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 covered banking organizations maintain sufficient high quality liquid assets (such as cash or certain US government securities) to cover cash outflows during a 30 day liquidity stress scenario that includes certain levels of deposit run-off or a reduction in wholesale funding capacity. The comment period ends February 2, 2016.
The purpose of the proposed rule is to give market participants adequate access to information about the liquidity of large banking organizations. In addition, designated systemically significant nonbank financial companies required to maintain the LCR also would be covered by the rule; currently, only one such nonbank financial company is required to comply with the LCR. The information would be disclosed in a standardized format to allow easier comparison of the information across multiple covered institutions. A covered institution must provide the information on its internet site or in its public financial or regulatory reports.
Each covered institution would have to disclose detailed information about its cash inflows, cash outflows and the high quality liquid assets maintained for the LCR. In addition, a covered institution would have to provide a “qualitative discussion” of its LCR results, to include information that it considers “significant” to its LCR results and will “facilitate an understanding of the data provided.” This information could include the main drivers of its LCR results and changes in those results over time, composition of the high quality liquid assets used to meet the LCR, and the covered institution’s centralized liquidity management function and how it interacts with other functional areas of the institution. Significant changes that alter the current liquidity profile of the covered institution also must be explained.
Once finalized, depending upon size of the covered institution, effective dates for the public disclosures range from July 2016 to January 2018.