Highlights of proposed capital, liquidity standards for large foreign banking organizations provided in OCC bulletin

A proposed framework for determining capital and liquidity requirements for large foreign banking organizations (FBOs), issued last week by banking regulators, is summarized in a bulletin released Tuesday by the Office of the Comptroller of the Currency (OCC).

The proposal, out for comment until June 21, was issued jointly by the OCC, Federal Reserve Board and Federal Deposit Insurance Corp. (FDIC). Published in the May 24 Federal Register, it generally aligns with a December 2018 rule affecting domestic banking organizations. It would establish a revised framework for determining requirements under the regulatory capital rule, the liquidity coverage ratio (LCR) rule, and the proposed net stable funding ratio (NSFR) rule for large foreign banking organizations (FBOs) with respect to certain U.S. operations based on their risk profile.

As noted by the OCC bulletin, the proposed rule would amend the risk factors used to determine the application of regulatory capital requirements to certain U.S. intermediate holding companies of FBOs and their depository institution subsidiaries as well as the application of standardized liquidity requirements with respect to certain U.S. operations of large FBOs and depository institution subsidiaries controlled by such FBOs, each according to risk-based categories.

For capital, the proposed rule would assign intermediate holding companies with total consolidated assets of $100 billion or more and their depository institution subsidiaries to one of three categories based on risk characteristics of the intermediate holding company. For liquidity, it would assign intermediate holding companies and their subsidiary depository institutions with consolidated assets of $10 billion or more to categories based on risk characteristics of the combined U.S. operations of the parent FBO.

Regulators are encouraging commenters to review the proposal alongside a separate, Fed Board-only proposed rule that would apply certain prudential standards to FBOs.

As reported last week, the Fed Board is also modifying one aspect of the proposed requirements under the domestic interagency proposal with respect to certain banking organizations; specifically, to propose the application of a standardized liquidity requirement to certain U.S. depository institution holding companies that meet specified criteria relating to their liquidity risk profile. The agencies are also making technical amendments to certain provisions of the domestic interagency proposal.

OCC Bulletin 2019-26

Reg lookup: 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

RR: Agencies bring forward proposal, comment request, on reg capital requirements for mid-sized holding companies of FBOs (May 21, 2019)

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