United States

Topic: Capital adequacy

Subscribe to Capital adequacy RSS feed

Basel Committee consults on an amendment to the process for reviewing the G-SIB methodology

On 20 July 2021, the Basel Committee of Banking Supervision published a consultation document setting out a technical amendment to the Basel framework. The amendment sets out a new process that will be used by the Committee to review the assessment methodology for global systemically important banks (G-SIBs). The Committee plans to replace the existing … Continue Reading

FSB interim report on lessons learnt from the COVID-19 pandemic from a financial stability perspective

On 13 July 2021, the Financial Stability Board (FSB) published an interim report on the lessons learnt from the COVID-19 pandemic from a financial stability perspective. Among other things the interim report notes that: So far, the global financial system has weathered the COVID-19 pandemic thanks to greater resilience, supported by the G20 reforms, and … Continue Reading

Basel Committee – technical amendments to the calculation of minimum haircut floors for securities financing transactions

On 1 July 2021, the Basel Committee on Banking Supervision published two technical amendments to the standard on minimum haircut floors for securities financing transactions (SFTs). The first technical amendment addresses an interpretative issue relating to collateral upgrade transactions and the second corrects for a misstatement of the formula used to calculate haircut floors for … Continue Reading

IOSCO reviews implementation of liquidity risk management recommendations and market participants´ responses to COVID-19 induced market stresses

On 5 March 2021, the International Organization of Securities Commissions (IOSCO) launched a thematic review of the 2018 Recommendations for Liquidity Risk Management for Collective Investment Schemes.  The thematic review aims to assess the extent to which the Recommendations have been implemented through IOSCO member regulatory frameworks. It also aims to gather information about how … Continue Reading

Basel Committee proposes amendments to rules on haircut floors for securities financing transactions

On 26 January 2021, the Basel Committee on Banking Supervision published for consultation two technical amendments to the standard on minimum haircut floors for securities financing transactions (SFTs). Technical amendments are defined as changes in the Basel standards that are not substantial in nature but that cannot be unambiguously resolved based on the current text. … Continue Reading

Basel III monitoring results based on end-December 2019 data published by the Basel Committee

On 10 December 2020, the Basel Committee on Banking Supervision issued the results of its latest Basel III monitoring exercise, based on data as of 31 December 2019. The report sets out the impact of the Basel III framework that was agreed in 2010 as well as the effects of the Basel Committee’s finalisation of … Continue Reading

Capital treatment of securitisations of non-performing loans

On 26 November 2020, the Basel Committee on Banking Supervision published a technical amendment ‘Capital treatment of securitisations of non-performing loans’. The technical amendment closes a gap in the Basel framework by setting out prudent and risk sensitive capital requirements for non-performing loan securitisations. The Basel Committee has agreed to add the following elements to … Continue Reading

Basel Committee reports to G20 Leaders on Basel III implementation

On 3 November 2020, the Basel Committee on Banking Supervision (Basel Committee) published a report for G20 leaders at their summit in Riyadh on 21-22 November 2020. The report provides an update on the implementation of the Basel III regulatory reforms and the Basel framework-related measures taken by the Basel Committee in response to the … Continue Reading

Implementation of international standards can have collateral consequences

Non-financial commercial companies often secure their derivatives transactions with financial institutions in a manner other than posting cash margin, such as by granting liens on a commercial end-user’s assets. A proposed regulation from the US federal banking regulators to revise risk-based capital rules regarding derivatives in order to implement an international standard may have the … Continue Reading

US Federal Banking Agencies issue Community Bank Leverage Ratio proposal

On November 21, 2018, the Office of the Comptroller of the Currency (the “OCC”), the Board of Governors of the Federal Reserve System (the “Board”), and the Federal Deposit Insurance Corporation (the “FDIC”) (collectively, the “Federal Banking Agencies” or the “Agencies”) jointly issued a notice of proposed rulemaking (the “NPR” or the “Proposal”) that would … Continue Reading

US federal banking agencies issue final regulations promulgating use of municipal obligations for LCR compliance

Late last month, the US federal banking agencies (the Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC), collectively, the “banking agencies”) issued an interim final rule that implements section 403 of the recently enacted “Economic Growth, Regulatory Relief, and Consumer Protection Act” (the “Act”), to … Continue Reading

