UPDATED: Single-counterparty credit limit final rule takes effect Oct. 5; comments sought on new reporting form

A final rule adopted by the Federal Reserve Board in June, setting single-counterparty credit limits (SCCLs) for bank holding companies (BHCs) and foreign banking organizations (FBOs) with $250 billion or more in total consolidated assets, has finally made it into the Federal Register. The rule, published in the F.R. Monday, Aug. 6, is set to take effect Oct. 5.

Also in the Aug. 6 F.R. will be a 60-day notice and request for comments on a new reporting form, FR 2590, that the entities will be required to use under the SCCL final rule. The Fed estimates a total of 104 users, three to seek temporary relief; and 237,982 annual burden hours – including 132,392 for one-time implementation and 30 hours for requests for temporary relief. Comments are due Oct. 5.

The Fed’s final rule, announced in June, applies to BHCs and FBOs with $250 billion or more in total consolidated assets, including any U.S. intermediate holding company of such FBO with $50 billion or more in total consolidated assets, and any BHC identified as a global systemically important bank holding company (GSIB) under the Fed Board’s capital rule. The rule implements section 165(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the board to impose limits on the amount of credit exposure that a BHC or FBO can have to an unaffiliated company, the aim being to reduce the risks arising from the affiliated company’s failure.

The final rule reflects changes enacted this May under the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA, S. 2155). Effective upon enactment of EGRRCPA, BHCs with total consolidated assets of less than $100 billion (except a BHC that is a U.S. GSIB under Fed capital rules) are no longer subject to Section 165 of Dodd-Frank. Eighteen months after enactment, BHCs with total consolidated assets less than $250 billion (again, except for any U.S. GSIB) are no longer subject to section 165 “unless the Board determines, by order or regulation, to apply any enhanced prudential standard to such firms after making certain statutory findings.”

Final Rule: Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations

Proposed Agency Information Collection Activities, Single-Counterparty Credit Limits