Featured Product

    US Agencies Finalize Changes to Rule on Supplementary Leverage Ratio

    November 19, 2019

    US Agencies (FDIC, FED, and OCC) finalized changes to the capital requirement for banking organizations predominantly engaged in custodial activities, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The agencies are required under section 402 of the EGRRCP Act to amend the capital rule to exclude from the supplementary leverage ratio certain central bank deposits of banking organizations predominantly engaged in custody, safekeeping, and asset servicing activities. Based on current data, only The Bank of New York Mellon Corporation, Northern Trust Corporation, and State Street Corporation, together with their depository institution subsidiaries, would qualify for the rule. The final rule will be effective April 01, 2020.

    The supplementary leverage ratio is one of many tools used by the federal bank regulatory agencies to determine minimum required capital levels and ensure financial stability in the event of stress in the banking system. It applies only to large or complex internationally active banking organizations. In April 2019, the agencies proposed to implement section 402. The agencies collectively received six comment letters on the proposal (from banking organizations and other interested parties). Some respondents were supportive of the proposal while others raised concerns about the potential effect that implementation of section 402 would have on other aspects of the banking sector. The agencies have considered all the comments received on the proposal and are adopting the proposal as a final rule without modification. 

    Section 402 of the EGRRCP Act defines a custodial bank as any depository institution holding company predominantly engaged in custody, safekeeping, and asset-servicing activities, including any insured depository institution subsidiary of such a holding company. As stated in the proposal, a depository institution holding company would be considered predominantly engaged in custody, safekeeping, and asset-servicing activities if the U.S. top-tier depository institution holding company in the organization has a ratio of assets under custody (AUC)-to-total assets of at least 30:1. Such a banking organization would have been termed a “custodial banking organization.” 

    Additionally, as per the proposal, a custodial banking organization would exclude deposits placed at a “qualifying central bank” from the denominator of the supplementary leverage ratio. A qualifying central bank would include a Federal Reserve Bank, ECB, or a central bank of a member country of the Organisation for Economic Co-operation and Development (OECD) if the member country meets certain criteria. The amount of central bank deposits that could have been excluded from total leverage exposure would have been limited by the amount of deposit liabilities of the custodial banking organization that are linked to fiduciary or custody and safekeeping accounts. 

     

    Related Links

    Effective Date: April 01, 2020

    Keywords: Americas, US, Banking, Supplementary Leverage Ratio, EGRRCP Act, Regulatory Capital, Leverage Ratio, Basel III, US Agencies

    Featured Experts
    Related Articles
    News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Climate Risks, Issues Other Updates

    The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.

    December 18, 2023 WebPage Regulatory News
    News

    US Government Moves to Regulate Development and Use of AI Models

    The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).

    December 18, 2023 WebPage Regulatory News
    News

    MAS Launches Gprnt Digital Platform for ESG Reporting for SMEs

    The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”

    November 29, 2023 WebPage Regulatory News
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    NGFS Publishes Phase IV Long-term Climate Scenarios for Banks

    The Network for Greening the Financial System (NGFS) published its latest set of long-term climate macro-financial scenarios (Phase IV) for assessing forward-looking climate risks.

    November 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8947