FED Publishes Final Supporting Statement for Market Risk Capital Rule
FED published the final supporting statement for the market risk capital rule. The statement highlights that FED has revised and extended for three years FR 4201, which is the collection of information associated with the market risk capital rule. The market risk rule, which requires banking organizations to hold capital to cover their exposure to market risk, is an important component of the regulatory capital framework of the FED, under the 12 CFR 217 or Regulation Q. The respondents for this collection of information are bank holding companies, savings and loan holding companies, intermediate holding companies, and state member banks that meet certain risk thresholds. No required reporting forms are associated with this information collection.
FED is revising the FR 4201 (OMB No. 7100-0314) to include certain prior approvals that respondent banking organizations must obtain under the market risk rule. The relevant reporting, recordkeeping, and disclosure requirements can be found in sections 217.203 through 217.210 and section 217.212 of 12 CFR 217. On April 09, 2019, FED had published an initial notice in the Federal Register requesting public comment for 60 days on the extension, with revision, of FR 4201. The comment period for this notice had expired on June 10, 2019. One public comment was received but it was outside the scope of the review of FED under the Paperwork Reduction Act. Post that, FED has published a final notice in the Federal Register on August 02, 2019.
The market risk rule applies to any banking organization with aggregate trading assets and trading liabilities equal to 10% or more of quarter-end total assets or USD 1 billion or more. FED may exclude a banking organization that meets these thresholds if FED determines that the exclusion is appropriate based on the level of market risk of the banking organization and is consistent with safe and sound banking practices. FED may further apply the market risk rule to any other banking organization if FED deems it necessary or appropriate because of the level of market risk of the banking organization or to ensure safe and sound banking practices. The market risk rule requires subject banking organizations to:
- Have clearly defined policies and procedures for determining which trading assets and trading liabilities are trading positions and which trading positions are correlation trading positions
- Have clearly defined trading and hedging strategies for trading positions
- Retain certain financial and statistical information regarding the institution's Board-approved sub-portfolios of its portfolio exposures subject to the market risk rule
- Have a formal disclosure policy that addresses the approach of a banking organization for determining the market risk disclosures
- Make certain public quantitative disclosures
Related Links
Keywords: Americas, US, Banking, FR 4201, Regulatory Capital, Regulation Q, Market Risk, Internal Model, FED
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Previous Article
RBNZ Amends Insurance Solvency Standards for New ZealandRelated Articles
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.
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.
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.
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.
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
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
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.
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.
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.
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.
