US Agencies (FDIC, FED, and OCC) announced an interim final rule that provides temporary relief to certain community banking organizations from certain regulations and reporting requirements as a result of their growth in size due to the COVID-19 response programs such as the Paycheck Protection Program. The rule permits community banking organizations to use asset data as of December 31, 2019 to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021. The temporary regulatory burden relief has been applied to regulations related to capital adequacy and regulatory reporting, among others. The interim final rule also summarizes the manner in which banking organizations will be required to determine the applicability of various reporting thresholds through the end of 2021 and beyond. The interim rule will be effective immediately on publication in the Federal Register while comments will be accepted for 60 days after publication in the Federal Register.
The community banking organizations include national banks, savings associations, state banks, bank holding companies, savings and loan holding companies, and U.S. branches and agencies of foreign banking organizations with under USD 10 billion in total assets as of December 31, 2019. Resulting from the participation in federal COVID-19 response programs and support measures, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary. The temporary increase in size could subject community banking organizations to new regulations or reporting requirements. In the absence of regulatory burden relief, community banking organizations that experience an increase in assets above one or more regulatory thresholds would face significant transition costs necessary to comply with new or more stringent regulatory and reporting standards. Therefore, the agencies believe it is appropriate to provide temporary regulatory burden relief to community banking organizations that have risen above, or will rise above, certain asset-based regulatory thresholds.
The relief shall promote further lending and avoid potentially temporary, but significant, transition costs that community banking organizations would otherwise face to comply with the new standards. With regard to the requirements covered by the interim final rule, community banking organizations that have crossed a relevant threshold generally will have until 2022 to either reduce their size or prepare for new regulatory and reporting standards. FED is also temporarily revising the instructions to a number of its regulatory reports to provide that community banking organizations may use asset data as of December 31, 2019 to determine reporting requirements for reports due in calendar years 2020 or 2021. The revisions to the affected reports do not affect the substantive reporting instructions for any item, schedule, or report. The regulatory burden relief applies to the following information collections:
- Financial Statements for Holding Companies (FR Y-9 Reports; OMB No. 7100-0128)
- Statements of U.S. Nonbank Subsidiaries of U.S. Holding Companies (FR Y-11 and FR Y-11S; 7100-0244)
- Reports of Foreign Banking Organizations (FR Y-7N, FR Y-7NS, and FR Y-7Q; 7100- 0125)
- Statements of Foreign Subsidiaries of U.S. Banks (FR 2314 and FR 2314S; OMB No. 7100-0073)
The agencies plan to publish a separate Federal Register notice that will address corresponding changes to the Call Reports (FFIEC 031, FFIEC 041, and FFIEC 051).
Comment Due Date: FR+60 Days
Effective Date: FR Publication Date
Keywords: Americas, US, Banking, COVID-19, Credit Risk, Regulatory Capital, Reporting, FR Y-9C, Call Reports, Paycheck Protection Program, US Agencies
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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