59230 Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Rules and Regulations
DEPARTMENT OF TREASURY
Office of the Comptroller of the
Currency
12 CFR Parts 3 and 50
[Docket ID OCC–2019–0009]
RIN 1557–AE63
FEDERAL RESERVE SYSTEM
12 CFR Parts 217 and 249
[Regulations Q, WW; Docket No. R–1628]
RIN 7100–AF21
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 324 and 329
RIN 3064–AE96
Changes to Applicability Thresholds
for Regulatory Capital and Liquidity
Requirements
AGENCY: Office of the Comptroller of the
Currency, Treasury; the Board of
Governors of the Federal Reserve
System; and the Federal Deposit
Insurance Corporation.
ACTION: Final rule.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), and the Federal Deposit
Insurance Corporation (FDIC) (together,
the agencies) are adopting a final rule to
revise the criteria for determining the
applicability of regulatory capital and
liquidity requirements for large U.S.
banking organizations and the U.S.
intermediate holding companies of
certain foreign banking organizations.
The final rule establishes four risk-based
categories for determining the
applicability of requirements under the
agencies’ regulatory capital rule and
liquidity coverage ratio (LCR) rule.
Under the final rule, such requirements
increase in stringency based on
measures of size, cross-jurisdictional
activity, weighted short-term wholesale
funding, nonbank assets, and off-
balance sheet exposure. The final rule
applies tailored regulatory capital and
liquidity requirements to depository
institution holding companies and U.S.
intermediate holding companies with
$100 billion or more in total
consolidated assets as well as to certain
depository institutions. Separately, the
Board is adopting a final rule that
revises the criteria for determining the
applicability of enhanced prudential
standards for large domestic and foreign
banking organizations using a risk-based
category framework that is consistent
with the framework described in this
final rule, and makes additional
modifications to the Board’s company-
run stress test and supervisory stress
test rules. In addition, the Board and the
FDIC are separately adopting a final rule
that amends the resolution planning
requirements under section 165(d) of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act using a risk-
based category framework that is
consistent with the framework
described in this final rule.
DATES: The final rule is effective
December 31, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Mark Ginsberg, Senior Risk
Expert, or Venus Fan, Risk Expert,
Capital and Regulatory Policy, (202)
649–6370; James Weinberger, Technical
Expert, Treasury & Market Risk Policy,
(202) 649–6360; or Carl Kaminski,
Special Counsel, Henry Barkhausen,
Counsel, or Daniel Perez, Senior
Attorney, Chief Counsel’s Office, (202)
649–5490, or for persons who are
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Constance M. Horsley, Deputy
Associate Director, (202) 452–5239;
Elizabeth MacDonald, Manager, (202)
475–6216; Peter Goodrich, Lead
Financial Institution Policy Analyst,
202–872–4997; Mark Handzlik, Lead
Financial Institution Policy Analyst,
(202) 475–6636; Kevin Littler, Lead
Financial Institution Policy Analyst,
(202) 475–6677; Althea Pieters, Lead
Financial Institution Policy Analyst,
202–452–3397; Peter Stoffelen, Lead
Financial Institution Policy Analyst,
202–912–4677; Hillel Kipnis, Senior
Financial Institution Policy Analyst II,
(202) 452–2924;, Matthew McQueeney,
Senior Financial Institution Policy
Analyst II, (202) 452–2942; Christopher
Powell, Senior Financial Institution
Policy Analyst II, (202) 452–3442,
Division of Supervision and Regulation;
or Asad Kudiya, Senior Counsel, (202)
475–6358; Jason Shafer, Senior Counsel
(202) 728–5811; Mary Watkins, Senior
Attorney (202) 452–3722; Laura Bain,
Counsel, (202) 736–5546; Alyssa
O’Connor, Attorney, (202) 452–3886,
Legal Division, Board of Governors of
the Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. For
the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), (202) 263–4869.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, bbosco@fdic.gov;
Michael E. Spencer, Chief, Capital
Markets Strategies Section,
michspencer@fdic.gov; Michael
Maloney, Senior Policy Analyst,
mmaloneyfdic.gov; regulatorycapital@
fdic.gov; Eric W. Schatten, Senior Policy
Analyst, eschatten@fdic.gov; Andrew D.
