FED Consults on Rule Establishing Risk-Based Categories for Banks
FED proposed a rule that would establish risk-based categories for determining prudential standards for large U.S. banking organizations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act). The proposal would amend FED's enhanced prudential standards rule to modify the application of requirements related to supervisory and company-run stress testing; liquidity risk management, stress testing, and buffer maintenance; risk committee and risk management; and single-counterparty credit limits. In addition, the proposal would include changes to the reporting requirements of the FR Y-14, FR Y-15, FR 2052a, FR Y-9C, and FR Y-9LP reporting forms. Comment period on this proposal ends on January 22, 2018.
The amendments would reflect the risk profiles of banking organizations under each proposed category of standards and would apply prudential standards to certain large savings and loan holding companies using the same categories. The proposal would apply to top-tier U.S. bank holding companies and covered savings and loan holding companies. It would not apply to a foreign banking organization, including to an intermediate holding company of a foreign banking organization. The proposal would establish four categories of prudential standards for large U.S. banking organizations:
- Category I (the most stringent set of) standards would apply to U.S. G-SIBs.
- Category II standards would apply to firms with USD 700 billion or more in total consolidated assets or USD 75 billion or more in cross-jurisdictional activity, and that are not subject to Category I standards.
- Category III standards would apply to firms that are not subject to Category I or II standards and that have USD 250 billion or more in total consolidated assets or USD 75 billion or more in any of the following indicators: Nonbank assets, weighted short-term wholesale funding, or off-balance-sheet exposures.
- Category IV standards would apply to firms with at least USD 100 billion in total consolidated assets that do not meet any of the thresholds specified for Categories I through III.
This proposal would reflect amendments made by EGRRCP Act to the Dodd-Frank Act regarding the application of enhanced prudential standards for large banking organizations. Separately, FED, OCC, and FDIC are proposing amendments to the agencies' capital and liquidity requirements based on the same categories. The proposal would not apply to foreign banking organizations, including to an intermediate holding company of a foreign banking organization.
Related Link: Proposed Rule in Federal Register
Comment Due Date: January 22, 2019
Keywords: Americas, US, Banking, EGRRCP Act, Dodd Frank Act, Proportionality, Reporting, Basel III, FED
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
