FED Revises Guidance on Managing Funding and Liquidity Risk
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.
Related Links
Effective Date: October 18, 2019
Keywords: Americas, US, Banking, FR 4198, Liquidity Risk, FED
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
FED Extends Information Collection on Leveraged LendingRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