Carayiannis, Senior Policy Analyst,
acarayiannis@fdic.gov; Capital Markets
Branch, Division of Risk Management
Supervision, (202) 898–6888; Michael
Phillips, Counsel, mphillips@fdic.gov;
Suzanne Dawley, Counsel, sudawley@
fdic.gov; Andrew B. Williams II,
Counsel, andwilliams@fdic.gov; or
Gregory Feder, Counsel, gfeder@
fdic.gov; Supervision and Legislation
Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW, Washington, DC 20429. For the
hearing impaired only,
Telecommunication Device for the Deaf
(TDD), (800) 925–4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background: Regulatory Capital and
Liquidity Framework
III. Overview of the Notices of Proposed
Rulemaking and General Summary of
Comments
IV. Overview of Final Rule
V. Framework for the Application of Capital
and Liquidity Requirements
A. Indicators-Based Approach and the
Alternative Scoring Methodology
B. Choice of Risk-Based Indicators
C. Application of Standards Based on the
Proposed Risk-Based Indicators
D. Calibration of Thresholds and Indexing
E. The Risk-Based Categories
F. Treatment of Depository Institution
Subsidiaries
G. Specific Aspects of the Foreign Bank
Proposal
H. Determination of Applicable Category of
Standards
VI. Capital and Liquidity Requirements for
Large U.S. and Foreign Banking
Organizations
A. Capital Requirements That Apply Under
Each Category
B. Liquidity Requirements Applicable to
Each Category
VIII. Impact Analysis
IX. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Plain Language
D. Riegle Community Development and
Regulatory Improvement Act of 1994
E. The Congressional Review Act
F. OCC Unfunded Mandates Reform Act of
1995 Determination
I. Introduction
The Office of the Comptroller of the
Currency (OCC), Board of Governors of
the Federal Reserve System (Board), and
Federal Deposit Insurance Corporation
(FDIC) (together, the agencies) are
finalizing the framework set forth under
the agencies’ recent proposals to change
VerDate Sep<11>2014 22:29 Oct 31, 2019 Jkt 250001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\01NOR5.SGM 01NOR5
DEPARTMENT OF TREASURY
Office of the Comptroller of the
Currency
12 CFR Parts 3 and 50
[Docket ID OCC–2019–0009]
RIN 1557–AE63
FEDERAL RESERVE SYSTEM
12 CFR Parts 217 and 249
[Regulations Q, WW; Docket No. R–1628]
RIN 7100–AF21
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 324 and 329
RIN 3064–AE96
Changes to Applicability Thresholds
for Regulatory Capital and Liquidity
Requirements
AGENCY: Office of the Comptroller of the
Currency, Treasury; the Board of
Governors of the Federal Reserve
System; and the Federal Deposit
Insurance Corporation.
ACTION: Final rule.
SUMMARY: The Office of the Comptroller
of the Currency (OCC), the Board of
Governors of the Federal Reserve
System (Board), and the Federal Deposit
Insurance Corporation (FDIC) (together,
the agencies) are adopting a final rule to
revise the criteria for determining the
applicability of regulatory capital and
liquidity requirements for large U.S.
banking organizations and the U.S.
intermediate holding companies of
certain foreign banking organizations.
The final rule establishes four risk-based
categories for determining the
applicability of requirements under the
agencies’ regulatory capital rule and
liquidity coverage ratio (LCR) rule.
Under the final rule, such requirements
increase in stringency based on
measures of size, cross-jurisdictional
activity, weighted short-term wholesale
funding, nonbank assets, and off-
balance sheet exposure. The final rule
applies tailored regulatory capital and
liquidity requirements to depository
institution holding companies and U.S.
intermediate holding companies with
$100 billion or more in total
consolidated assets as well as to certain
depository institutions. Separately, the
Board is adopting a final rule that
revises the criteria for determining the
applicability of enhanced prudential
standards for large domestic and foreign
banking organizations using a risk-based
category framework that is consistent
with the framework described in this
final rule, and makes additional
modifications to the Board’s company-
run stress test and supervisory stress
test rules. In addition, the Board and the
FDIC are separately adopting a final rule
that amends the resolution planning
requirements under section 165(d) of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act using a risk-
based category framework that is
consistent with the framework
described in this final rule.
