On July 7, 2016, the Federal Reserve Board approved the final extension – to July 21, 2017 – for bank entities to comply with the Volcker Rule and “to divest ownership in certain legacy investment funds and terminate relationships with funds that are prohibited under the rule.” Release.
Federal Reserve Board
Agencies Permit Reduced Content Resolution Plan Submissions for Firms with Limited U.S. Operations
On June 10, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation allowed 84 entities with limited activities in the United States “to file reduced content resolution plans for their next three resolution plans.” These reports are required under federal law and relate to each entity’s planned response to various insolvency events. FDIC Release. FRB Release.
Banking Agencies Permit “Reduced Content” Living Wills for Smaller FBOs
On June 10, 2016, the Federal Reserve Board and Federal Deposit Insurance Corporation announced they are permitting 84 foreign banking organizations (not identified) with limited U.S. operations to file “reduced content” resolution plans for their next three resolution plans. As reported, the decision is intended “to increase clarity and reduce burden by creating more certainty around future filing requirements.” All of the 84 firms have less than $50 billion in total U.S. assets. The agencies said “the reduced content plans should focus on changes the firms have made to their prior resolution plans, actions taken to improve the effectiveness of, or that may alter, those plans, and, where applicable, actions to ensure any subsidiary insured depository institution is adequately protected from the risks arising from the activities of nonbank subsidiaries of the firm. The first of these reduced content plans must be submitted to the agencies by December 31, 2016. To file reduced content plans for the next three years, the firms must maintain less than $50 billion in U.S. assets and not experience any material events.
Agencies Extend Deadline for Certain Foreign Banking Organizations’ Resolution Plan Submissions
On June 8, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation extended the deadline for Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS to present their upcoming resolution plans to July 1, 2017, as a result of these entities engaging in restructuring in order to be in “compliance with the Federal Reserve Board’s Intermediate Holding Company (IHC) requirement[.]” Press release. Press release.
U.S. Treasury Department Issues White Paper on Online Marketplace Lending Industry
On May 10, 2016, the Department of the Treasury issued a white paper on online marketplace lending that maps the current market landscape, reviews industry insights and offers policy proposals for the road ahead. Based on approximately 100 responses from online marketplace lenders, financial institutions, investors and other key industry figures, the Treasury, in consultation with the CFPB, FDIC, Federal Reserve Board, FTC, OCC, SBA and SEC, made several notable recommendations and observations.
The white paper explores policies that would expand regulatory oversight, including standardized representations and warranties in securitizations, pricing methodology standards, the implementation of a registry for tracking data on transactions and the reporting of loan-level performance, among others. In addition, the Treasury mentions potential cybersecurity threats, anti-money laundering, the uneven protections and regulations in place for small business borrowers and the growth of the mortgage and auto loan markets as some of the emerging trends to monitor. The Treasury is also considering the role of federal agencies in regulating these areas, including the formation of an interagency working group for online market place lending. Press Release. White Paper.
The Federal Reserve Board Finalizes Rule Regarding Investment-Grade General Obligation State and Municipal Securities
On April 1, 2016, the Federal Reserve Board finalized a rule to include certain U.S. general obligation state and municipal securities in the type of assets that financial institutions may use to satisfy requirements designed to ensure that such institutions have the capacity to meet liquidity needs during a period of financial stress. The final rule allows investment-grade, U.S. general obligation state and municipal securities to be counted as high-quality liquid assets (HQLA) up to certain levels if such securities meet the same liquidity criteria that apply currently to corporate debt securities. Release. Final Rule.
Federal Reserve Board Issues Repeal of Regulation AA and Requests Comment on Proposal to Repeal Regulation C
On February 11, the Federal Reserve Board announced: (i) the repeal of Regulation AA, which regulated unfair practices; and (ii) the proposed repeal of Regulation C, through which it effectuated the laws contained in the Home Mortgage Disclosure Act. The Board took these actions because of the language in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Release.
CFTC Approves Final Rule on Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants
On December 16, 2015, the U.S. Commodity Futures Trading Commission approved a new regulation for uncleared swaps not regulated by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Administration or the Federal Housing Finance Agency. The new rule requires parties to collect margin in order to address concerns of entities taking on excessive risk. Press release.
The Federal Reserve Board Issues Final Rule Adopting Amendments to the Board’s Regulatory Capital Rules for Non-Traditional Stock Corporations
On December 4, 2015, the Board of Governors of the Federal Reserve System (the “Board”) issued a final rule adopting amendments to the Board’s regulatory capital framework (“Regulation Q”) that was issued in June 2013. The final rule provides examples of how to apply the framework to depository institution holding companies that are not organized as traditional stock corporations and how instruments issued by such firms may qualify as regulatory capital. The final rule also issued a temporary exclusion from Regulation Q for savings and loan holding companies that are trusts and depository institution holding companies that are employee stock ownership plans – until the Board can propose appropriate rules for such entities. In addition, the Board extended the applicable compliance date with the revised capital framework to July 1, 2016. The final rule will take effect on January 1, 2016. Press Release. Final Rule.
Final Rule Issued to Establish Minimum Margin Requirements for Non-Cleared Swaps and Non-Cleared Security-Based Swaps
On December 3, 2015, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the Federal Housing Finance Agency (collectively, “Agencies”) issued a final rule establishing capital requirements, as well as minimum requirements for the exchange of initial and variation margin, for covered swap entities with respect to non-cleared swaps and non-cleared security-based swaps. The purpose of the requirements is to offset the greater risk to such entities, and thus, the amount of margin required will vary based on relative risk. The final rule implements sections 731 and 764 of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 and will take effect on April 1, 2016 – however, the minimum margin requirements will not phase-in until September 1, 2016. All swap counterparties must comply with the variation margin requirements by March 1, 2017, while swap counterparties with more than $3 trillion in outstanding swap activity must comply with both the initial and variation margin requirements by September 1, 2016. Press Release. Final Rule.