Capital and Prudential Standards Blog

Basel Committee Chair Discusses Liquidity Risk Management

Posted on May 16, 2014, by Andrew S. Fei in Basel Committee, Basel III - International, Board of Directors, Dodd-Frank, Enhanced Prudential Standards, Liquidity, Risk Governance, Risk Management.

The Chairman of the Basel Committee, Stefan Ingves, delivered a speech entitled Liquidity risk management – the LCR and beyond. In addition to discussing the Basel III liquidity coverage ratio (LCR) and net stable funding ratio (NSFR), Chairman Ingves reminded banks that “the LCR and NSFR are not meant to be the first line of defence against banks’ liquidity problems.” He observed that “the LCR and NSFR are relatively simple quantitative measures that cannot hope to fully capture the many nuances of liquidity risk that a bank may face” and that “[b]anks must develop a range of quantitative and qualitative controls for themselves to ensure that they are prepared for the volatility in their cash flows that is inherent in the complexity of banks’ business models.” In this context, Chairman Ingves discussed the Basel Committee’s Principles for sound liquidity risk management and supervision and concluded by stating that:

“The first line of defence against the impact of future liquidity shocks on the banking system is stronger risk management by banks themselves.… Read More

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U.S. Intermediate Holding Company: Structuring and Regulatory Considerations for Foreign Banks – Visual Memorandum

Establishing a top-tier U.S. intermediate holding company (IHC) that complies with Dodd-Frank enhanced prudential standards involves complex structuring, regulatory, capital, liquidity, tax and corporate governance considerations as well as significant business, legal and operational analysis. We have prepared a visual memorandum (available here) that uses flowcharts, diagrams, comparison tables and timelines to explore key structuring and regulatory considerations for foreign banks that are required to establish an IHC.

View IHC Structuring Visual Memorandum… Read More

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

Posted on March 24, 2014, by Luigi L. De Ghenghi, Randall D. Guynn, Margaret E. Tahyar and Andrew S. Fei in Board of Directors, Capital Planning & Stress Tests, Dodd-Frank, Enhanced Prudential Standards, Federal Reserve, Final Rules, Foreign Banking Organizations, Liquidity, Risk Governance.

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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Risk Governance: Visual Memorandum on Guidelines Proposed by the OCC

Posted on January 29, 2014, by Luigi L. De Ghenghi, Randall D. Guynn, Margaret E. Tahyar and Andrew S. Fei in Board of Directors, Capital Planning & Stress Tests, Corporate Governance, Guidance, OCC, Proposals, Risk Governance, Risk Management.

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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Federal Reserve Publishes Paper on Capital Planning at Large Bank Holding Companies

Posted on August 19, 2013, by Luigi L. De Ghenghi, Randall D. Guynn, Margaret E. Tahyar and Andrew S. Fei in Board of Directors, Capital Planning & Stress Tests, Corporate Governance, Dodd-Frank, Enhanced Prudential Standards, Federal Reserve, Reports and Studies, Risk Governance, Supervisory Guidance.

Today, the Federal Reserve published a paper entitled Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice. The paper is intended to promote better capital planning at large bank holding companies (BHCs) and to provide greater clarity on the standards against which those practices are evaluated as part of the Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR).

The paper discusses the Federal Reserve’s expectations for capital planning at large BHCs and described the range of practices it has observed at these companies during the past three CCAR exercises. … Read More

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U.S. Banking Regulators Propose Dodd-Frank Company-Run Stress Test Guidance for Mid-Sized Banking Organizations

Posted on July 30, 2013, by Luigi L. De Ghenghi, Randall D. Guynn, Margaret E. Tahyar and Andrew S. Fei in Board of Directors, Capital Planning & Stress Tests, Corporate Governance, Dodd-Frank, Enhanced Prudential Standards, FDIC, Federal Reserve, OCC, Risk Governance.

Beginning this fall, many U.S. banking organizations will be conducting their first annual Dodd-Frank company-run stress tests. Today, the U.S. banking regulators (Federal Reserve, OCC and FDIC) proposed guidance setting forth supervisory expectations for stress tests conducted by national banks, state member and non-member banks, savings associations, bank holding companies and savings and loan holding companies with total consolidated assets of greater than $10 billion and less than $50 billion (collectively, “mid-sized firms”).

The proposed guidance is intended to help mid-sized firms conduct stress tests that are appropriately scaled to their size, complexity, risk profile, business mix and market footprint. … Read More

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