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 Office of the Comptroller of the Currency Releases Risk Appetite Statement
On April 12, 2016, the US Office of the Comptroller of the Currency released its Risk Appetite Statement, which documents the OCC's overall conservative risk appetite in carrying out its supervisory mission. The Risk Appetite Statement provides that the OCC will accept more risk in some areas in order to adapt to the changing needs of supervised national banks and federal savings associations. OCC management and employees will use the statement to evaluate their decisions in overseeing national banks and federal savings associations as well as the execution of agency management functions, such as human resources, procurement and information technology.
Comptroller of the Currency Thomas J. Curry noted that by clearly articulating acceptable levels of risks within the OCC's operations, agency personnel have "clearer signposts by which to guide their decisions and external stakeholders can better understand OCC actions in the context of the risks facing the agency." The OCC plans to update its Risk Appetite Statement periodically as the federal banking system and its supervision evolve.
The OCC's Risk Appetite Statement is available at: http://www.occ.gov/publications/publications-by-type/other- publications-reports/risk-appetite-statement.pdf.
US Financial Stability Oversight Council Files Appeal to MetLife Decision
On April 8, 2016, the US Financial Stability Oversight Council filed its appeal to the DC District Court opinion overturning the FSOC's designation of insurer MetLife as a systemically important financial institution. In the March 30, 2016 judicial opinion that was unsealed last week, US District Court Judge Rosemary Collyer called the FSOC's determination process "fatally flawed" and "arbitrary and capricious," ruling that the FSOC did not follow its own guidelines before deciding on the Metlife designation. US Treasury Secretary Jacob J. Lew has criticized the court's ruling, arguing that by overturning the conclusions of experienced financial regulators, "the court imposed new requirements that Congress never enacted, and contradicted key policy lessons from the financial crisis."
The US District Court opinion is available at: https://www.scribd.com/doc/307428677/MetLife-vs-FSOC-U-S-District-Court-for-D-C and the statement from Treasury Secretary Jacob J. Lew is available at: https://www.treasury.gov/press-center/press-releases/Pages/jl0410.aspx.
US Board of Governors of the Federal Reserve System Proposes Technical Amendments to Risk-Based Capital Surcharge for Global Systemically Important Bank Holding Companies
On April 7, 2016, the US Board of Governors of the Federal Reserve System proposed technical amendments to its rule requiring a risk-based capital surcharge for global systemically important bank holding companies. The rule, finalized by the Federal Reserve Board in July 2015, establishes the criteria for identifying a GSIB and the methodology a GSIB is required to use to determine its risk-based capital surcharge, which corresponds to the systemic risk of that firm.
The proposed amendments would not materially change the underlying final rule but rather clarify that GSIBs must continue to calculate their surcharges using year-end data, while their related surcharge data will be reported on a quarterly basis. The proposal explains that bank holding companies subject to the rule are required to compute their method 2 surcharge scores using systemic indicator amounts expressed in billions of dollars even though the data is reported in millions of dollars. The amendments also provide additional information on how GSIBs should calculate their short-term wholesale funding scores, which help to determine their surcharges, during the rule's transition period.
Comments on the proposal are due by May 13, 2016.
The Federal Reserve Board press release is available at: http://www.federalreserve.gov/newsevents/press/bcreg/20160407a.htm and the proposal is available at: https://www.gpo.gov/fdsys/pkg/FR-2016-04-08/pdf/2016-08015.pdf.
To continue reading this article, 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.
