Proposed Changes to the Regulatory Capital and Liquidity Rules
On January 30th, the Federal Deposit Insurance Corporation (“FDIC”) requested comment on a proposed rule that would amend the definition of “qualifying master netting agreement” under the regulatory capital rules, and the liquidity coverage ratio rule. The FDIC also is proposing to amend the definitions of “collateral agreement,” “eligible margin loan,” and “repostyle transaction” under the regulatory capital rules. The amendments are designed to ensure that the regulatory capital and liquidity treatment of certain financial contracts generally would not be affected by implementation of special resolution regimes in foreign jurisdictions if such regimes are substantially similar to Title II of the DoddFrank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”) and the Federal Deposit Insurance Act, or by the International Swaps and Derivative Association Resolution Stay Protocol that provide for contractual submission to such regimes. In December 2014, the Office of the Comptroller of the Currency (“OCC”) and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) adopted a related interim rule. Comments on the FDIC’s proposal should be submitted on or before March 31st, 2015. 80 FR 5063. On January 26th, the OCC issued a Bulletin on the interim final rule it jointly issued with the Federal Reserve concerning the capital and liquidity rules. The rule was effective January 1st, 2015. Comments on the OCC and Federal Reserve interim rule should be submitted on or before March 3rd, 2015.
FDIC Proposes Revisions to Securitization Safe Harbor Rule
On January 30th, the FDIC published for comment a proposal that would revise certain provisions of its securitization safe harbor rule. The proposal relates to the treatment of financial assets transferred in connection with a securitization or participation. The proposal would clarify the requirements of the Securitization Safe Harbor regarding retention of an economic interest in the credit risk of securitized financial assets following the effective date of the credit risk retention regulations adopted under Section 15G of the Securities Exchange Act of 1934 (the “Exchange Act”). Comments should be submitted on or before March 31st, 2015. 80 FR 5076.
OCC Bulletin on Credit Risk Retention Requirements
On January 29th, the OCC issued a Bulletin on the final rule implementing the credit risk retention requirements of section 15G of the Exchange Act, as added by Section 941 of the DoddFrank Act. The final rule requires sponsors of assetbacked securities to retain at least 5 percent of the credit risk of the assets underlying the securities and does not permit sponsors to transfer or hedge that credit risk during a specified period. The final rule applies to assetbacked securities issued on or after December 24, 2015, if the securities are backed by residential mortgages. The final rule applies to all other classes of assetbacked securities issued on or after December 24h, 2016.
Expansion of Small Bank Holding Company Policy Statement Proposed
On January 29th, the Federal Reserve requested comment on a proposed rule that would expand the applicability of the Federal Reserve's Small Bank Holding Company Policy Statement for small bank holding companies as well as certain savings and loan holding companies. The Policy Statement facilitates the transfer of ownership of small community banks by allowing their holding companies to operate with higher levels of debt than would otherwise be permitted. Institutions subject to the Policy Statement are not subject to the Federal Reserve’s regulatory capital requirements. The proposed rule allows bank holding companies and savings and loan holding companies with less than $1 billion in total consolidated assets that meet qualitative requirements to qualify. In addition, the Federal Reserve has taken steps to reduce the regulatory reporting burden for these institutions. For certain smaller institutions savings and loan holding companies with less than $500 million in total consolidated assets that meet the qualitative requirements in the Policy Statement the Federal Reserve also adopted an interim final rule to exclude these institutions from the Federal Reserve's regulatory capital requirements and has proposed to eliminate quarterly consolidated financial reporting requirements for these institutions, and instead require parentonly financial statements. Comments should be submitted within 60 days after publication in the Federal Register, which is expected during the week of February 2nd. Federal Reserve Board Press Release.
Guidance on Private Student Loan Origination
On January 29th, state and federal financial regulatory agencies jointly issued guidance on private student loans with graduated repayment terms at origination. The guidance provides principles that financial institutions should consider in their policies and procedures for originating private student loans with graduated repayment terms. Joint Press Release. See also OCC Bulletin.
FDIC Financial Institution Letter
On January 28th, the FDIC issued a Financial Institution Letter encouraging supervised institutions to take a risk based approach in assessing individual customer relationships, rather than declining to provide banking services to entire categories of customers without regard to the risks presented by an individual customer or the financial institution’s ability to manage the risk. The FDIC also reinforced the agency’s policies on managing customer relationships to examiners and other supervisory staff. FDIC Press Release.
FDIC Technical Assistance Video on CFPB Mortgage Rules
On January 27th, the FDIC announced the release of the second in a series of three new technical assistance videos regarding compliance with certain mortgage rules issued by the Consumer Financial Protection Bureau. The first video, released on November 19th, 2014, covered the Ability to Repay and Qualified Mortgage Rule. The second video covers the Loan Originator Compensation Rule, and the third video, expected to be released in February, will cover the Servicing Rule. FDIC Press Release.