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Capital and Prudential Standards Blog

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Home Archive for category "Enhanced Prudential Standards" (Page 3)
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Federal Reserve to Vote on Final Dodd-Frank Enhanced Prudential Standards

The Federal Reserve has scheduled an open meeting for Tuesday, February 18, 2014, at 3:15 p.m., to vote on a final rule establishing Dodd-Frank enhanced prudential standards for U.S. bank holding companies with ≥$50 billion in total consolidated assets (Large U.S. BHCs) and foreign banking organizations with ≥$50 billion in total consolidated assets (Large FBOs).

By way of background, Section 165 of the Dodd-Frank Act requires the Federal Reserve to establish enhanced prudential standards, including heightened capital standards, liquidity standards, single counterparty credit limits, enhanced risk management requirements, capital stress testing requirements (final rules already issued) and an early remediation framework, for Large U.S.…  Read More

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Governor Tarullo Outlines Federal Reserve’s Prudential Regulatory Priorities for 2014

In his written testimony before the Senate Banking Committee on Dodd-Frank implementation, Federal Reserve Board Governor Daniel K. Tarullo outlined the Federal Reserve’s prudential regulatory and supervisory priorities for 2014.  As discussed further in this blog post, these priorities include, among other things: (1) finalizing, in the “near term,” Dodd-Frank enhanced prudential standards for large domestic and foreign banking firms; (2) proposing, “fairly soon,” to implement the Basel Committee’s risk-based capital surcharge for global systemically important banks (G-SIBs); (3) finalizing, in the “coming months,” higher Basel III supplementary leverage ratio standards for the 8 U.S.…  Read More

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Financial Stability Board Proposes Methodologies for Identifying Non-Bank Non-Insurance Global Systemically Important Financial Institutions

Today, the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) proposed a set of assessment methodologies for identifying non-bank non-insurance global systemically important financial institutions (NBNI G-SIFIs).  The proposal includes a high-level framework for identifying G-SIFIs and implementation approaches that will apply across all NBNI financial entities.  It also includes NBNI financial sector-specific methodologies for (1) finance companies, (2) market intermediaries (e.g., securities broker-dealers), and (3) investment funds.

Complement Existing Methodologies for Identifying G-SIFIs:  According to the FSB and IOSCO, the proposed assessment methodologies for identifying NBNI G-SIFIs complement the existing methodologies for identifying global systemically important banks (G-SIBs) and global systemically important insurers (G-SIIs). …  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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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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Federal Reserve Governor Stein Discusses Fire-sales Problem Associated with Securities Financing Transactions and Potential Policy Remedies

Today, Federal Reserve Governor Jeremy C. Stein delivered a speech discussing the fire-sales problem associated with securities financing transactions (SFTs) and potential policy remedies, including a liquidity-linked capital surcharge, modifications to liquidity standards such as the Basel III net stable funding ratio (NSFR) and universal margin requirements for SFTs.

Existing Regulatory Tools:  In his speech, Governor Stein argued that “the mainstays of our existing regulatory toolkit–risk-based capital, liquidity, and leverage requirements–have a variety of other virtues, but none seem well-suited to lean in a comprehensive way against the specific fire-sale externalities created by SFTs.”

New Regulatory Tools:  Governor Stein went on to consider other tools that might be better suited to dealing with SFT-related fire-sales externalities. …  Read More

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