DATES: The final rule is effective
December 31, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Mark Ginsberg, Senior Risk
Expert, or Venus Fan, Risk Expert,
Capital and Regulatory Policy, (202)
649–6370; James Weinberger, Technical
Expert, Treasury & Market Risk Policy,
(202) 649–6360; or Carl Kaminski,
Special Counsel, Henry Barkhausen,
Counsel, or Daniel Perez, Senior
Attorney, Chief Counsel’s Office, (202)
649–5490, or for persons who are
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Constance M. Horsley, Deputy
Associate Director, (202) 452–5239;
Elizabeth MacDonald, Manager, (202)
475–6216; Peter Goodrich, Lead
Financial Institution Policy Analyst,
202–872–4997; Mark Handzlik, Lead
Financial Institution Policy Analyst,
(202) 475–6636; Kevin Littler, Lead
Financial Institution Policy Analyst,
(202) 475–6677; Althea Pieters, Lead
Financial Institution Policy Analyst,
202–452–3397; Peter Stoffelen, Lead
Financial Institution Policy Analyst,
202–912–4677; Hillel Kipnis, Senior
Financial Institution Policy Analyst II,
(202) 452–2924;, Matthew McQueeney,
Senior Financial Institution Policy
Analyst II, (202) 452–2942; Christopher
Powell, Senior Financial Institution
Policy Analyst II, (202) 452–3442,
Division of Supervision and Regulation;
or Asad Kudiya, Senior Counsel, (202)
475–6358; Jason Shafer, Senior Counsel
(202) 728–5811; Mary Watkins, Senior
Attorney (202) 452–3722; Laura Bain,
Counsel, (202) 736–5546; Alyssa
O’Connor, Attorney, (202) 452–3886,
Legal Division, Board of Governors of
the Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. For
the hearing impaired only,
Telecommunication Device for the Deaf
(TDD), (202) 263–4869.
FDIC: Benedetto Bosco, Chief, Capital
Policy Section, bbosco@fdic.gov;
Michael E. Spencer, Chief, Capital
Markets Strategies Section,
michspencer@fdic.gov; Michael
Maloney, Senior Policy Analyst,
mmaloneyfdic.gov; regulatorycapital@
fdic.gov; Eric W. Schatten, Senior Policy
Analyst, eschatten@fdic.gov; Andrew D.
Carayiannis, Senior Policy Analyst,
acarayiannis@fdic.gov; Capital Markets
Branch, Division of Risk Management
Supervision, (202) 898–6888; Michael
Phillips, Counsel, mphillips@fdic.gov;
Suzanne Dawley, Counsel, sudawley@
fdic.gov; Andrew B. Williams II,
Counsel, andwilliams@fdic.gov; or
Gregory Feder, Counsel, gfeder@
fdic.gov; Supervision and Legislation
Branch, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW, Washington, DC 20429. For the
hearing impaired only,
Telecommunication Device for the Deaf
(TDD), (800) 925–4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background: Regulatory Capital and
Liquidity Framework
III. Overview of the Notices of Proposed
Rulemaking and General Summary of
Comments
IV. Overview of Final Rule
V. Framework for the Application of Capital
and Liquidity Requirements
A. Indicators-Based Approach and the
Alternative Scoring Methodology
B. Choice of Risk-Based Indicators
C. Application of Standards Based on the
Proposed Risk-Based Indicators
D. Calibration of Thresholds and Indexing
E. The Risk-Based Categories
F. Treatment of Depository Institution
Subsidiaries
G. Specific Aspects of the Foreign Bank
Proposal
H. Determination of Applicable Category of
Standards
VI. Capital and Liquidity Requirements for
Large U.S. and Foreign Banking
Organizations
A. Capital Requirements That Apply Under
Each Category
B. Liquidity Requirements Applicable to
Each Category
VIII. Impact Analysis
IX. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Plain Language
D. Riegle Community Development and
Regulatory Improvement Act of 1994
E. The Congressional Review Act
F. OCC Unfunded Mandates Reform Act of
1995 Determination
I. Introduction
The Office of the Comptroller of the
Currency (OCC), Board of Governors of
the Federal Reserve System (Board), and
Federal Deposit Insurance Corporation
(FDIC) (together, the agencies) are
finalizing the framework set forth under
the agencies’ recent proposals to change
VerDate Sep<11>2014 22:29 Oct 31, 2019 Jkt 250001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\01NOR5.SGM 01NOR5
59231Federal Register / Vol. 84, No. 212 / Friday, November 1, 2019 / Rules and Regulations
1 See ‘‘Proposed Changes to Applicability
Thresholds for Regulatory Capital and Liquidity
Requirements,’’ 83 FR 66024 (December 21, 2018);
‘‘Changes to Applicability Thresholds for
Regulatory Capital Requirements for Certain U.S.
