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Risk Governance: Visual Memorandum on Guidelines Proposed by the OCC

The OCC has proposed a set of enforceable and specific risk governance guidelines to formalize its heightened expectations for large national banks and federal savings associations. The risk governance guidelines would set new, and much higher, minimum standards for the design and implementation of a bank’s own risk governance framework and the oversight of such framework by the bank’s board of directors.

State banks that are not subject to the OCC’s proposed risk governance guidelines should still pay attention because the same or similar principles will likely be applied by the Federal Reserve and the FDIC to large state member and non-member banks.…  Read More

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Basel Committee Discusses Fundamental Elements of a Bank’s Capital Planning Process

Today, the Basel Committee published a paper that discusses four fundamental components of a sound capital planning process:  (1) internal control and governance; (2) capital policy and sufficient risk capture; (3) forward-looking view through stress testing; and (4) management framework for preserving capital.

The Basel Committee stated that its paper does not set forth new capital planning guidance.  Rather, it presents sound practices observed at some banks, which the Basel Committee believes can foster overall improvement in banks’ capital planning processes. …  Read More

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Revised Basel III Leverage Ratio: Visual Memorandum

The Basel Committee recently finalized its revisions to the Basel III leverage ratio.  Compared to its June 2013 proposal, the Basel Committee has made several important changes to the denominator of the Basel III leverage ratio.  Davis Polk’s visual memorandum uses diagrams, comparison tables, examples and formulas to illustrate the Basel Committee’s revisions to the Basel III leverage ratio and potential U.S. implementation issues.

View the Revised Basel III Leverage Ratio Visual Memorandum here (PDF) Read More

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Volcker TruPS CDO Interim Final Rule: The Bottom Line

Here is the bottom line for the Volcker TruPS CDOs interim final rule issued by the U.S. regulators yesterday.

No Relief for CLOs:  The rule does not help CLOs at all.

TruPS CDOs:  For TRuPS CDOs we believe it will be very helpful.

Specifically, the interim final rule permits any banking entity, large or small, to retain an interest in, or to act as sponsor (including as trustee) of, an issuer that is backed by TruPS so long as:

  • The TruPS CDO issuer was established before May 19, 2010;
  • The banking entity reasonably believes that the offering proceeds received by the issuer were invested primarily in Qualifying TruPS Collateral; and
  • The banking entity’s interest in the vehicle was acquired on or before December 10, 2013 (unless acquired pursuant to an M&A).
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Basel III Net Stable Funding Ratio (NSFR) – High-Level Comparison Tables

[Detailed client memorandum to come.]  We have prepared a set of tables that provide a high-level comparison of the available stable funding (ASF) factors and the required stable funding (RSF) factors used to calculate the Basel III net stable funding ratio (NSFR).  The tables compare the Basel Committee’s January 2014 proposed revisions to the NSFR with the original December 2010 version of the NSFR.  We will be publishing a client memorandum that analyzes the key proposed changes to the Basel III NSFR.…  Read More

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Davis Polk Blackline of Basel Committee’s Final Liquidity Coverage Ratio Disclosure Standards

We have prepared a blackline that compares the Basel Committee’s January 2014 final Basel III liquidity coverage ratio (LCR) disclosure standards to its July 2013 proposed disclosure standards.  The Basel Committee expects national regulators to implement the LCR disclosure standards by January 1, 2015, so that banking organizations in their jurisdiction may begin making disclosures in 2015.

Background:  Today, the Basel Committee finalize its Pillar 3 disclosure standards for the Basel III LCR.  Our blog post summarizing the Basel Committee’s July 2013 proposed disclosures standards is available here. …  Read More

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