On June 3, 2016, the US Board of Governors of the Federal Reserve System issued proposed rules to apply enhanced prudential standards and capital standards to certain insurance companies within the Federal Reserve Board's jurisdiction. Specifically, the Federal Reserve Board issued an advance notice of proposed rulemaking that would apply capital standards to (i) systemically important insurance companies and (ii) insurance companies that own a bank or thrift. The ANPR would apply different capital standards to the two groups, but both approaches would be tailored to the differences between insurance companies and banks and would use insurance-focused risk weights and formulas that reflect the particular risks and liabilities faced by insurance companies.
The Federal Reserve Board concurrently approved a proposed rule to apply enhanced prudential standards to insurance companies designated as "systemically important" by the US Financial Stability Oversight Council. Under the proposed rule, a systemically important insurance company would be subject to the requirements applicable to systemically important financial institutions set forth under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requirements would apply heightened liquidity, corporate governance and risk-management standards to the firms.
Federal Reserve Board Chair Janet Yellen and Federal Reserve Board Governor Daniel Tarullo issued separate statements discussing the proposals, stating that the ANPR and the proposed rules for insurance companies would serve the purpose of applying more stringent regulation to firms that pose greater risks to the financial system, while at the same time creating tailored regulation that reflects the individual characteristics of financial institutions.
Comments on the ANPR and the proposed rule are due by August 2, 2016.
The full text of the ANPR is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160603a1.pdf.
The full text of the proposed rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160603a2.pdf.
The text of Chair Yellen's statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/yellen- opening-statement-20160603.htm.
The text of Governor Tarullo's statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/tarullo-opening-statement-20160603.htm.
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