May 2019Transmittal 459
Effective: 5/1/2019
Banks and Banking
Policy Statements
The Board, the Federal Deposit Insurance Corporation
(FDIC), the National Credit Union Administration, and the Office of
the Comptroller of the Currency (OCC) (collectively, “the agencies”)
reissued on April 3, 2019,
Frequently Asked Questions on the Current
Expected Credit Losses Methodology, with additional frequently
asked questions (FAQs) numbered 38 through 46.
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These FAQs were developed by
the agencies to assist institutions and examiners in their implementation
of the new accounting standard for credit losses recently issued by
the Financial Accounting Standards Board. The agencies plan to publish
additional FAQs and/or update existing FAQs periodically (Guidance, Allowance for Loan and Lease Losses at 3-1489). Regulation KK
The Board, the
Farm Credit Administration, the FDIC, the Federal Housing Finance
Agency, and the OCC adopted an interim final rule amending the agencies’
regulations that require swap dealers and security-based swap dealers
under the agencies’ respective jurisdictions to exchange margin
with their counterparties for swaps that are not centrally cleared
(swap margin rule).
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The swap margin rule takes effect under a phased compliance
schedule stretching from 2016 through 2020, and the dealers covered
by the rule continue to hold swaps in their portfolios that were entered
into before the effective dates of the rule. Those swaps are grandfathered
from the swap margin rule’s requirements until they expire according
to their terms. There are currently financial services firms located
within the United Kingdom (U.K.) that conduct swap dealing activities
subject to the swap margin rule. The U.K. has provided formal notice
of its intention to withdraw from the European Union (E.U.). If this
transpires without a negotiated agreement between the U.K. and E.U.,
these entities located in the U.K. may not be authorized to provide
full-scope financial services to swap counterparties located in the
E.U. The agencies’ policy objective in developing the interim
final rule is to address one aspect of the scenario likely to ensue,
whereby entities located in the U.K. might transfer their existing
swap portfolios that face counterparties located in the E.U. over
to an affiliate or other related establishment located within the
E.U. or the United States. The agencies seek to address industry concerns
about the status of grandfathered swaps in this scenario, so the industry
can focus on making preparations for swap transfers. These transfers,
if carried out in accordance with the conditions of the interim final
rule, will not trigger the application of the swap margin rule to
grandfathered swaps that were entered into before the compliance dates
of the swap margin rule. The interim final rule is effective March
19, 2019 (Regulation KK, Docket R-1654), the same day it was published in the Federal
Register. Holding and Nonbank Financial Companies
Regulation Y
The Board
is amending the capital plan rule to limit the scope of potential
objections to a firm’s capital plan on the basis of qualitative
deficiencies in the firm’s capital planning process (qualitative
objection).
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In particular, effective immediately, the Board will no longer issue
a qualitative objection under the capital plan rule to a firm if the
firm has been subject to a potential qualitative objection
for four consecutive years, and the firm does not receive a qualitative
objection in the fourth year of that period. In addition, except for
certain firms that have received a qualitative objection in the immediately
prior year, the Board will no longer issue a qualitative objection
to any firm effective January 1, 2021. The final rule is effective
March 13, 2019 (Regulation Y, Docket R-1653), the same day it was published in the Federal
Register. Procedural and Organizational Rules
Systems of Records of the Federal Reserve
System
Pursuant to the provisions of the Privacy
Act of 1974, notice was given that the Board proposed the establishment
of a new system of records,
BGFRS-41 “FRB—Ethics Program Records.”
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The new system
of records became effective after the comment period closed on April
1, 2019 (Rules Regarding Access to Personal Information under the
Privacy Act of 1974, Systems of Records of the Federal Reserve System) and was published
in the Federal Register on March 1, 2019.
Pursuant to the provisions of the Privacy Act of 1974,
notice was given that the Board proposed the establishment of a new
system of records,
BGFRS-42 “FRB—General File of the Insurance Policy
Advisory Committee.”
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The new system of records became
effective after the comment period closed on March 11, 2019 (Rules
Regarding Access to Personal Information under the Privacy Act of
1974, Systems of Records of the Federal Reserve System) and was published
in the Federal Register on February 8, 2019. Proposed Rules
The Board, the FDIC, and
the OCC are inviting public comment on a notice of proposed rulemaking
that would address an advanced approaches banking organization’s
regulatory capital treatment of an investment in unsecured debt instruments
issued by foreign or U.S. global systemically important banking organizations
(G-SIBs) for the purposes of meeting minimum total loss absorbing
capacity (TLAC) and, where applicable, long-term debt (LTD) requirements,
or unsecured debt instruments issued by G-SIBs that are pari passu
or subordinated to such debt instruments.
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Under the proposal, investments
by an advanced approaches banking organization in such unsecured debt
instruments generally would be subject to deduction from the advanced
approaches banking organization’s own regulatory capital. The
proposal would reduce both interconnectedness within the financial
system and systemic risk. The Board is proposing changes to regulatory
reporting requirements resulting from the proposal. The Board is also
proposing to require that banking organizations subject to minimum
TLAC and LTD requirements under Board regulations publicly disclose
their TLAC and LTD issuances in a manner described in this proposal.
Comments on this notice of proposed rulemaking must be received by
June 7, 2019 (Docket R-1655).