On November 17, 2017, the Federal Reserve Board (“FRB“) continued the comment period for two proposals – one relating to boards of directors and the other relating to a proposed ratings program for certain types of organizations – from November 30, 2017 to February 15, 2018. Release.
On June 28, 2017, the Federal Reserve Board announced that it has completed its annual review of the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies and did not object to the capital plans of all 34 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). However, the Federal Reserve Board is requiring one firm to address weaknesses in its capital planning process and resubmit its capital plan by the end of 2017. Report. Press Release.
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.
On June 7, 2017, the Federal Reserve Board authorized an extension of up to five (5) years for Deutsche Bank AG, SVB Financial Group, and UBS Group AG to comply with certain aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act (often referred to as the Volcker rule) relating to “investments in certain ‘illiquid funds[.]'” Press Release.
On January 31, 2017, the Federal Reserve Board (the “Board“) adopted a final rule that revises the capital plan and stress test rules for (i) bank holding companies with $50 billion or more in total consolidated assets and (ii) U.S. intermediate holding companies of foreign banking organizations. Under the final rule, large and noncomplex firms are no longer subject to the qualitative assessment of the Board’s Comprehensive Capital Analysis and Review (“CCAR“). However, large and noncomplex firms will remain subject to their capital requirements as part of CCAR’s quantitative assessment and will still be subject to regular supervisory assessments examining their capital planning processes. Press Release. Final Rule.
On January 18, 2017, the Federal Reserve Board announced that it was adjusting its maximum civil money penalty limits, pursuant to federal law, to accommodate for inflation. Release.
On January 13, 2017, the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation changed, from January 17, 2017 to February 17, 2017, the deadline for comments “for the advance notice of proposed rulemaking on enhanced cyber risk management standards for large and interconnected entities under their supervision and those entities’ service providers.” Cyber standards are being contemplated in five areas: “cyber risk governance; cyber risk management; internal dependency management; external dependency management; and incident response, cyber resilience, and situational awareness.” Federal Reserve Release. OCC Release. FDIC Release.
On December 12, 2016, the Federal Reserve Board announced additional details regarding how banking entities may seek an extension to conform their investments in a narrow class of funds that qualify as “illiquid funds” to the requirements of Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Volcker Rule. An illiquid fund is defined by the statute as a fund that is “principally invested” in illiquid assets and holds itself out as employing a strategy to invest principally in illiquid assets.
The Volcker Rule generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring or having certain relationships with a hedge fund or private equity fund. These prohibitions are subject to a number of statutory exemptions, restrictions and definitions.
The Dodd-Frank Act permits the Board, upon an application by a banking entity, to provide up to an additional five years to conform investments in certain legacy illiquid funds where the banking entity had a contractual commitment to invest in the fund as of May 1, 2010. The five-year extension for certain legacy illiquid funds is the last conformance period extension that the Board is authorized to provide banking entities under the statute.
According to the guidelines adopted by the Board, firms seeking an extension should submit information, including details about the funds for which an extension is requested, a certification that each fund meets the definition of illiquid fund, a description of the specific efforts made to divest or conform the illiquid funds, and the length of the requested extension and the plan to divest or conform each illiquid fund within the requested extension period.
The Board expects that the illiquid funds of banking entities will generally qualify for extensions, though extensions may not be granted in certain cases – for example, where the banking entity has not demonstrated meaningful progress to conform or divest its illiquid funds, has a deficient compliance program under the Volcker Rule or where the Board has concerns about evasion.
The Board consulted with staffs of the other agencies charged with enforcing the requirements of the Volcker Rule, and the agencies plan to administer their oversight of banking entities under their respective jurisdictions in accordance with the Board’s conformance rule and the attached guidance.
On December 12, 2016, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) finalized rules that generally allow well-capitalized and well-managed banks and savings associations with less than $1 billion in total assets to benefit from an 18-month examination cycle rather than a 12-month cycle. Prior to the adoption of the interim final rules, only firms with total assets of less than $500 million were eligible to benefit from the extended 18-month cycle. The final rules are meant, among other things, to reduce regulatory compliance costs for smaller institutions. Press Release. Final Rule.
On October 19, 2016, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency announced proposed rules relating to cybersecurity and risk management concerns that would apply to larger institutions under their purview. FDIC Press Release. Federal Reserve Press Release. OCC Press Release.
