US Agencies Amend LCR Rule for Banks Participating in MMLF and PPPLF
US Agencies (FDIC, FED, and OCC) announced an interim final rule that modifies the liquidity coverage ratio (LCR) rule to support participation of banking organizations in the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF). FED had established these two facilities to support the economy in light of the COVID-19 disruptions. This amendment impacts the information collection for the Complex Institution Liquidity Monitoring Report (FR 2052a). The interim rule will be effective on May 06, 2020 and comments on the rule will be accepted until June 05, 2020.
The interim final rule facilitates participation in these liquidity facilities by neutralizing the LCR impact associated with the non-recourse funding provided by these facilities. The LCR rule requires covered companies to calculate and maintain an amount of high-quality liquid assets (HQLA) sufficient to cover their total net cash outflows over a thirty-day stress period. A covered company’s LCR is the ratio of its HQLA amount (LCR numerator) divided by its total net cash outflows (LCR denominator). Absent the interim final rule, under the LCR rule, covered companies would be required to recognize outflows for MMLF and PPPLF loans with a remaining maturity of 30 days or less and inflows for certain assets securing the MMLF and PPPLF loans. As a result, a covered company’s participation in the MMLF or PPPLF could affect its total net cash outflows, which could potentially result in an inconsistent, unpredictable, and more volatile calculation of LCR requirements across covered companies.
The interim final rule adds a new definition and a new section to the LCR rule. The new definition “Covered Federal Reserve Facility Funding” means a non-recourse loan that is extended as part of the MMLF or PPPLF authorized by FED pursuant to section 13(3) of the Federal Reserve Act. The new section requires Covered Federal Reserve Facility Funding and the assets securing such funding to be excluded from the calculation of a covered company’s total net cash outflow amount as calculated under the LCR rule, notwithstanding any other section of the LCR rule. This new section excludes advances made by a Federal Reserve Bank under the MMLF or the PPPLF from being assigned an outflow rate and any collateral securing such an advance from being assigned an inflow rate. This new section does not apply to the extent the covered company secures Covered Federal Reserve Facility Funding with securities, debt obligations, or other instruments issued by the covered company or its consolidated entity.
FED has temporarily revised the reporting form and instructions for the FR 2052a to reflect the changes made in this interim final rule. FED is also inviting comment on a proposal to extend the FR 2052a for three years, with revisions. Comments will be accepted for 60 days after publication in the Federal Register. At the end of the comment period, the comments and recommendations received will be analyzed to determine the extent to which FED should modify the information collection.
Related Links
Comment Due Date: June 05, 2020
Effective Date: May 06, 2020
Keywords: Americas, US, Banking, COVID-19, MMLF, Paycheck Protection Program, Liquidity Facility, LCR, FR 2052a, Reporting, Liquidity Risk, Basel, FED, US Agencies
Featured Experts

Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives

Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Previous Article
FSI Examines Jurisdictional Dividend Distribution Policies for BanksRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.