In this 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 Launches Web System for Banks to File Licensing and Certain Applications and Notices
On November 7, 2016, the US Office of the Comptroller of the Currency announced that it will launch a web-based system for banks to file licensing and public welfare investment applications and notices early next year. The Central Application Tracking System will allow OCC-supervised institutions to draft, submit and track applications and notices online. The system also will allow OCC staff to receive, process and manage those submissions online. The first phase of the system's rollout will start on January 17, 2017, with the second and third phases set to begin that spring. The new system will replace the current OCC systems, e-Corp and CD-1 Invest. Before the phase 1 rollout, the OCC will provide webinars and resources to explain registration and use of the new system.
The OCC press release is available at: https://occ.gov/news-issuances/news-releases/2016/nr-occ-2016-143.html.
US Board of Governors of the Federal Reserve System Announces Annual Indexing of 2017 Reserve Requirement Exemption Amount and of Low Reserve Tranche
On October 27, 2016, the US Board of Governors of the Federal Reserve System announced the annual indexing of the reserve requirement exemption amount and the low reserve tranche, two amounts used in determining reserve requirements of depository institutions under Regulation D.
All depository institutions must hold a percentage of certain types of deposits as reserves in the form of vault cash, as a deposit in a Federal Reserve Bank or as a deposit in a pass-through account at a correspondent institution. Reserve requirements currently are assessed on the depository institution's net transaction accounts (mostly checking accounts). Depository institutions must also regularly submit reports of their deposits and other reservable liabilities.
For net transaction accounts in 2017, the first $15.5 million, up from $15.2 million in 2016, will be exempt from reserve requirements. A three percent reserve ratio will be assessed on net transaction accounts over $15.5 million up to and including $115.1 million, up from $110.2 million in 2016. A ten percent reserve ratio will be assessed on net transaction accounts in excess of $115.1 million.
The new low reserve tranche and reserve requirement exemption amount will apply to the 14-day reserve maintenance period that begins January 19, 2017. The Federal Reserve Board also announced changes in two other amounts, the non-exempt deposit cut-off level and the reduced reporting limit, that are used to determine the frequency with which depository institutions must submit deposit reports.
The Federal Reserve Board final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20161027a1.pdf.
US Federal Reserve Board Votes to Affirm the Countercyclical Capital Buffer at Current Zero Percent Level
On October 24, 2016, the US Federal Reserve Board announced that it had voted to affirm the countercyclical capital buffer at the current level of zero percent. The release notes that the CCyB is a macro-prudential tool that can be used to raise capital requirements on internationally active banking organizations when such organizations are exposed to an elevated risk of above-normal future losses. In such circumstances, the CCyB would be available to help banking organizations absorb higher losses and to moderate credit supply fluctuations. The Federal Reserve Board's release noted that the Federal Deposit Insurance Corporation and the OCC were consulted before the Federal Reserve Board voted on this decision. Should the Federal Reserve Board in the future modify the CCyB amount, banking organizations would have twelve months before an increase becomes effective unless the Federal Reserve Board decides on an earlier effective date.
The Federal Reserve Board press release is available at: https://www.federalreserve.gov/newsevents/press/bcreg/20161024a.htm.
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