Joint Federal Regulators Approve Final Risk Retention Rules

On October 21 and 22, the Fed, HUD, FDIC, FHFA, OCC, and SEC jointly approved final risk retention rules.  The final rules, which implement Section 941 of Dodd Frank, generally follow the re-proposed rules issued in August 2013, mandating that sponsors retain at least 5% of the credit risk in asset-backed securities transactions.  Generally, risk may be retained by holding either a horizontal or avertical slice of issued securities, while additional options are available for specific types of securitizations.  The rules will apply toresidential mortgage-backed securities one year after publication in the Federal Register, and will apply to all other asset classes two years after publication.  Final Rules.  Joint Release.

OCC Finalizes its Heightened Standards for Large Financial Institutions

On September 2, the OCC published final guidelines to strengthen the governance and risk management practices of large financial institutions.  The guidelines apply to insured national banks, insured federal savings associations, and insured federal branches of foreign banks with US$50 billion or more in average total consolidated assets.  The guidelines also apply to an OCC-regulated institution with less than US$50 billion in average total consolidated assets if that institution’s parent company controls at least one other covered institution.  The guidelines provide that covered institutions should establish and adhere to a written risk governance framework to manage and control risk-taking activities.  The guidelines also provide minimum standards for the institutions’ boards of directors to oversee the risk governance framework.  Release.

Federal Agencies Seek Comment on Swap Margin Requirements

On September 3, the Fed, the Farm Credit Administration, the FDIC, the FHFA, and the OCC sought comment on a proposed rule to establish margin requirements for swap dealers, major swap participants, security-based swap dealers and major security-based swap participants as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  The proposed rule would establish minimum requirements for the exchange of initial and variation margin between covered swap entities and their counterparties to non-cleared swaps and non-cleared security-based swaps.  The margin requirements mandated by the Dodd-Frank Act are intended to address a number of weaknesses in the regulation and structure of the swap markets that were revealed during the recent financial crisis.  The requirements are intended to reduce risk, increase transparency, and promote market integrity.  Proposed Rule.

OCC Releases Revised Comptroller’s Handbook

On August 20, the OCC released an updated booklet providing guidance to examiners and bankers on assessing and managing the risks associated with merchant processing activities. The booklet replaces the earlier version issued in December 2001. The booklet addresses a variety of topics including, among others, data security standards in the payment card industry for merchants and processors.  Press ReleaseUpdated Booklet.

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.

Bank Regulatory Agencies Seek to Identify Reductions to Regulatory Burden

On June 4, the Fed, FDIC and OCC published the first of several requests for comments to identify outdated, unnecessary or unduly burdensome regulations imposed on insured depository institutions.

The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires the federal banking regulators to review regulations issued by the agencies at least every 10 years. It also requires the regulators to break down the regulations by category, present each category for comment and identify areas of regulations that are outdated, unnecessary or unduly burdensome.

The regulators have divided the regulations into 12 categories and will request comments with respect to each category over the next two yearsFed Press ReleaseRule Notice.

OCC Announces Changes to the Supervisory Process for the Largest Banks

On May 28, the OCC announced that it will expand the organization, functions and responsibilities of its large bank lead expert program to improve horizontal perspective and analysis, systemic risk identification and resource prioritization.  The OCC will establish a formal rotation program for all examiners to provide them with broader perspectives.  The OCC will also formalize an enterprise risk management framework.  These changes come in response to an international peer review of the OCC’s supervision of large banks and thrifts.  Press ReleaseInternational Peer Review ReportSummary of OCC Responses.

Final Guidance for Medium-Sized Firms on Dodd-Frank Stress Tests

On March 5, the Fed, the FDIC, and the OCC issued final guidance which describes supervisory expectations for stress tests to be conducted by financial companies with between $10 and $50 billion in total assets.  The guidance confirms that these companies are not subject to the Fed’s capital plan rule, the Fed’s annual Comprehensive Capital Analysis and Review, Dodd-Frank Act supervisory stress tests, or related data collections, which apply to bank holding companies with assets of at least $50 billion.  Joint Release.  Final Supervisory Guidance.

Volcker Rule Exclusion for TruPS CDOs

On January 14, the Fed, CFTC, FDIC, OCC and SEC issued an interim final rule which will permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) if the following conditions are met: (i) the TruPS CDO was established and the interest was issued before May 19, 2010; (ii) the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral (as defined by the rule); and (iii) the banking entity’s interest in the TruPS CDO was acquired on or before December 10, 2013, the date the agencies issued final rules implementing section 619 of the Dodd-Frank Act (the Volcker Rule).  The agencies also released a non-exclusive list of issuers which meet the requirements of the interim final rule.  Comments must be submitted within 30 days of publication in the Federal Register.  Joint ReleaseJoint Interim Final RuleList of Excluded CDO Issuers.

Three Agencies Seek Comment on Joint Supplemental Guidance on Income Tax Allocation Agreements

On December 19, Fed, FDIC and OCC issued a statement seeking comment on supplemental guidance on income tax allocation agreements involving holding companies and insured depository institutions.  The proposed guidance will clarify ownership of any tax refundsReleaseProposed Addendum.