Subsidiaries of Foreign Banking Organizations and
Application of Liquidity Requirements to Foreign
Banking Organizations, Certain U.S. Depository
Institution Holding Companies, and Certain
Depository Institution Subsidiaries,’’ 84 FR 24296
(May 24, 2019). The final rule combines these two
proposals into a single final rule.
2 The Board’s rules require foreign banking
organizations with $50 billion or more in U.S. non-
branch assets to establish a U.S. intermediate
holding company and to hold its ownership interest
in all U.S. subsidiaries (other than companies
whose assets are held pursuant to section 2(h)(2) of
the Bank Holding Company Act, 12 U.S.C.
1841(h)(2) and DPC branch subsidiaries) through its
U.S. intermediate holding company. See 12 CFR
252.153.
3 A ‘‘top tier banking organization’’ means the
top-tier bank holding company, U.S. intermediate
holding company, savings and loan holding
company, or depository institution domiciled in the
United States. As of the date of this final rule, no
depository institution that is not also a subsidiary
of a bank holding company, U.S. intermediate
holding company, or savings and loan holding
company meets any risk-based indicator threshold.
Accordingly, references to ‘‘top tier banking
organization’’ in this Supplementary Information as
a practical matter refer to holding companies,
including U.S. intermediate holding companies.
4 See ‘‘Regulatory Capital Rules: Implementation
of Risk-Based Capital Surcharges for Global
Systemically Important Bank Holding Companies,’’
80 FR 49082 (Aug. 14, 2015).
5 The Board and OCC issued a joint final rule on
October 11, 2013 (78 FR 62018), and the FDIC
issued a substantially identical interim final rule on
September 10, 2013 (78 FR 55340). The FDIC
adopted the interim final rule as a final rule with
no substantive changes on April 14, 2014 (79 FR
20754).
6 Banking organizations subject to the agencies’
capital rule include national banks, state member
banks, insured state nonmember banks, savings
associations, and top-tier bank holding companies
and savings and loan holding companies domiciled
in the United States not subject to the Board’s Small
Bank Holding Company and Savings and Loan
Holding Company Policy Statement (12 CFR part
225, appendix C, and 12 CFR 238.9), excluding
certain savings and loan holding companies that are
substantially engaged in insurance underwriting or
commercial activities or that are estate trusts, and
bank holding companies and savings and loan
holding companies that are employee stock
ownership plans.
7 See 79 FR 61440 (October 10, 2014), codified at
12 CFR part 50 (OCC), 12 CFR part 249 (Board), and
12 CFR part 329 (FDIC).
8 The LCR rule applies to depository institutions
with $10 billion or more in total consolidated assets
that are subsidiaries of a holding company subject
to the full requirements of the agencies’ LCR rule.
9 For certain depository institution holding
companies with $50 billion or more, but less than
$250 billion, in total consolidated assets and less
than $10 billion in on-balance sheet foreign
exposure, the Board separately adopted a modified
LCR requirement. See 12 CFR part 249, subpart G.
