OCC Publishes Final Rule that Revises the Risk-Based Capital Definition of Eligible Guarantee for Advanced Approaches Banks

The OCC, the Fed, and the FDIC have published a final rule that revises the advanced approaches risk-based capital rules by removing the requirement that only guarantees provided by certain counterparties are eligible for recognition as credit risk mitigants. Specifically, the final rule modifies the definition of “eligible guarantee” for purposes of the advanced approaches risk-based capital rules by removing the requirement that an eligible guarantee be provided by an “eligible guarantor” for all exposures other than securitization exposures. The rule was published in the Federal Register on July 30, 2014Press ReleaseFinal Rule.

Fed Issues Report on the Economic Well-Being of U.S. Households

On August 7, the Fed provided a snapshot of the self-perceived financial and economic well-being of U.S. households and the issues they face, based on responses to the Board’s 2013 Survey of Household Economics and Decisionmaking. The report provides insight into numerous topics of current relevance to household finances, including: housing and living arrangements; credit access and behavior; education and student loan debt; savings; retirement; and health expenses.  Press Release.

Treasury Issues Proposed Rules to Enhance Financial Transparency

On July 30, the Financial Crimes Enforcement Network of the U.S Department of the Treasury proposed rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for banks and other financial institutions (including brokers or dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities) in an effort to help prevent the use of anonymous companies to engage in or launder the proceeds of illegal activity in the U.S. financial sector.  Comments must be submitted within 60 days of the proposal’s publication in the Federal Register.  ReleaseNotice of Proposed Rulemaking.

SEC Enforcement Division Modifies Municipalities Disclosure Initiative

On July 31, the SEC announced modifications to its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative that will (i) allow issuers and obligors more time to complete their reporting requirements by extending the deadline to self-report potential violations from September 10, 2014 - December 1, 2014 and (ii) implement a tiered approach to civil penalties for underwriters based on the size of the firm.   Release.

FDIC Gives Guidance to S-Corporation Banks Regarding Dividends under Basel III

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 earningsPress ReleaseFinancial Institution Letters.

SEC Proposes Removing Credit Rating References and Amending Issuer Diversification Requirement

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.

SEC Issues Money Market Fund Reform Rules

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 NAVReleaseFinal Rule.

SEC Adopts Cross-Border Security-Based Swap Rules

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 ReleaseFinal Rules.