Featured Product

    US Agencies Amend LCR Rule for Banks Participating in MMLF and PPPLF

    May 06, 2020

    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
    Related Articles
    News

    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.

    January 04, 2023 WebPage Regulatory News
    News

    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.

    January 01, 2023 WebPage Regulatory News
    News

    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.

    December 30, 2022 WebPage Regulatory News
    News

    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.

    December 29, 2022 WebPage Regulatory News
    News

    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.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    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.

    December 22, 2022 WebPage Regulatory News
    News

    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.

    December 22, 2022 WebPage Regulatory News
    News

    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.

    December 20, 2022 WebPage Regulatory News
    News

    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.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697