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Home Archive for category "Risk-Weighted Assets"
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Federal Reserve Governor Tarullo Discusses Removal of Internal Ratings-Based (IRB) Approach to Regulatory Capital

Today, Federal Reserve Governor Daniel K. Tarullo delivered a speech that, among other things, argued for discarding the advanced internal ratings-based (IRB) approach for calculating risk-based capital requirements.  Currently, under U.S. Basel III, the advanced IRB approach applies to U.S. banking organizations with at least $250 billion in total consolidated assets or at least $10 billion in on-balance-sheet foreign exposures.  Governor Tarullo also argued for increasing the $50 billion applicability threshold for Dodd-Frank enhanced prudential standards to a higher asset level, such as $100 billion. …  Read More

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Basel Committee’s Final Capital Standards for Bank Exposures to Central Counterparties (CCPs)

[Update:  We have prepared a blackline (available here) of the April 2014 final standards vs. the July 2012 interim standards.]  The Basel Committee has finalized its risk-based capital standards for bank exposures to central counterparties (CCPs).  The final standards will take effect on January 1, 2017. The interim standards that were published in July 2012 will continue to apply until that time.

Like the interim standards, the final standards distinguish between trade exposures and default fund exposures to CCPs and distinguish between exposures to qualifying CCPs (QCCPs) and non-QCCPs. …  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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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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Basel Committee Agrees to 0% Risk Weight for European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF)

The Basel Committee has agreed that supervisors may allow banks to apply a 0% risk weight to claims on the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF). The ESM and EFSF will be included in the list of entities receiving a 0% risk weight under the Basel capital framework — paragraph 56 of Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework (June 2006). Claims on the ESM and EFSF will also be included as Level 1 High Quality Liquid Assets (HQLA) under the Basel Committee’s liquidity coverage ratio (LCR) framework — paragraph 50 (c) of Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools (Jan.…  Read More

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Visual Summaries of Final Dodd-Frank Enhanced Prudential Standards

We have prepared two visual summaries of the Federal Reserve’s Dodd-Frank enhanced prudential standards final rule.  One visual summary focuses on requirements that apply to U.S. bank holding companies (BHCs) and the other focuses on requirements that apply to foreign banks, including the U.S. intermediate holding company (IHC) requirement.

Visual Summary for U.S. BHCs >>

Visual Summary for Foreign Banks >> Read More

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