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

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    News

    Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks

    At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.

    September 14, 2023 WebPage Regulatory News
    News

    ISSB Standards Shine Spotlight on Comparability of ESG Disclosures

    The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures

    August 22, 2023 WebPage Regulatory News
    News

    EBA Issues Several Regulatory and Reporting Updates for Banks

    The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.

    August 10, 2023 WebPage Regulatory News
    News

    BCBS Proposes to Revise Core Principles for Banking Supervision

    The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.

    August 04, 2023 WebPage Regulatory News
    News

    US Proposes Final Basel Rules, Transition Period to Start in July 2025

    The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.

    August 04, 2023 WebPage Regulatory News
    News

    FSB Report Outlines Next Steps for Climate Risk Roadmap

    The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.

    August 04, 2023 WebPage Regulatory News
    News

    EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise

    The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.

    July 31, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8931