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Wednesday, April 16, 2014

Basel Finalizes Limits on Counterparty Exposure

The Basel Committee on Banking Supervision has released its final framework for measuring and limiting bank exposure to a single counterparty. Under the framework, exposure will be limited to 25% of a bank’s Tier 1 capital. Single counterparty exposure at designated global systemically significant financial institutions will be limited to 15% of Tier 1 capital. The standard, scheduled to take effect in January 2019, is intended to limit losses a bank could face due to the failure of a counterparty or group of interconnected counterparties.

Read more.

Yellen: ‘Might Be Room’ for Higher Capital, Liquidity Standards

The Basel III capital and liquidity standards may be insufficient to address financial stability risks -- in particular, risks associated with short-term wholesale funding -- Federal Reserve Chairman Janet Yellen said via video to a financial conference in Atlanta.

Yellen said the liquidity standards proposed last fall “do not fully address” financial stability concerns since they apply only to internationally active banks and not to the shadow banking sector that “played a major role in the crisis.” She also cited a 2010 Basel Committee study that she said “provides some support for the view that there might be room for stronger capital and liquidity standards for large banks than have been adopted so far.”

Among additional measures to address short-term wholesale funding issues might be higher requirements for capital, stable funding or highly liquid assets, as well as minimum margin requirements for repos and other securities transactions, Yellen said.

Read the speech.

CFPB to Extend Remittance Disclosure Deadline

The CFPB proposed extending by 5 years a temporary exception in its remittance rule that allows sending institutions to estimate fees charged by the receiving institution. The original provision would have expired in July 2015 but the proposal extends it to June 21, 2020, to facilitate industry compliance.

Under the rule, which took effect in October, a sending financial institution is generally required to disclose fees charged by third parties, including the recipient institution, as well as the exchange rate. The exception allows federally insured institutions to estimate these charges when they cannot determine exact amounts.

Comments will be due 30 days after publication in the Federal Register.

Read the proposal.

Monday, April 14, 2014

Bill Introduced to Modify CFPB’s Information Request Process

Senator Dan Coats (R-Ind.) introduced a bill that would modify the way the in which the CFPB requests information from financial institutions with less than $10 billion in assets by requiring the CFPB to use publicly available information or obtain information from existing banking regulators. The bill would provide regulatory relief for community banks who spent more than $250 million to comply with new regulations during the first quarter of 2013, according to Sen. Coats’s press release.

The bill, The Community Financial Protection Act, would stipulate that:

  • The CFPB must use current and existing publicly available information and data prior to requesting any information from the prudential regulator;
  • If the CFPB does request information that is not currently publicly available, it must provide justification to the regulator as to why it needs that information
  • The prudential regulator has the authority to deny any request for information from the CFPB; and
  • The CFPB can only request institution-specific information rather than industry-wide information.

S. Joe DeHaven, President and CEO of Indiana Bankers Association, applauded Sen. Coats efforts and noted that the bill “is a solid step in the right direction to ensure that Hoosiers will have continued access to capital to invest in and build communities.”

Read Sen. Coats’s press release.

OCC’s Curry: ‘Heightened Expectations’ Not for Small Banks

Comptroller of the Currency Tom Curry told bankers gathered at ABA’s Risk Management Forum in Orlando last week that the OCC’s proposed “heightened expectations” guidelines will not apply to small banks.

Curry said the guidelines, which set minimum standards for a bank’s risk governance framework and for oversight of that framework by the board of directors, do not apply to banks under $50 billion. The only exception is if a bank’s operations are highly complex or present a heightened risk -- a threshold that Curry said would only be crossed in “extraordinary circumstances.”

“Some community bankers may be reading that language as a loophole that we will use to impose onerous new requirements on community banks,” Curry said. “I want to assure you that this is not the case and not our intent.”

Curry also clarified that enforcing the guidelines means that if a bank fails to meet the guidelines, it will be required to develop and implement a plan to achieve compliance. “A formal enforcement action is only necessary in the event that a bank fails to submit or comply with an acceptable plan,” he said.

Read Curry’s speech.

FDIC Final Rule: Restrictions on Sales of Assets

The FDIC is adopting a final rule final rule to implement section 210(r) of the Dodd-Frank Act which would prohibit individuals or entities that have, or may have, contributed to the failure of a ‘‘covered financial company’’ to buy a covered financial company’s assets from the FDIC. The final rule establishes a self-certification process that will become a prerequisite to the purchase of assets of a covered financial company from the FDIC.

The final rule will be effective July 1, 2014.

Read the final rule.