Today, the Basel Committee published its first report on the regulatory consistency of risk-weighted assets (RWAs) for credit risk in the banking book. This study is a part of the Basel Committee’s wider Regulatory Consistency Assessment Programme (RCAP), which is intended to ensure consistent implementation of the Basel III framework. The study draws on supervisory data from more than 100 major banks, as well as additional data on sovereign, bank and corporate exposures collected from 32 major international banks as part of a portfolio benchmarking exercise.… Read More
In his statement at today’s open meeting to approve the U.S. Basel III final rule, Federal Reserve Governor Daniel K. Tarullo previewed “four rulemakings that will enhance capital requirements for the eight U.S. banking organizations already identified as of global systemic importance.” Governor Tarullo described these four rulemakings for the 8 U.S. G-SIBs as being in various stages of development.
1. Higher Basel III Leverage Ratio: According to Governor Tarullo, the U.S. banking regulators are very close to issuing a proposal to establish a leverage ratio for the eight U.S.… Read More
OCC Lending Limits Final Rule: Credit Exposures from Derivatives and Securities Financing Transactions
The OCC has issued a final rule specifying the methods for calculating credit exposure arising from derivatives and securities financing transactions for purposes of the federal lending limits that apply to national banks, federal and state branches and agencies of foreign banks and federal and state savings associations. The final rule reflects a further convergence in methods for measuring credit exposure from derivatives and securities financing transactions between bank capital rules and legal lending limits.
The final rule, like the June 2012 interim final rule that it revises, implements Section 610 of the Dodd-Frank Act, which is one of several provisions in the statute that requires banks to take into account credit exposure arising from derivatives and securities financing transactions in calculating prudential limits. … Read More
Today, the OCC published a final rule to implement Section 610 of the Dodd Frank Act, which applies the lending limit statute to credit exposures arising from derivative transactions and securities financing transactions.
We have prepared a blackline of the final rule against the interim final rule on lending limits that was issued in June 2012. Most of the changes are contained in Sections 32.1 (authority, purpose and scope), 32.2 (definitions), 32.6 (nonconforming loans and extensions of credit) and 32.9 (credit exposure arising from derivative and securities financing transactions).… Read More
Federal Reserve Governor Tarullo Delivers Speech Setting Forth Roadmap for U.S. Prudential Regulatory Reforms
Today, Federal Reserve Governor Daniel K. Tarullo delivered a speech setting forth a roadmap for prudential regulatory reforms in the United States. Among other things, Governor Tarullo:
- U.S. Basel III: Appealed to other U.S. bank regulators to approve the U.S. Basel III final rules to avoid further implementation delays, noting that they can always seek further changes down the road.
- Leverage Ratio: Suggested that the Federal Reserve may require the largest U.S. firms to maintain a Basel III leverage ratio greater than the 3% agreed upon by the Basel Committee.
The bill announced by Senators Sherrod Brown (D-Ohio) and David Vitter (R-La.) is the latest volley in the ongoing debate about whether financial reform has gone far enough in ending the risk that some banks are too big to fail. Although it is highly unlikely that the Brown-Vitter bill, in its current form, will become law, its erroneous assumptions and assertions, as well as the policy measures proposed by the bill, could resurface, either in other bills or as pressure on regulators to transform the financial regulatory landscape.… Read More