OCC, following Fed, invites comments on proposed changes to big banks’ capital, liquidity standards

The Office of the Comptroller of the Currency (OCC) became the second banking regulator Wednesday to seek comments from the public on proposed revisions to capital and liquidity standards for banking institutions with more than $100 billion in assets.

The proposal for comment, released earlier in the day by the Federal Reserve Board, would establish four categories of risk-based standards to tailor capital and liquidity requirements under the regulatory capital rule, the liquidity coverage ratio rule, and the proposed net stable funding ratio rule for large U.S. banking organizations. The standards are based on institutions’ size, cross-jurisdictional activity, weighted short-term wholesale funding, off-balance sheet exposure, and nonbank assets.

The proposed categories and criteria are consistent with the considerations and factors provided in the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) in amending section 165 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank); as well as the categories of prudential standards in the Fed Board-only proposal addressing holding companies.

The agencies present 30 questions throughout the proposal on which they are seeking comments. Some of the issues addressed are:

  • for scope of application, assigning a category of standards to a subsidiary depository institution based on the category assigned to its top-tier parent holding company;
  • indicators for determining which capital and liquidity regulations apply to a depository institution without a holding company;
  • use of size thresholds to tailor capital and liquidity requirements;
  • calculations of cross-jurisdictional activity;
  • use of the proposed risk-based indicators in determining off-balance sheet exposure;
  • use of scoring methodologies to tailor prudential standards for large institutions that are not global systemically important banking organizations (GSIBs).

The proposed rule was developed by the OCC, Federal Reserve Board and Federal Deposit Insurance Corp. (FDIC). It was released Wednesday by the Fed Board on a vote of 3-1 (with Gov. Lael Brainard dissenting), along with another proposal by the Fed to revise prudential standards for large U.S. banking organizations.

Both proposals are out for comment until Jan. 22.

Proposed changes to applicability thresholds for regulatory capital and liquidity requirements

Prudential Standards for Large Bank Holding Companies and Savings and Loan Holding Companies