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December 21, 2018

US Agencies (FDIC, FED, and OCC) are proposing to establish risk-based categories for determining applicability of requirements under the regulatory capital rule, the liquidity coverage ratio (LCR) rule, and the proposed net stable funding ratio (NSFR) rule for large U.S. banking organizations. The proposal would establish four categories of standards and apply tailored capital and liquidity requirements for banking organizations subject to each category. The proposal is consistent with a separate proposal issued by FED that would apply certain prudential standards for large U.S. banking organizations based on these categories. Comments must be received by January 22, 2019.

This proposal would not amend the capital and liquidity requirements applicable to an intermediate holding company of a foreign banking organization or its subsidiary depository institutions. It would also not amend the requirements applicable to federal branches or agencies of foreign banking organizations. The US Agencies are proposing to amend the scope of certain aspects of the regulatory capital and LCR rules; the agencies are also re-proposing the scope of NSFR rule. The proposal would update the regulatory distinction between advanced approaches and standardized approach banking organizations and further tailor the capital and liquidity requirements applicable to large banking organizations according to risk-based indicators. Among others, the proposed rule would require changes to the FFIEC 031, 041, 051, and 101 call reports, which will be addressed in a separate Federal Register notice. 

For banking organizations with consolidated assets of USD 100 billion or more, the proposal would establish four categories of standards based on size, cross-jurisdictional activity, weighted short-term wholesale funding, off-balance sheet exposure, and non-bank assets:

  • The most stringent set of standards (Category I) would apply to U.S. global systemically important bank holding companies (G-SIBs) and their subsidiary depository institutions. The proposed standards are  consistent with the BCBS standards, subject to notice and comment rulemaking in the United States.
  • The second set of standards (Category II) would apply to banking organizations that are very large or have significant international activity. Like Category I, the agencies intend for Category II standards to be consistent with the BCBS standards, subject to notice and comment rulemaking in the United States. 
  • The third set of standards (Category III) would apply to banking organizations with consolidated assets of USD 250 billion or more that do not meet the criteria for Category I or II and to other banking organizations with consolidated assets of USD 100 billion or more, but less than USD 250 billion, that meet or exceed specified indicators of risk. Category III standards would reflect these banking organizations' heightened risk profiles relative to smaller and less complex banking organizations.
  • The fourth set of standards (Category IV) would apply to banking organizations with consolidated assets of USD 100 billion or more that do not meet the thresholds for one of the other categories. These banking organizations generally have greater scale and operational and managerial complexity relative to smaller banking organizations, but less than banking organizations that would be subject to Category I, II, or III standards. Category IV standards are less stringent than Category III standards, reflecting the lower risk profile of these banking organizations relative to other banking organizations with USD 100 billion or more in total consolidated assets. 

 

Related Link: Federal Register Notice

Comment Due Date: January 22, 2019

Keywords: Americas, US, Banking, LCR, NSFR, Regulatory Capital, G-SIB, Proportionality, Reporting, US Agencies

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