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Capital and Prudential Standards Blog

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Overview of Basel Committee’s Standardized Approach for Measuring Derivatives Exposure (SA-CCR, formerly known as NIMM)

The Basel Committee has finalized a standardized, non-internal-model-based method for calculating counterparty credit risk exposures associated with OTC derivatives, exchange-traded derivatives, and long settlement transactions.  This blog post provides a high-level overview of the new standardized approach (SA-CCR), which replaces both the Current Exposure Method (CEM) and the Standardised Method (SM) in the Basel capital framework.  In addition, the IMM shortcut method will be eliminated from the Basel capital framework once the SA-CCR takes effect, which is scheduled for January 1, 2017. …  Read More

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Visuals of Federal Reserve’s 2014 CCAR and Dodd-Frank Stress Test Results (updated for company-run results)

We have prepared visuals (available here) of the 2014 Comprehensive Capital Analysis and Review (“CCAR“) and Dodd-Frank Act Stress Test (“DFAST“) results.   Update:  The visuals have been updated to include the company-run DFAST results.

View Davis Polk’s Visuals of 2014 CCAR and DFAST Results

Background on DFAST:  Pursuant to its DFAST regulations, the Federal Reserve conducts annual supervisory stress tests to assess the potential impact of various hypothetical economic scenarios on the consolidated earnings, losses and regulatory capital of each U.S.…  Read More

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Volcker Metrics Timing: OCC Provides Guidance in Dear CEO Letter

For those anxiously awaiting the oft-promised FAQ on metrics from the interagency task force on Volcker, the OCC has provided the answer.  In a Dear CEO letter dated yesterday, the OCC makes it clear in the following guidance that Volcker Rule metrics recording, as many of us have been saying for some time, begins on July 1st.  The relevant text of the Dear CEO letter is below.  Who knew that Dear CEO letters are the new FAQs?

“Banks with trading assets and liabilities of at least $50 billion will be required to report metrics designed to monitor their permitted trading activities.

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Visuals of Federal Reserve’s 2014 Stress Test Results (Updated to Reflect CCAR Results)

We have prepared visuals (available here) of the Federal Reserve’s 2014 supervisory Dodd-Frank Act stress test (“DFAST“) results.   Update: We have updated these visuals to reflect the company-run DFAST results and the Federal Reserve’s 2014 Comprehensive Capital Analysis and Review (“CCAR“) results. 

Background:  On March 20, 2014, the Federal Reserve published results of the 2014 supervisory DFAST for 30 U.S. bank holding companies with $50 billion or more in total consolidated assets (“Large BHCs“). …  Read More

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Davis Polk Blackline of Federal Reserve’s Corrections to Dodd-Frank Stress Test Capital Ratio Projections

Today, the Federal Reserve published corrections to its 2014 supervisory Dodd-Frank Act stress test (“DFAST“) results.  We have prepared a blackline (available here) showing the Federal  Reserve’s revised capital ratio projections for 30 large U.S. bank holding companies under the supervisory severely adverse stress scenario.  According to the Federal Reserve, it adjusted the supervisory DFAST results to “address inconsistencies in the treatment of the fourth quarter 2013 actual capital actions and assumptions about preferred and employee compensation-related issuance over the course of the planning horizon.”

View Blackline of Federal Reserve’s Corrections to 2014 Supervisory DFAST Capital Ratio Projections

 

Materials: 

Federal Reserve, Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results (originally published on Mar.…  Read More

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Dodd-Frank Enhanced Prudential Standards for Foreign Banks with Limited U.S. Footprints: Visual Memorandum

The Federal Reserve’s Dodd-Frank enhanced prudential standards (EPS) final rule adopts a tiered approach for applying EPS to foreign banks. Under the tiered approach, the most burdensome requirements will only apply to foreign banks with large U.S. operations, whereas fewer requirements will apply to foreign banks with limited U.S. footprints. We have prepared a visual memorandum focusing on the requirements that will apply to foreign banks with limited U.S. footprints, including the U.S. risk committee, internal liquidity stress testing, home country capital certification and home country capital stress testing requirements.…  Read More

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