100-0326). The interagency policy statement, also known as guidance, summarizes the principles of sound liquidity risk management and becomes effective with immediate effect. FED did not receive any comments to this proposal, the comment period for which had expired on August 26, 2019. Thus, the revisions will be implemented as proposed.
FED had proposed to revise FR 4198 to account for certain aspects of the guidance that include recordkeeping provisions for liquidity risk management policies, procedures, and assumptions and contingency funding plans. Before this revision, FR 4198 did not account for the recordkeeping provisions for contingency funding plans and did not fully account for the recordkeeping provisions related to liquidity risk management policies, procedures, and assumptions. The reporting frequency of FR 4198 is annual and no required reporting forms are associated with the guidance (the FR 4198 designation is for internal purposes only). The documentation required by the guidance is maintained by each institution; therefore, the documentation is not collected or published by FED.
The guidance states that financial institutions should develop and document liquidity risk management policies and procedures commensurate with the complexity, risk profile, and scope of operations of an institution. Sections 3 and 6 of the guidance provide that financial institutions should maintain such policies and procedures, Section 6 states that financial institutions should have a contingency funding plan that sufficiently addresses potential adverse liquid events and emergency cash flow requirements, and Section 34 states that the contingency funding plan should be documented. The guidance also includes a number of voluntary recordkeeping provisions that apply to bank holding companies, savings and loan holding companies, state-licensed branches and agencies of foreign banks (other than insured branches), corporations organized or operating under sections 25 or 25A of the Federal Reserve Act, and state member banks. The estimated number of respondents for implementing recordkeeping is 30 and for ongoing recordkeeping is 4,789.
Effective Date: October 18, 2019
Keywords: Americas, US, Banking, FR 4198, Liquidity Risk, FED
Previous ArticleFED Extends Information Collection on Leveraged Lending
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.