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  • Fed to Require Public Disclosure of Big Liquidity Risk Metrics

    Federal Issues

    On December 19, the Fed announced its approval of a rule requiring large banks to publicly disclose certain quantitative liquidity-risk metrics on a quarterly basis. As previously covered in InfoBytes, in September 2014, the federal banking agencies had adopted a rule requiring banks with assets of $50 billion or more to hold “high-quality liquid assets” (HQLA) in an amount equal to or greater than the bank’s net cash outflows during a 30-day stress period; the ratio of HQLA to net cash outflows is the bank’s “liquidity coverage ratio” (LCR). The Fed’s new rule requires large banks to disclose their LCRs, HQLA amounts by category, and certain other metrics, including projected “net stressed cash outflow” amounts and derivatives inflows and outflows. Compliance deadlines range from April 2017 through October 2018.

    Federal Issues Banking HQLA LCR

  • Prudential Regulators Finalize Liquidity Coverage Ratio Rule

    Consumer Finance

    On September 3, the OCC, the FDIC, and the Federal Reserve Board released a final rule establishing a minimum liquidity requirement for large and internationally active banking organizations. The rule will require banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposure, and such banking organizations’ subsidiary depository institutions that have assets of $10 billion or more, to hold high quality, liquid assets (HQLA) that can be converted easily into cash in an amount equal to or greater than its projected cash outflows minus its projected cash inflows during a 30-day stress period. The ratio of the institution’s HQLA to its projected net cash outflow is its “liquidity coverage ratio,” or LCR. The Federal Reserve Board also is adopting a modified LCR for bank holding companies and savings and loan holding companies that do not meet these thresholds, but that have $50 billion or more in total assets. Bank holding companies and savings and loan holding companies with substantial insurance or commercial operations are not covered by the final rule. Relative to the proposal issued in October 2013, the final rule includes changes to the range of corporate debt and equity securities included in HQLA, a phasing-in of daily calculation requirements, a revised approach to address maturity mismatch during a 30-day period, and changes in the stress period, calculation frequency, and implementation timeline for the bank holding companies and savings and loan companies subject to the modified LCR. Covered U.S. firms will be required to be fully compliant with the rule by January 1, 2017. Specifically, covered institutions will be required to maintain a minimum LCR of 80% beginning January 1, 2015. From January 1, 2016, through December 31, 2016, the minimum LCR would be 90%. Beginning on January 1, 2017, and thereafter, all covered institutions would be required to maintain an LCR of 100%.

    FDIC Federal Reserve OCC HQLA

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