FED Revises Information Collection Under Market Risk Capital Rule
FED adopted a proposal to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314). The revisions become effective immediately. FED had proposed to extend and revise the market risk capital rule in January 2020 and to reinstate the recordkeeping requirement concerning securitizations. FED had also proposed to revise the FR 4201 to account for the general recordkeeping requirement in section 217.203(f) of the market risk capital rule, which was not previously accounted for. The comment period for this proposal expired on March 17, 2020. FED did not receive any comments; thus, the revisions are being implemented as proposed.
The market risk capital rule requires banking organizations to hold capital to cover their exposure to market risk and is an important component of the regulatory capital framework. The rule includes collections of information that permit FED to monitor the market risk profile of FED-regulated banking organizations that have significant market risk and to evaluate the impact of the market risk rule on these banking organizations. The respondents for this collection of information are bank holding companies, savings and loan holding companies, intermediate holding companies, and state member banks. The market risk capital rule applies to any banking organization with aggregate trading assets and trading liabilities equal to 10% or more of quarter-end total assets, or USD 1 billion or more. FED may exclude a banking organization that meets these thresholds if it determines that the exclusion is appropriate based on the level of market risk of the banking organization and is consistent with safe and sound banking practices.
There are several recordkeeping requirements outlined in the market risk capital rule. The subject banking organizations must conduct and document an analysis of the risk characteristics of each securitization position prior to acquiring the position, considering structural features of the securitization that would materially impact the performance of the position. They must also conduct and document an analysis of relevant information regarding the performance of underlying credit exposure(s), market data of the securitization, and, for resecuritization positions, performance information on the underlying securitization exposure. On an ongoing basis (but no less frequently than quarterly), subject banking organizations must evaluate, review, and update, as appropriate, the analysis required for each securitization position.
Related Link: Federal Register Notice
Effective Date: September 17, 2020
Keywords: Americas, US, Banking, FR 4201, Market Risk, Information Collection, Regulatory Capital, Securitization, Basel, 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.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
FED Releases Scenarios for Second Round of Stress Tests on BanksRelated Articles
FSB Sets Out Effective Practices for Cyber Incident Recovery
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol
HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.
FSB Sets Out Roadmap for Transition to Alternative Reference Rates
FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).
HM Treasury Publishes Response to Proposal on BRRD2 Transposition
HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).
HM Treasury Publishes Response to Proposal on CRD5 Transposition
HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.
BoE Publishes Reporting Schedule for Statistical Returns
In a recent statistical notice, BoE announced publication of the reporting schedule for statistical returns for 2021.
EC Welcomes Declaration by Member States on EU Cloud Federation
EC welcomed the joint declaration by 25 EU member states on building the next generation of cloud in Europe.
MAS Amends Notice on Issuance of Covered Bonds by Banks in Singapore
MAS published amendments to Notice 648 on the issuance of covered bonds by banks incorporated in Singapore.
FDIC Selects Technology Companies for Rapid Prototyping Competition
FDIC has selected 14 technology companies—including Accenture Federal Services, LLC, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the next phase of the rapid prototyping competition.
GLEIF Defines New Validation Agent Role for Financial Institutions
GLEIF announced that financial institutions worldwide can realize a variety of cost, efficiency, and customer experience benefits by assuming a new “validation agent” role within the Global Legal Entity Identifier (LEI) System.
