FED announced plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility, which is a temporary emergency lending facility that closed on December 31, 2020. In addition, FED published two notices in the Federal Register on the recordkeeping provisions associated with stress testing guidance (FR 4202) and on the Basel II Interagency Pillar 2 Supervisory Guidance (FR 4199).
The following are the key highlights of the updates from FED:
- FED is adopting a proposal to extend for three years, without revision, the recordkeeping provisions associated with Stress Testing Guidance (FR 4202). The Stress Testing Guidance recommends that banking organizations have a stress testing framework that includes clearly defined objectives, well-designed scenarios tailored to the banking organization's business and risks, well-documented assumptions, conceptually sound methodologies to assess potential impact on the banking organization's financial condition, informative management reports, and recommended actions based on stress test results. The Guidance also recommends organizations to have policies and procedures for a stress testing framework. FED has extended the FR 4202 without revision to ensure compliance with the Paperwork Reduction Act. However, whether and to what extent changes should be made to the guidance, in light of recent amendments made by FED to its stress testing rules, is under consideration. FED will publish any proposed changes to the FR 4202 via a separate notice for comment.
- FED is seeking comments on a proposal to extend for three years, without revision, the Basel II Interagency Pillar 2 Supervisory Guidance (FR 4199). The Pillar 2 Guidance is intended to assist banking organizations that are subject to the Basel II advanced approaches capital adequacy framework in applying that framework. Advanced approaches banking organizations are required to use an internal ratings-based approach to calculate regulatory credit risk capital requirements and advanced measurement approaches to calculate regulatory operational risk capital requirements. Banking organizations are required to meet certain qualification requirements before they can use the advanced approaches framework for risk-based capital purposes. The Pillar 2 Guidance sets the expectation that such organizations maintain certain documentation as described in certain parts of the guidance. FED consulted with FDIC and OCC and confirmed that there will be no revisions to the guidance and no revision to the time per response estimates. Comments must be submitted by August 09, 2021.
- FED announced plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), which is a temporary emergency lending facility that closed on December 31, 2020. The SMCCF proved vital in restoring market functioning last year, supporting the availability of credit for large employers and bolstering employment through the COVID-19 pandemic. SMCCF portfolio sales will be gradual and orderly and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds. The Federal Reserve Bank of New York, which manages the operations of the SMCCF, will announce additional details soon and before sales begin. The SMCCF was established with the approval of the Treasury Secretary and equity provided by the Treasury Department under the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.
Comment Due Date: August 09, 2021
Keywords: Americas, US, Banking, FR 4202, FR4199, Stress Testing, Reporting, Regulatory Capital, COVID-19, SMCCF, Credit Risk, Lending Facility, Pillar 2, Basel, FED
Previous ArticleFASB Proposes Taxonomy Implementation Guide for Debt Securities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)