10 See ‘‘Net Stable Funding Ratio: Liquidity Risk
Measurement Standards and Disclosure
Requirements,’’ 81 FR 35124 (Proposed June 1,
2016). For certain depository institution holding
companies with $50 billion or more, but less than
$250 billion, in total consolidated assets and less
than $10 billion in total on-balance sheet foreign
exposure, the Board separately proposed a modified
NSFR requirement.
11 See ‘‘Enhanced Prudential Standards for Bank
Holding Companies and Foreign Banking
Organizations,’’ 79 FR 17240 (March 27, 2014) (the
enhanced prudential standards rule), codified at 12
CFR part 252.
the applicability thresholds under the
regulatory capital and liquidity
requirements for U.S. banking
organizations (domestic proposal) and
the U.S. operations of foreign banking
organizations (foreign bank proposal,
and together, the proposals), with
certain adjustments in response to
comments.1 The final rule establishes
four risk-based categories for
determining the regulatory capital and
liquidity requirements applicable to
large U.S. banking organizations and the
U.S. intermediate holding companies of
foreign banking organizations, which
apply generally based on indicators of
size, cross-jurisdictional activity,
weighted short-term wholesale funding,
nonbank assets, and off-balance sheet
exposure.2 The final rule measures these
indicators based on the risk profile of
the top-tier banking organization.3 For
the largest and most systemic and
interconnected U.S. bank holding
companies, the final rule retains the
identification methodology in the
Board’s global systemically important
bank holding company (GSIB) surcharge
rule.4 Under the final rule, the capital
and liquidity requirements that apply to
U.S. intermediate holding companies
and their depository institution
subsidiaries generally align with those
applicable to similarly situated U.S.
banking organizations.
II. Background: Regulatory Capital and
Liquidity Framework
In 2013, the agencies adopted a
revised capital rule that, among other
things, addressed weaknesses in the
regulatory framework that became
apparent during the financial crisis.5
The revised capital rule strengthened
the regulatory capital requirements
applicable to banking organizations
supervised by the agencies, including
U.S. intermediate holding companies
and depository institution subsidiaries
of foreign banking organizations, by
improving both the quality and quantity
of regulatory capital and enhancing the
risk sensitivity of capital requirements.6
In 2014, the agencies adopted the
liquidity coverage ratio (LCR) rule to
improve the banking sector’s resiliency
to liquidity stress by requiring large U.S.
banking organizations to be more
actively engaged in monitoring and
managing liquidity risk.7 The LCR rule
generally applies to large depository
institution holding companies, certain
of their depository institution
subsidiaries, and large depository
institutions that do not have a parent
holding company.8 Banking
organizations subject to the LCR rule
must maintain an amount of high-
quality liquid assets (HQLA) equal to or
greater than their projected total net
cash outflows over a prospective 30-
calendar-day period.9 In addition, in
June 2016, the agencies invited
comment on a proposal to implement a
net stable funding ratio (NSFR)
requirement that would apply to the
same U.S. banking organizations,
including U.S. intermediate holding
companies, as are subject to the LCR
rule.10 The NSFR proposed rule would
establish a quantitative metric to
measure and help ensure the stability of
a banking organization’s funding profile
over a one-year time horizon. During the
same period, the Board implemented
enhanced prudential standards for large
bank holding companies and foreign
banking organizations.11
These and other post-crisis financial
regulations have resulted in substantial
gains in the resiliency of individual
banking organizations and the financial
system as a whole. U.S. banking
organizations, including the U.S.
operations of foreign banking
organizations, hold higher levels of
high-quality capital and liquidity than
before the financial crisis. Robust
regulatory capital, stress testing, and
liquidity regulations for large banking
organizations operating in the United
States have helped to ensure that they
are better positioned to continue
lending and perform other financial
intermediation functions through
periods of economic stress and market
turbulence.
