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
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