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Blackline of U.S. Liquidity Coverage Ratio Proposal: Federal Register Version vs. Draft Version

Today, the Office of the Federal Register released for public inspection the version of the U.S. liquidity coverage ratio (LCR) proposal that will be published in the Federal Register on November 29, 2013.  We have prepared a blackline of the rule text in the Federal Register version against the rule text in the Federal Reserve’s October 24 draft version of the U.S. LCR proposal.

A notable technical correction contained in the Federal Register version relates to the eligibility of a sovereign entity, U.S.…  Read More

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UK Financial Policy Committee to Conduct Review Into Leverage Ratio

The UK Chancellor of the Exchequer has requested that the Bank of England’s Financial Policy Committee conduct a review into the role for the leverage ratio within the capital framework for UK banks.  The exchange of letters between the UK Chancellor of the Exchequer and the Governor of the Bank of England are included below.

In his letter, Mark Carney, the Governor of the Bank of England, stated that the Financial Policy Committee will publish some high-level considerations on the role of the leverage ratio within the overall capital framework in its Financial Stability Report on November 28, 2013.…  Read More

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Federal Reserve Governor Tarullo Discusses Short-term Wholesale Funding and Potential Regulatory Remedies

Today, Federal Reserve Governor Daniel K. Tarullo delivered a speech discussing the potential financial stability concerns raised by short-term wholesale funding in the form of securities financing transactions (SFTs), which include repo and reverse repo, securities lending and borrowing, and securities margin lending transactions.  Governor Tarullo also discussed possible regulatory measures to address these concerns, including (1) regulatory capital surcharge calculated by reference to a firm’s reliance on SFTs and other forms of short-term wholesale funding (2) modifications to capital and liquidity standards such as standardized banking book risk weights, trading book capital charges and Basel III net stable funding ratio (NSFR) and (3) universal margin requirements for SFTs.…  Read More

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Speech by Basel Committee Chairman: Strengthening Bank Capital – Basel III and Beyond

Today, Stefan Ingves, Chairman of the Basel Committee on Banking Supervision and Governor of Sveriges Riksbank delivered a speech entitled Strengthening Bank Capital – Basel III and Beyond.  Mr. Ingves stated that it is important that bank capital is seen to be of sufficient quantity, quality, consistency and reliability. These four characteristics are critical to the long-run credibility and success of the international capital adequacy framework.  Mr. Ingves concluded that:

“The Basel III reforms themselves deliver two of the four characteristics that I said were essential – higher quantity and quality of capital.…  Read More

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Financial Stability Board Updates List of Global Systemically Important Banks (G-SIBs); Basel Committee Releases Data Relating to Methodology for Identifying G-SIBs

Today, the Financial Stability Board (FSB) published its annual update to the list of global systemically important banks (G-SIBs).  The updated list is based on 2012 data and the revised assessment methodology for identifying G-SIBs issued by the Basel Committee in July 2013.  Please see below for a blackline of the 2013 list of G-SIBs against the 2012 list.

Data relating to G-SIB Assessment Methodology for Identifying G-SIBs:  In its revised assessment methodology for identifying G-SIBs, the Basel Committee announced that it will bring forward by one year to November 2013 the publication of the denominators used to calculate banks’ G-SIB scores, as well as the cut-off score and thresholds used to identify G-SIBs and allocate them to different G-SIB capital surcharge buckets. …  Read More

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Davis Polk Blackline Comparing Federal Reserve’s Final and Proposed Policy Statements on Stress Test Scenario Design

Today, the Federal Reserve issued a final policy statement describing the processes it will use to develop scenarios for future capital planning and stress testing exercises.  The policy statement will be used to develop supervisory scenarios for both annual supervisory and company-run stress tests.  It describes the characteristics of the stress test scenarios and explains the procedures for formulating the scenarios.

The Federal Reserve noted that the macroeconomic scenarios released last week for the 2014 stress testing exercise are consistent with the final policy statement.…  Read More

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