The agencies regularly review their
regulatory framework, including capital
and liquidity requirements, to ensure it
is functioning as intended. These efforts
include assessing the impact of
regulations as well as exploring
alternatives that achieve regulatory
objectives and promote safe and sound
practices while improving the
simplicity, transparency, and efficiency
of the regulatory regime. The final rule
is the product of such a review. The
final rule revises the applicability of
requirements for U.S. banking
organizations and U.S. intermediate
holding companies in a way that
enhances the risk sensitivity and
efficiency of the agencies’ capital and
liquidity regulations, maintains the
fundamental reforms of the post-crisis
framework, and supports banking
organizations’ resilience. Thus, the final
rule seeks to better align the regulatory
requirements for large banking
VerDate Sep<11>2014 22:29 Oct 31, 2019 Jkt 250001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\01NOR5.SGM 01NOR5
1 See ‘‘Proposed Changes to Applicability
Thresholds for Regulatory Capital and Liquidity
Requirements,’’ 83 FR 66024 (December 21, 2018);
‘‘Changes to Applicability Thresholds for
Regulatory Capital Requirements for Certain U.S.
Subsidiaries of Foreign Banking Organizations and
Application of Liquidity Requirements to Foreign
Banking Organizations, Certain U.S. Depository
Institution Holding Companies, and Certain
Depository Institution Subsidiaries,’’ 84 FR 24296
(May 24, 2019). The final rule combines these two
proposals into a single final rule.
2 The Board’s rules require foreign banking
organizations with $50 billion or more in U.S. non-
branch assets to establish a U.S. intermediate
holding company and to hold its ownership interest
in all U.S. subsidiaries (other than companies
whose assets are held pursuant to section 2(h)(2) of
the Bank Holding Company Act, 12 U.S.C.
1841(h)(2) and DPC branch subsidiaries) through its
U.S. intermediate holding company. See 12 CFR
252.153.
3 A ‘‘top tier banking organization’’ means the
top-tier bank holding company, U.S. intermediate
holding company, savings and loan holding
company, or depository institution domiciled in the
United States. As of the date of this final rule, no
depository institution that is not also a subsidiary
of a bank holding company, U.S. intermediate
holding company, or savings and loan holding
company meets any risk-based indicator threshold.
Accordingly, references to ‘‘top tier banking
organization’’ in this Supplementary Information as
a practical matter refer to holding companies,
including U.S. intermediate holding companies.
4 See ‘‘Regulatory Capital Rules: Implementation
of Risk-Based Capital Surcharges for Global
Systemically Important Bank Holding Companies,’’
80 FR 49082 (Aug. 14, 2015).
5 The Board and OCC issued a joint final rule on
October 11, 2013 (78 FR 62018), and the FDIC
issued a substantially identical interim final rule on
September 10, 2013 (78 FR 55340). The FDIC
adopted the interim final rule as a final rule with
no substantive changes on April 14, 2014 (79 FR
20754).
6 Banking organizations subject to the agencies’
capital rule include national banks, state member
banks, insured state nonmember banks, savings
associations, and top-tier bank holding companies
and savings and loan holding companies domiciled
in the United States not subject to the Board’s Small
Bank Holding Company and Savings and Loan
Holding Company Policy Statement (12 CFR part
225, appendix C, and 12 CFR 238.9), excluding
certain savings and loan holding companies that are
substantially engaged in insurance underwriting or
commercial activities or that are estate trusts, and
bank holding companies and savings and loan
holding companies that are employee stock
ownership plans.
7 See 79 FR 61440 (October 10, 2014), codified at
12 CFR part 50 (OCC), 12 CFR part 249 (Board), and
12 CFR part 329 (FDIC).
8 The LCR rule applies to depository institutions
with $10 billion or more in total consolidated assets
that are subsidiaries of a holding company subject
to the full requirements of the agencies’ LCR rule.
9 For certain depository institution holding
companies with $50 billion or more, but less than
$250 billion, in total consolidated assets and less
than $10 billion in on-balance sheet foreign
exposure, the Board separately adopted a modified
LCR requirement. See 12 CFR part 249, subpart G.
10 See ‘‘Net Stable Funding Ratio: Liquidity Risk
Measurement Standards and Disclosure
Requirements,’’ 81 FR 35124 (Proposed June 1,
2016). For certain depository institution holding
companies with $50 billion or more, but less than
$250 billion, in total consolidated assets and less
than $10 billion in total on-balance sheet foreign
exposure, the Board separately proposed a modified
NSFR requirement.
