On July 21, the FDIC clarified how it will evaluate requests by S-Corporation Banks to make dividend payments that would otherwise be prohibited under the Basel III capital conservation buffer. New Basel III capital rules include a capital conservation buffer which prohibits or limits the dividends a bank can pay when its risk-based capital ratios fall below certain thresholds. If an S-corporation bank has income but is limited from paying dividends as a result of the new rules, its shareholders may have to pay taxes on their pass-through share of the S-corporation’s income from their own resources. To avoid this problem, a bank may request approval from their primary federal regulator to make a dividend payment that would not otherwise be permitted. Absent serious safety-and-soundness concerns about the requesting bank, the FDIC generally would expect to approve such requests by well-rated S-corporation banks that are limited to the payment of dividends to cover shareholders’ taxes on their portion of an S-corporation’s earnings. Press Release. Financial Institution Letters.
On July 23, the SEC re-proposed amendments, initially proposed in March 2011, related to the removal of credit rating references in rule 2a-7 and Form N-MFP of the Investment Company Act. The re-proposed amendments would implement provisions of Dodd-Frank. Comments must be submitted within 60 days of the proposal’s publication in the Federal Register. Proposed Rule.
On July 23, the SEC adopted amendments to the rules that govern money market mutual funds. The new rules require a floating net asset value (NAV) for institutional prime money market funds to fluctuate, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. This provides non-government money market fund boards with new tools— liquidity fees and redemption gates—to address the problem of investor runs. With a floating NAV, institutional prime money market funds are required to value their portfolio securities using market-based factors and sell and redeem shares based on a floating NAV. Release. Final Rule.
On June 25, the SEC adopted the first of a series of rules and guidance on cross-border security-based swap activities for market participants. The rules and guidance explain when a cross-border transaction must be counted toward the requirement to register as a security-based swap dealer or major security-based swap participant. The rules also address the scope of the SEC’s cross-border anti-fraud authority. Press Release. Final Rules.
On June 26, the Department of the Treasury announced an effort to revive the residential mortgage-backed private label securities market to improve the overall efficiency of the U.S. housing finance system. In connection with this effort, the Treasury Department published a request for comment soliciting input from investors, securitizers and other market participants and plans to host a series of upcoming meetings to further explore ways to increase private lending. Comments are due on August 8, 2014. Press Release.
On June 16, the SEC adopted revisions to the EDGAR manual and related rules. Among other changes, the revisions change the ABS Asset Class value from “Corporate Debt” for ABS-15G and ABS-15G/A to “Debt Securities.” The EDGAR system was scheduled to be upgraded the same day. Rule.
On June 16, Lael Brainard took the oath of office as a member of the Fed Board. In addition, Jerome H. Powell was sworn in for a second term, and Stanley Fischer was sworn in as Vice Chairman. Press Release.
On June 16, J. Christopher Giancarlo was officially sworn in, after being confirmed by the U.S. Senate on June 3. Press Release.