On April 2, 2019, the federal banking agencies proposed a rule that would require large banking organizations to deduct from their regulatory capital certain investments in total loss-absorbing capacity (“TLAC”) debt issued by global systemically important banking organizations (“G-SIBs”) rather than to risk-weight such investments as is currently done.  The rule is intended to reduce interconnectedness in the financial system by discouraging (but not prohibiting) banking organizations from investing in G-SIBs’ debt, and therefore has important implications for the marketability and liquidity of debt instruments that G-SIBs are required to issue under the Federal Reserve’s TLAC requirements.

In a chart accompanying this blog post, we have compared the key parameters of the interagency proposal to the deduction requirements included in the Federal Reserve’s 2015 TLAC proposal and the Basel Committee’s 2016 final standard.  Comments on the interagency proposal are due June 7, 2019.

Continue Reading Federal Banking Agencies Propose TLAC Deduction Standard

On March 6, 2019, the Federal Reserve issued a final rule to exempt from the qualitative component of the Comprehensive Capital Analysis and Review (“CCAR”) exercise large firms that have participated in CCAR for four consecutive years and have passed the final year’s qualitative component without objection.  The final rule serves to provide an immediate exemption for all domestic bank holding companies currently subject to CCAR, and to phase out the qualitative objection for U.S. intermediate holding companies of foreign banks (“IHCs”).

Continue Reading Federal Reserve Eliminates CCAR’s Qualitative Objection for Most Firms