FED released corrected stress test results stemming from an error in projected trading losses. Consequently, FED revised the capital requirements for two banks—The Goldman Sachs Group, Inc. and Morgan Stanley. FED identified the error and all results affected by it, corrected those results, and implemented changes to prevent similar errors in the future. The related stress test results documents have also been updated. These documents include results of the Dodd-Frank Act Stress Test (DFAST) for 2020 and results of a sensitivity analysis that explored the vulnerabilities of banks to the downside risks to the economy posed by the COVID-19 outbreak.
FED highlighted that the loss rates for certain public welfare investments made by large banks were initially miscalculated, resulting in an overestimation of hypothetical losses for those investments. The error affected five banks—Citigroup Inc, The Goldman Sachs Group Inc, HSBC North America Holdings Inc, Morgan Stanley, and Wells Fargo & Company. However, the resulting common equity tier 1, or CET1, capital requirements for three firms (Citigroup Inc, HSBC North America Holdings Inc, and Wells Fargo & Company) were unaffected, while the CET1 capital requirements for the remaining two firms were revised. In its review of the loss models used for certain public welfare investments, FED identified other model components that were similarly implemented and has conducted additional reviews, which found no further implementation errors.
Keywords: Americas, US, Banking, Stress Testing, Dodd Frank Act, DFAST, Sensitivity Analysis, COVID-19, Stress Test Results, Regulatory Capital, CET1, FED
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EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.
APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.
BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.
Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.
PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).
FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.