United States: Financial Regulatory Developments Focus December 16, 2014 Issue 46/2014

Bank Prudential Regulation & Regulatory Capital

Federal Reserve Board Proposes Additional Capital Surcharge for Global Systemically Important Banks

On December 9, 2014, the US Board of Governors of the Federal Reserve System ("Federal Reserve Board") issued proposed amendments to its risk-based capital rule. The proposed amendments would impose a risk-based capital surcharge on eight US global systemically important banks ("G-SIBs"). The proposal is based on the international standard adopted by the Basel Committee on Banking Supervision (the "Basel Committee") in November 2011 and would amend the Federal Reserve Board's risk-based capital rules. However, the US G-SIB surcharge would exceed the amount established by the Basel Committee and would be based in part on a firm's reliance on short-term wholesale funding. The stated goal of the G-SIB surcharge is to internalize the negative externalities posed by G-SIBs, including those arising from the perception that they are too-big-to-fail, protect the financial system from spillover risks due to the G-SIB's failure and correct for competitive distortions created by a G-SIB banks' systemic nature. The G-SIB surcharge, if adopted as proposed, would become effective on the same timeline as the capital conservation buffer and thus would be phased in beginning in 2016 and become fully effective on January 1, 2019.

The proposal is available at:


Federal Reserve Board Issues Proposal to Provide Additional Capital Information for Non-Stock Entities

On December 12, 2014, the Federal Reserve Board proposed amendments to its risk-based capital framework in relation to depository institution holding companies with non-traditional capital structures. The proposed rule sets out examples of instruments issued by non-stock entities, characteristics that prevent these instruments from counting towards tier 1 common equity capital, and provides suggestions on alterations that would allow them to count towards the requirements. The proposal would also add provisions relating to savings and loan holding companies and extend the deadline to January 1, 2016 from January 1, 2015 to allow for compliance with the new rules by the relevant entities.

The proposal is available at:


Adoption of Direct Recapitalization Instrument for Eurozone Banks

On December 8, 2014, the Board of Governors of the European Stability Mechanism ("ESM") announced that it adopted the Direct Recapitalization Instrument ("DRI") applicable to Eurozone banks, following the formation of the Banking Union (which consists of the Single Supervisory Mechanism ("SSM"), the Single Resolution Mechanism as well as funding arrangements which include the DRI). Previously, the ESM was only able to recapitalize financial institutions indirectly. The DRI now allows the ESM to recapitalize systemic and viable financial institutions directly, as a last resort measure and under certain specific circumstances, by providing a loan to the government of the relevant member state, who will then in turn recapitalize the bank.

For further details on the SSM, you may want to read our client note at:

http://www.shearman.com/~/media/Files/NewsInsights/Publications/2014/11/Ban king-Supervision-Within-the-Eurozone-The-Single-Supervisory-Mechanism-FIA FR-111714.pdf.

The press release and FAQs are available at:

http://www.esm.europa.eu/press/releases/esm-direct-bank-recapitalisation-instrum ent-adopted.htm and


European Banking Authority Overview on Implementation and Transposition of CRD IV

On December 10, 2014, the European Banking Authority ("EBA") published all of the information disclosed by EU competent authorities under the EBA's implementing technical standards on supervisory disclosure. The information published is in an aggregated format and organized in four sections, covering: (i) the rules and guidance adopted by each member state to implement and transpose the Capital Requirements Directive IV ("CRD IV") across the EU; (ii) the options and national discretions used by member states; (iii) the supervisory review and evaluation process; and (iv) the aggregate statistical data on the EU banking sector as at the end of 2013. The information disclosed covers all EU member states other than Cyprus, Lithuania, Poland and Portugal, for which updates are expected shortly.

The overview is available at:


Commission Lists Jurisdictions with Equivalent Supervisory and Regulatory Arrangements for Exposures to Credit Institutions, Investment Firms and Exchanges

On December 12, 2014, the European Commission published the Implementing Decision it has adopted on the equivalence of the supervisory and regulatory requirements of certain third countries for the treatment of exposures according to CRD IV, together with related FAQs. The Implementing Decision deems six jurisdictions have equivalent supervisory and regulatory arrangements for treatment of exposures to credit institutions, investment firms and exchanges: Brazil; Canada; China; Singapore; South Africa; and the US. The Implementing Decision will enter into force on 1 January 2015.

The Implementing Decision and FAQs are available at:

http://ec.europa.eu/finance/bank/docs/regcapital/acts/implementing/141212- implementing-decision_en.pdf and


Basel Committee Consultation on Net Stable Funding Ratio Disclosure Standards

On December 9, 2014, the Basel Committee issued a consultative paper on the net stable funding ratio ("NSFR") disclosure standards, following the publication of the NSFR standard in October 2014. The NSFR is a ratio structure requiring banks to address any liquidity mismatches and seeking to align the funding of longer-term illiquid assets with more stable financing, so as to reduce the risk of a bank's failure, which could potentially lead to broader systemic stress. The disclosure requirements aim to improve liquidity risk management, enhance the transparency of regulatory funding requirements and strengthen market discipline. In order for market participants to be able to consistently assess the funding risks of banks, it is important that a common disclosure framework be adopted. The disclosure standards are expected to come into effect from January 1, 2018 and would apply to all internationally active banks on a consolidated basis, though may be used for other banks and on any subset of entities of internationally active banks. Disclosure would be required as often as financial statements are published, and common templates will be used. The consultation closes on March 6, 2015.

The consultation document is available at:


Consultation to Identify Simple, Transparent and Comparable Securitizations

On December 11, 2014, the Basel Committee and International Organization of Securities Commissions jointly published a consultative document on criteria to identify simple, transparent and comparable securitizations. Fourteen criteria have been identified for the development of such securitizations, aiming to assist involved parties in evaluating the risks of certain securitizations when carrying out due diligence. The proposed criteria relate to key types of risk in the securitization process: (i) asset risk; (ii) structural risk; and (iii) fiduciary and servicer risk. The consultation closes on February 13, 2015.

The consultation document is available at:


To view the full newsletter please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.