November 29, 2018

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

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