In this week’s newsletter, we provide a snapshot of the principal US, European and global financial regulatory developments of interest to banks, investment firms, broker dealers, market infrastructure providers, asset managers and corporates.
Bank Prudential Regulation & Regulatory Capital
US Board of Governors of the Federal Reserve System Approves Final Rule Amending Regulation D
On June 18, 2015, the Board of Governors of the Federal Reserve System adopted a final rule amending Regulation D (Reserve Requirements of Depository Institutions), changing the calculation of interest payments on certain balances maintained by eligible institutions at Federal Reserve Banks. In contrast to the previous rule, which based interest payments on the average rate over the two-week reserve maintenance period, the final rule bases interest payments on a daily rate. The amendment is intended to enhance the effectiveness of changes in such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee, especially when changes in those rates do not coincide with the beginning of a maintenance period. The amendments to Regulation D will be effective July 23, 2015.
The text of the amended Regulation D is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150618a1.pdf.
US Federal Banking Agencies Finalize Revisions to the Capital Rules Applicable to Advanced Approaches Banking Organizations
On June 16, 2015, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued final revisions to the regulatory capital rules adopted in July 2013. The final rule is applicable to large, international banking organizations that calculate their regulatory capital ratios using the advanced approaches rule (generally, institutions with more than $250 billion in total consolidated assets or more than $10 billion in total on-balance sheet foreign exposures). The final rule substantially adopts the changes to the rule as proposed on December 18, 2014, and corrects and updates certain aspects of the advanced approaches rule, including the calculation requirements for risk-weighted assets for banking organizations using the advanced approaches method. The revisions also enhance the consistency of the advanced approaches rule with international capital standards. The final rule will be effective October 1, 2015.
The text of the final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150616a1.pdf.
US Federal Deposit Insurance Corporation Proposes Rule to Revise Deposit Insurance Assessments for Small Banks
On June 16, 2015, the FDIC proposed an amendment to the methods used by the FDIC in assessing small banks for deposit insurance. Under the proposal, only banks with less than $10 billion in assets that have been insured by the FDIC for at least five years would be affected. Specifically, the FDIC will (i) revise the financial ratios method to be based on a statistical model estimating the probability of failure over three years; (ii) update the financial measures used in the financial ratios method to be consistent with the statistical model; and (iii) eliminate risk categories for established small banks and use the financial ratios method to determine assessment rates for all such banks. As the proposal seeks to be revenue neutral, the aggregate assessment revenue collected from small banks affected by the revisions is expected to remain approximately the same as it would have been otherwise. To assist banks in understanding the potential effect of the proposed rule and in estimating assessment rates under the proposal, the FDIC has published an online assessment calculator. Comments on the proposal are due within 60 days from publication of the proposed rule in the Federal Register.
The text of the notice of proposed rulemaking is available at: https://www.fdic.gov/news/board/2015/2015-06_16_notice_dis_a_fr.pdf and the proposed assessment calculator is available at: https://www.fdic.gov/deposit/insurance/calculator.html.
The text of the statement by FDIC Chairman Martin J. Gruenberg regarding the proposed rule is available at: https://www.fdic.gov/news/news/speeches/spjune1615.html.
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