US Agencies Finalize Interim Final Rules Issued Amid Pandemic
US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year. One of the final rules temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions. This final rule will become effective on its publication in the Federal Register and will expire on December 31, 2020. Another final rule neutralizes—due to the lack of credit and market risks—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities. The effective date for this final rule is December 28, 2020.
Final Rule on Real Estate Appraisals
The final rule temporarily deferring appraisal and evaluation requirements is substantially similar to the interim final rule issued in April 2020. The final rule adopts deferral of the requirement to obtain an appraisal or evaluation for up to 120 days following the closing of certain residential and commercial real estate transactions, excluding transactions for acquisition, development, and construction of real estate. The final rule makes one revision to the interim final rule. In response to the comments received on the interim final rule, the final rule clarifies that transactions for the acquisition, development, and construction of real estate excluded from the 120-day deferral period mean, for purposes of this rule, the loans that are described in the Call Report Instructions for Schedule RC-C, “Loans and Lease Financing Receivables,” Part I, "Loans and Leases," item 1.a, “Construction, land development, and other land loans.”
Final Rule on Treatment of Certain Emergency Facilities in Regulatory Capital and Liquidity Coverage Ratio (LCR) Rules
US Agencies are adopting the revisions made to the regulatory capital rule and the LCR rule under three interim final rules published in March, April, and May 2020. The agencies are adopting these interim final rules as final with no changes. Under this final rule, banking organizations may continue to neutralize the regulatory capital effects of participating in the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF) and are required to continue to neutralize the LCR effects of participating in the MMLF and the PPPLF. In addition, Paycheck Protection Program loans will receive a zero percent risk-weight under the agencies’ regulatory capital rules. The final rule will support the flow of credit to households and businesses affected by the coronavirus event.
In connection with the interim final rules, FED temporarily revised the financial statements for holding companies (FR Y-9 reports) and the complex institution liquidity monitoring report (FR 2052a); it also invited comment on proposals to revise and extend these collections of information for three years. FED has extended the FR Y-9 and FR 2052a for three years, with revision, as originally proposed. Additionally, in connection with the interim final rules, the agencies made revisions to the call reports, the report of assets and liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002), and the regulatory capital reporting for institutions subject to the advanced capital adequacy framework (FFIEC 101). The changes to the call reports, FFIEC 002, and FFIEC 101 and their related instructions have been addressed in a separate Federal Register notice.
Related Links
- Press Release
- Final Rule on Real Estate Appraisals (PDF)
- Federal Register Notice on Treatment of Emergency Facilities
Effective Date: FR Publication Date/December 28, 2020
Keywords: Americas, US, Banking, Securities, COVID-19, Real Estate Appraisals, Credit Risk, Residential Real Estate, MMLS, Paycheck Protection Program, LCR, Regulatory Capital, Reporting, FR Y-9C, FR 2052A, Call Reports, Basel, US Agencies
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.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
EC to Defer Application of SFDR Standards Till July 2022
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
EIOPA Consults on Reporting and Disclosures Under Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.
BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
EBA Seeks Views on Proportionality Assessment Methodology
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