CFTC registers LedgerX to trade, clear Bitcoin derivatives

The Commodity Futures Trading Commission (CFTC) recently approved two applications from LedgerX – a platform for trading and clearing Bitcoin options – to become registered as a swap execution facility (SEF) and derivatives clearing organization (DCO). These approvals make LedgerX the first DCO and the second SEF approved to facilitate digital currency-related derivatives activity (another … Continue Reading

Federal Reserve Board finalizes disclosure of liquidity coverage ratio specifics

On December 19, 2016, the Federal Reserve Board announced that it had finalized a regulation requiring large banking organizations (covered companies) to publicly disclose on a quarterly basis certain information about their liquidity coverage ratios (LCRs). The final regulation is substantially similar to the proposed regulation issued in December 2015, but there have been minor … Continue Reading

FRB proposes new limits on physical commodity activities of financial holding companies

The Federal Reserve Board (FRB) recently proposed new restrictions on the ability of a financial holding company (FHC) to engage in physical commodity activities. The complex proposal includes (i) heightened capital requirements for certain physical commodity activities, (ii) changes to the maximum amount of specified physical commodities FHCs can hold, (iii) clarification of restrictions on … Continue Reading

Federal Reserve takes first steps toward capital requirements for insurance companies that own banks

On June 14, 2016, the Federal Reserve Board (“FRB”) published an Advance Notice of Proposed Rulemaking (“ANPRM”) requesting comments on how it should formulate capital standards for insurance companies that own banks that carry federal deposit insurance (“insured banks”). Comments are due on or before August 17, 2016. Section 171 of the Dodd-Frank Wall Street … Continue Reading

US banking regulators propose net stable funding liquidity requirements

The US federal banking regulators (the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of Comptroller of the Currency) recently issued a Notice of Proposed Rulemaking (NPRM) proposing a new regulation that would impose another liquidity requirement on large financial institutions. The net stable funding ratio, or NSFR, would require that covered … Continue Reading

Federal Reserve Board allows state and municipal bonds to be used for LCR eligibility

On April 11, 2016, the Federal Reserve Board published a final rule that allows banking organizations under its jurisdiction the flexibility to include some state and municipal securities in meeting certain of its liquidity requirements. It is effective July 1, 2015. In September 2014, the US federal banking regulators (the Federal Reserve Board, the Office … Continue Reading

CFTC and futures exchange enforcement actions: A year in review (2015)

Market participants must be mindful of the robust enforcement environment at the CFTC and U.S. futures exchanges.  In 2015, the CFTC brought numerous enforcement actions and continued to impose aggressive civil monetary penalties on market participants, including energy and agricultural companies.  Significantly, the CFTC also started to pivot from implementing to enforcing its regulations promulgated … Continue Reading

Revised proposed changes to international capital rules

Under current international capital standards issued by the Basel Committee of the Bank for International Settlements, certain large banking organizations, with regulatory approval, can use their sophisticated internal risk-based models to determine the risk weight of their assets, called the Internal Ratings-Based Approach. The remaining banking organizations use the Standardized Approach. The standardized risk-based capital … Continue Reading

Federal Reserve Board proposes disclosure of liquidity coverage ratio specifics

On December 1, 2015, the Federal Reserve Board published in the Federal Register a proposed rule to require all depository institution holding companies to publicly disclose on a quarterly basis certain information about their liquidity coverage ratios. In September 2014, the US banking regulators had finalized the liquidity coverage ratio rule, which requires that certain … Continue Reading

Proposed US regulations aim at strengthening systemically important banks

Recently, the Federal Reserve Board proposed new regulations, based on recommendations from international regulators, to require global systemically important US banks, and such non-US banks with US operations, to maintain a “total loss-absorbing capacity” ratio that would be satisfied by maintaining additional capital and issuing certain types of unsecured long term debt. Kathleen A. Scott … Continue Reading

Agencies reconcile regulatory capital deductions for Volcker Rule covered fund investments

On November 6, 2015, US banking regulators (the Office of Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve Board) issued instructions (“Instructions”) for banking entities on making regulatory capital adjustments for their investments in covered funds subject to the Volcker Rule. Both the Volcker Rule and the agencies’ risk-based regulatory … Continue Reading

FINRA issues guidance on liquidity risks

The Financial Industry Regulatory Authority (“FINRA”) has issued Regulatory Notice 15-33, which provides guidance on prudent practices that broker-dealers should consider and implement in order to effectively manage liquidity.  In its notice, FINRA stressed that failure to manage liquidity has contributed to firm failures as well as wide spread systemic crises. The notice described a review … Continue Reading
LexBlog