Today, the U.S. banking agencies issued a final rule to implement the Basel III liquidity coverage ratio (LCR). We have prepared a blackline that compares the text of the final rule against the proposed rule that was issued in 2013.
The Basel Committee has published a proposal to significantly revise the Pillar 3 capital disclosure standards for internationally active banks. By way of background, Pillar 3 of the Basel framework aims to promote market discipline through qualitative and quantitative regulatory disclosure requirements.
The main objectives of today’s proposed changes include further enhancing the comparability and consistency of disclosures (both across time and across banks) and providing greater transparency of banks’ internal capital calculation models and methodologies.
Overall themes. The new disclosure requirements embody, among others, the following overall themes:
- Longer and more detailed disclosures.
Today, the Federal Reserve issued a proposal to revise certain aspects of its capital planning and stress testing regulations. We have prepared a blackline (available here) showing these proposed changes.
Key changes: The proposal would, among other things:
- Shift the start date of the capital plan and stress test cycles from October 1 of a calendar year to January 1 of the following calendar year. A large (≥$50 billion) bank holding company (“BHC“) would be required to submit its capital plan and stress test results to the Federal Reserve by April 5, three months later than under current regulations.
The Federal Reserve has issued a proposal to implement the financial sector concentration limit in Section 622 of the Dodd-Frank Act. The concentration limit generally prohibits a financial company from merging or consolidating with, acquiring all or substantially all of the assets of, or otherwise acquiring control of another company if the “liabilities” of the resulting financial company, calculated using methodologies in the proposal, exceed 10% of aggregate financial sector liabilities. We have prepared a visual memorandum (available here) that uses diagrams, formulas, tables and examples to illustrate key aspects of the Federal Reserve’s concentration limit proposal.… Read More
Summary and Blackline of OCC’s Proposed Revisions to National Bank and Federal Savings Association Licensing Rules
We have prepared a summary and blackline (available here) of the OCC’s proposed changes to its rules for national banks and federal savings associations relating to policies and procedures for corporate activities and transactions (“licensing rules”).
Background: The Dodd-Frank Act transferred to the OCC all functions of the former Office of Thrift Supervision (OTS) relating to federal savings associations. With a few exceptions, the OCC currently has one set of rules applicable to national banks and another set of rules applicable to federal savings associations, or, where appropriate, to all savings associations.… Read More
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