On November 13, the OCC, the FDIC and the FRB amended the effective date of the Capital Simplification Final Rule issued on July 22. Banks not subject to the advanced approaches capital rule will be permitted to implement the simplified standards for calculating regulatory capital on January 1, 2020, instead of April 1, 2020, as initially provided. OCC Release. Federal Register.
On November 13, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) published in the Federal Register a final rule creating an optional Community Bank Leverage Ratio (CBLR) framework for measuring capital adequacy of qualifying community banking organizations. Banks that meet the qualifying criteria, including maintaining a leverage ratio greater than 9 percent, and elect to use the CBLR framework will be considered to have met the capital requirements for the “well capitalized” category under the agencies’ Prompt Corrective Action (PCA) framework and will no longer be subject to the generally applicable capital rule. The final rule will become effective on January 1, 2020. OCC Release. Federal Register.
On October 29, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) adopted a final rule that simplifies capital requirements for community banks. The final rule allows community banks with less than $10 billion in total consolidated assets, a leverage ratio of greater than nine percent (9%) and limited amounts of off-balance-sheet exposures and trading assets to adopt a simple leverage ratio to measure their compliance with the capital requirements. The simplified leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for qualifying community banks that opt into the framework. FDIC Release. Federal Reserve Release.
On September 17, the Federal Deposit Insurance Corporation (FDIC) finalized a rule that introduces an optional community bank leverage ratio (CBLR) framework for measuring capital adequacy of qualifying community banking organizations. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9 percent, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements will be considered to have met the well-capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. Release. Final Rule.
The Federal Deposit Insurance Corporation (FDIC) published its annual review of the primary risk factors facing the banking system, focusing on the categories of credit risk and market risk. The key credit risk identified by the FDIC is increased competition among lenders as loan growth has slowed, posing risk management challenges given market demand for higher-yielding leveraged loan and corporate bond products, resulting in looser underwriting standards. The main market risk recognized in the report is the current interest rate environment. Release. Report.
The Federal Reserve Board and the FDIC completed their evaluation of 82 foreign banks’ 2018 resolution plans, which describe a company’s strategy for rapid and orderly resolution in the event of bankruptcy. In light of proposed resolution plan rule changes, the agencies also extended the deadline to file their next resolutions plans to 2021 for these 82 foreign banks and 15 additional domestic banks. Release. Joint Release.
On July 23, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) released the public sections of the resolution plans submitted by the eight U.S. global systemically important banks. The full resolution plans, which are required by the Dodd-Frank Act and commonly known as living wills, were submitted for the agencies’ review on July 1. Release.
On July 9, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, the Commodity Futures Trading Commission (CFTC), the Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) adopted a final rule that excludes community banks from the Volcker Rule, which restricts banking entities from engaging in proprietary trading and from owning, sponsoring or having certain relationships with hedge funds or private equity funds. Under the final rule that was adopted, community banks with $10 billion or less in total consolidated assets, and which have total trading assets and liabilities that are 5% or less than such community bank’s total consolidated assets, will be excluded from the Volcker Rule.
On July 8, the Federal Deposit Insurance Corporation (FDIC) announced its intentions to centralize the supervision and resolution activities for the largest banks and complex financial institutions in a new division to be named the Division of Complex Institution Supervision and Resolution (CISR). The new division will be responsible for the Agency’s supervision and monitoring of banks with assets greater than $100 billion for which the FDIC is not the primary federal regulator. On the resolution side, the new division will be responsible for planning for and executing the FDIC’s resolution mandates for these institutions, as well as for other financial companies if called upon to protect U.S. financial stability. Release.
