bank holding companies

Federal Reserve Board Releases Results of Supervisory Bank Stress Tests

 

On June 22, 2017, the Federal Reserve Board released the results of its annual supervisory stress tests conducted on 34 bank holding companies. According to the results, the nation’s largest bank holding companies have strong capital levels and retain their ability to lend to households and businesses during a severe recession. The supervisory stress tests are carried out pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and is one component of the Federal Reserve’s analysis during the Comprehensive Capital Analysis and Review (CCAR), which is an annual exercise to evaluate the capital planning processes and capital adequacy of large bank holding companies. Report. Press Release.

Federal Reserve Updates Risk Management Supervisory Guidance for Smaller FBOs

On June 8, 2016, the Federal Reserve updated its Supervisory Guidance that partially supersedes SR letter 95-51, “Rating the Adequacy of Risk Management and Internal Controls at State Member Banks and Bank Holding Companies.”  The guidance clarifies Board and senior management oversight of risk management, policies, procedures and limits, risk monitoring and MIS, and internal controls.  One revision extends the applicability of the guidance to the U.S. operations of foreign banking organizations with total consolidated U.S. assets of less than $50 billion (such as ISP), which were not previously subject to SR 95- 51. The guidance notes, however, that FBO risk management processes and control functions for the U.S. operations may be implemented domestically or outside of the U.S. and in cases where the functions are performed outside of the U.S., the FBO’s oversight function, policies and procedures, and information systems need to be sufficiently transparent to allow U.S. supervisors to assess their adequacy.

Additionally, the FBO’s U.S. senior management need to demonstrate and maintain a thorough understanding of all relevant risks affecting the U.S. operations and the associated management information systems, used to manage and monitor these risks within the U.S. operations.  With respect to Board responsibilities, the guidance states in a footnote: “For the purpose of this guidance, for foreign banking organizations, ‘board of directors’ refers to the equivalent governing body of the U.S. operations of the FBO.”

The guidance goes on further to state that:

The board of directors should collectively have a balance of skills, knowledge, and experience to clearly understand the activities and risks to which the institution is exposed.  The board of directors should take steps to develop an appropriate understanding of the risks the institution faces, through briefings from experts internal to their organization and potentially from external experts.  The institution’s management information systems should provide the board of directors with sufficient information to identify the size and significance of the risks.  Using this knowledge and information, the board of directors should provide clear guidance regarding the level of exposures acceptable to the institution and oversee senior management’s implementation of the procedures and controls necessary to comply with approved policies, the guidance states.

Fed Final Rule on Supervision and Regulation of Bank Holding Companies and Foreign Banks

On February 18, the Fed issued a final rule which establishes enhanced supervision standards for large U.S. bank holding companies and foreign banking organizations, as required by the Dodd-Frank Act.  The final rule will be effective for U.S. entities on January 1, 2015, and for foreign entities in either 2016 or 2018, depending on the type of entity.  Fed Release.   Fed Final Rule.

Rating Agency Developments

On May 2, KBRA released its methodology for rating global banks and bank holding companiesKBRA Report

On April 30, Fitch released its criteria for rating U.S. auto lease ABSFitch Report

On April 26. S&P released its criteria for rating Canadian auto loan ABSS&P Report

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Fed Proposal on Annual Assessments

On April 15, the Fed requested comment on a proposed rule to establish an annual assessment for bank holding companies and savings and loan companies with $50 billion or greater in total consolidated assets, as well as for nonbank financial companies designated for Fed supervision by the FSOC.  Comments on the proposed rule must be submitted by June 15.  Fed Release.  Proposed Rule.

Fed, FDIC Announce Due Dates for Large Bank Resolution Plans

On June 29, the Fed and the FDIC announced the process for receiving and evaluating initial resolution plans for U.S. bank holding companies with $250 billion or more in total nonbank assets and non-U.S. banking holding companies with $250 billion or more in total U.S. nonbank assets. Such bank holding companies must submit their initial resolution plans on or before July 2 and the public sections of these resolution plans will be released on July 3. Fed Release. FDIC Release.