FRB

Federal Bank Regulatory Agencies Issue Final Rule on Treatment of High Volatility Commercial Real Estate

 

On November 19, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) implemented a final rule addressing high volatility commercial real estate (HVCRE).  The rule aims to clarify the definition of HVCRE exposure and the treatment of credit facilities financing one- to four-family residential properties and land development. Banking institutions will have the option to maintain their current capital treatment for acquisition, development or construction loans originated between January 1, 2015 and the effective date of the final rule on April 1, 2020. FDIC ReleaseFRB ReleaseOCC Release.

Agencies Finalize Changes to Supplementary Leverage Ratio as Required by EGRRCPA

 

On November 19, the OCC, the FDIC and the FRB finalized changes that affect a capital requirement for banking organizations performing custodial activities under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The EGRRCPA allows banking organizations performing custodial activities to exclude qualifying deposits at certain central banks from their supplementary leverage ratio, with the primary aim to fortify financial stability within the banking system. The rule will be effective on April 1, 2020. FDIC ReleaseFRB ReleaseOCC Release.

 

 

Federal Bank Regulatory Agencies Finalize Rule to Update Calculation of Counterparty Credit Risk for Derivative Contracts

 

On November 19, the OCC, the FDIC and the FRB published a final rule that implements a “standardized approach for measuring counterparty credit risk,” that banking organizations must follow with respect to derivative contracts. This methodology is intended to better reflect the current derivatives market. The final rule will be effective on April 1, 2020. FDIC ReleaseFRB ReleaseOCC Release.

 

Banking Agencies Amend Effective Date for Capital Simplification Final Rule for Non-Advanced Approach Banks

 

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 ReleaseFederal Register.

 

Banking Agencies Publish Capital Simplifications for Qualifying Community Banking Organizations

 

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 ReleaseFederal Register.

Federal Reserve Board Proposes Extending Initial Compliance Dates for Foreign Banks Subject to Single-Counterparty Credit Limit Rule

 

On November 8, the FRB invited public comment on a proposal to extend by 18 months the initial compliance dates for foreign banks subject to its single-counterparty credit limit rule. The extension would allow additional time for foreign banks to comply with the FRB’s rule via certification with a similar home country rule or standard. Under the proposal, the largest foreign banks would need to comply by July 1, 2021, while smaller foreign banks would need to comply by January 1, 2022. Comments will be accepted for 30 days after publication in the Federal Register. ReleaseProposed Rule.

 

Agencies Publish Rule Simplifying Capital Calculations for Community Banks

 

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.

FRB Finalizes Rules that Tailor its Regulations for Banks to More Closely Match Their Risk Profiles

 

On October 10, the Federal Reserve Board (FRB) finalized rules that tailor its regulations for domestic and foreign banks to more closely match their risk profiles. The rules establish a framework that sorts banks with $100 billion or more in total assets into four different categories based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure. Firms in the lowest risk category will have reduced compliance requirements, and as the risk of a firm increases and it moves into a new risk category, its requirements will increase. Release.

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.