1. Federal judge vacates SEC rule on disclosing payments to foreign governments
On July 2, 2013, a judge in the District Court for the District of Columbia said that the Securities and Exchange Commission misinterpreted the Dodd-Frank Act when it required oil, natural gas, and mining companies to disclose their payments to foreign governments. Additionally, the failure to allow exemptions without any explanation was arbitrary and capricious. The rule was vacated.
2. Updated Financial Reporting Manual
On July 16, 2013, the Division of Corporation Finance updated its Financial Reporting Manual. According to the website, the issues updated relate to real estate acquisitions, determining significance for equity method investees, and non-GAAP measures.
3. Proposed NYSE Rule Provides for One-Year Transition Period
The NYSE recently filed a proposed rule that would allow newly-listed companies a one-year transition period to comply with the internal audit requirements of the NYSE. There is already a transition period for companies that come to the NYSE from another private exchange.
4. Senate Bill: Glass-Steagall 2.0
On July 11, 2013, Elizabeth Warren (D-MA), along with John McCain (R-AZ) and two other sponsors, introduced a bill that would reverse the 1999 repeal of Glass-Steagall. The Act prohibited banks that used federal deposit insurance from participating in certain types of volatile speculative activity. Its repeal allowed for the merging of large banks and for those banks to engage in trading and other investment practices. The new bill would require deposit-taking banks to stop most derivative trading.
5. Federal Reserve and FDIC Adopt Final Capital Rules
The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) adopted final rules requiring new capital adequacy levels for banks. The rule will implement requirements from both the Dodd-Frank Act and the international Basel III regulatory capital reforms. The new requirement increases the amount of and the quality of capital that banks must hold. The final rule largely adopts the three proposals, but does include burden-reducing modifications for community banking organizations. However, the 18 banking organizations that are subject to the advanced approaches capital rules have certain higher burdens, including the expansion of the Collins Amendment to capital conservation and countercyclical capital buffers.
Banking organizations not subject to the advanced approaches may opt out of the requirement that they include “accumulated other comprehensive income” in Tier I capital, and will have until January 1, 2015 to begin compliance with the final rule. Banks with less than $15 billion in total assets are not subject to the phase-out of non-qualifying Tier 1 capital instruments.
The Final Rule also eliminated the categorization and risk weighting requirements for residential backed mortgages, making it easier for banks to calculate their risk-based capital. This also indirectly reduces the burden of calculating the risk weights for residential mortgage backed securities.
The FDIC also issued a notice of proposed rulemaking for a Supplementary Leverage Ration Proposal. This proposal would require that the eight globally systemically important banks would have a minimum 5% supplemental leverage ratio for parent organizations (6% to be considered well capitalized) and 6% at the level of subsidiaries. Based on calculations from the last quarter of 2012, the banks would need to raise an aggregate of $63 billion for the parent-level ratio and $89 billion for the bank-level ratio. Banks do report that they are on track to meet the ratios by year-end 2017.