Fed Board to consider final rules on prudential standards, resolution plan requirements

Final rules on prudential standards and resolution plan requirements for large domestic and foreign banking organizations will be considered by the Federal Reserve Board when it meets Thursday in open session in Washington.

The meeting is set for 2 p.m.; it will be live-streamed via the Internet. The board will also consider a proposed rule on supervisory assessments for large banking organizations.

About a year ago, the board issued a proposed rule on prudential standards by a vote of 3-1 (with Gov. Lael Brainard dissenting) to carry out the requirements of the 2018 Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA, S.2155) and tailor other requirements that were put in place following the 2008 financial crisis.

(In the two-minute video from the meeting last year when they considered the proposed rule, Federal Reserve Board Chair Jerome Powell and Vice Chair for Supervision Randal Quarles discuss their views of the proposal.)

Revising the Fed’s enhanced prudential standards rule, the proposal would apply to top-tier U.S. bank holding companies (BHCs) and certain savings and loan holding companies (SLHCs). The proposal categorized banking firms based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure.

The proposal (applied to firms according to four risk categories) would modify the application of requirements relating to supervisory and company-run stress testing; liquidity risk management, stress testing, and buffer maintenance; risk committee and risk management; and single-counterparty credit limits.

The Fed has also pointed out that the proposal, while revising only the enhanced prudential standards rule, also provides a framework to be used throughout the Fed Board’s prudential standards framework for large financial institutions.

Brainard, in voting against the proposal last year, said the proposals went too far, and noted particular concern regarding a proposed change that would modify requirements for institutions with $250 billion to $700 billion in assets. She said, at the time, that if implemented as proposed, the proposal would “weaken the buffers that are core to the resilience of our system” and raise the risk that American taxpayers “again will be on the hook.”

(In the 30-second video below from last October, Gov. Brainard summarizes why she cannot support the proposal.)

Federal Reserve Board: Sunshine Act Meeting