11 See ‘‘Enhanced Prudential Standards for Bank
Holding Companies and Foreign Banking
Organizations,’’ 79 FR 17240 (March 27, 2014) (the
enhanced prudential standards rule), codified at 12
CFR part 252.
the applicability thresholds under the
regulatory capital and liquidity
requirements for U.S. banking
organizations (domestic proposal) and
the U.S. operations of foreign banking
organizations (foreign bank proposal,
and together, the proposals), with
certain adjustments in response to
comments.1 The final rule establishes
four risk-based categories for
determining the regulatory capital and
liquidity requirements applicable to
large U.S. banking organizations and the
U.S. intermediate holding companies of
foreign banking organizations, which
apply generally based on indicators of
size, cross-jurisdictional activity,
weighted short-term wholesale funding,
nonbank assets, and off-balance sheet
exposure.2 The final rule measures these
indicators based on the risk profile of
the top-tier banking organization.3 For
the largest and most systemic and
interconnected U.S. bank holding
companies, the final rule retains the
identification methodology in the
Board’s global systemically important
bank holding company (GSIB) surcharge
rule.4 Under the final rule, the capital
and liquidity requirements that apply to
U.S. intermediate holding companies
and their depository institution
subsidiaries generally align with those
applicable to similarly situated U.S.
banking organizations.
II. Background: Regulatory Capital and
Liquidity Framework
In 2013, the agencies adopted a
revised capital rule that, among other
things, addressed weaknesses in the
regulatory framework that became
apparent during the financial crisis.5
The revised capital rule strengthened
the regulatory capital requirements
applicable to banking organizations
supervised by the agencies, including
U.S. intermediate holding companies
and depository institution subsidiaries
of foreign banking organizations, by
improving both the quality and quantity
of regulatory capital and enhancing the
risk sensitivity of capital requirements.6
In 2014, the agencies adopted the
liquidity coverage ratio (LCR) rule to
improve the banking sector’s resiliency
to liquidity stress by requiring large U.S.
banking organizations to be more
actively engaged in monitoring and
managing liquidity risk.7 The LCR rule
generally applies to large depository
institution holding companies, certain
of their depository institution
subsidiaries, and large depository
institutions that do not have a parent
holding company.8 Banking
organizations subject to the LCR rule
must maintain an amount of high-
quality liquid assets (HQLA) equal to or
greater than their projected total net
cash outflows over a prospective 30-
calendar-day period.9 In addition, in
June 2016, the agencies invited
comment on a proposal to implement a
net stable funding ratio (NSFR)
requirement that would apply to the
same U.S. banking organizations,
including U.S. intermediate holding
companies, as are subject to the LCR
rule.10 The NSFR proposed rule would
establish a quantitative metric to
measure and help ensure the stability of
a banking organization’s funding profile
over a one-year time horizon. During the
same period, the Board implemented
enhanced prudential standards for large
bank holding companies and foreign
banking organizations.11
These and other post-crisis financial
regulations have resulted in substantial
gains in the resiliency of individual
banking organizations and the financial
system as a whole. U.S. banking
organizations, including the U.S.
operations of foreign banking
organizations, hold higher levels of
high-quality capital and liquidity than
before the financial crisis. Robust
regulatory capital, stress testing, and
liquidity regulations for large banking
organizations operating in the United
States have helped to ensure that they
are better positioned to continue
lending and perform other financial
intermediation functions through
periods of economic stress and market
turbulence.
The agencies regularly review their
regulatory framework, including capital
and liquidity requirements, to ensure it
is functioning as intended. These efforts
include assessing the impact of
regulations as well as exploring
alternatives that achieve regulatory
objectives and promote safe and sound
practices while improving the
simplicity, transparency, and efficiency
of the regulatory regime. The final rule
is the product of such a review. The
final rule revises the applicability of
requirements for U.S. banking
organizations and U.S. intermediate
holding companies in a way that
enhances the risk sensitivity and
efficiency of the agencies’ capital and
liquidity regulations, maintains the
fundamental reforms of the post-crisis
framework, and supports banking
organizations’ resilience. Thus, the final
rule seeks to better align the regulatory
requirements for large banking
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