OCC

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 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.

 

Thresholds Increase for the Major Assets Prohibition of the Depository Institution Management Interlocks Act Rules

 

On October 10, the Office of the Comptroller of the Currency (OCC) published a final rule in the Federal Register that increases the major assets prohibition thresholds for management interlocks in the OCC’s rule implementing the Depository Institution Management Interlocks Act (DIMIA). The final rule reduces the number of national banks and federal savings associations subject to the major assets prohibition in the OCC’s DIMIA rule by increasing both major assets prohibition thresholds from $1.5 billion and $2.5 billion to $10 billion. Release.

Amendments to the Stress Testing Rule for National Banks and Federal Savings Associations

 

On October 10, the OCC published a final rule in the Federal Register that will amend the OCC’s stress testing rule at 12 CFR 46. The final rule implements requirements imposed by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The final will raise the minimum asset threshold for national banks and federal savings associations covered by the company-run stress testing requirement from $10 billion to $250 billion in total consolidated assets. Release.

OCC Extends Dodd-Frank Act Stress Test Requirements Through November 25

 

The Office of the Comptroller of the Currency (OCC) announced that the deadline to comply with Dodd-Frank Act Stress Test (DFAST) requirements will be extended to November 25, and thereafter will be discontinued. The OCC believes that sufficient stress testing programs have been adopted and integrated into the risk management policies of banks and federal savings institutions to which the DFAST rules apply. Press Release.

OCC Issues Final Rule Allowing Federal Savings Associations to Exercise National Bank Powers

 

On May 24, the Office of the Comptroller of the Currency (OCC) issued a final rule permitting federal savings associations with total consolidated assets of $20 billion or less to elect to operate as “covered savings associations” with the rights and privileges of national banks. A covered savings association will retain its federal savings association charter and existing governance framework, but will be subject to the same duties, restrictions, penalties, liabilities, conditions and limitations as a national bank. The final rule implements section 206 of the Economic Growth, Regulatory Relief and Consumer Protection Act. Release.

OCC Amends Rules Governing Annual Stress Testing Under Dodd-Frank

On February 23, 2018, the Office of the Comptroller of the Currency (“OCC“) announced a final rule that revised the OCC’s annual stress test regulation.  Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act“), the Board of Governors of the Federal Reserve System (the “Board“) is required to conduct annual stress tests of holding companies with $50 billion or more in assets.  The OCC’s final rule (i) extends the range of possible “as-of” dates used in the global market shock component of the annual stress test to conform to changes made by the Board and (ii) provides additional time for bank holding companies that cross the $50-billion-in-assets threshold in the fourth quarter of a calendar year to prepare for the stress testing requirements.  Under the final rule, a bank holding company that crosses the $50 billion threshold in the fourth quarter of a calendar year will not be subject to the stress testing requirements until the third year after it crosses such threshold. Release.