Federal Reserve Board Issues Rule Extending Compliance Dates for Single-Counterparty Credit Limits

The Federal Reserve Board (Board) recently issued a final rule extending the compliance dates regarding the single-counterparty credit limits (SCCL) applicable to foreign banking organizations (FBOs).  The rule shifts the compliance dates to July 1, 2021, for FBOs with the characteristics of a global systemically important banking organization, and January 1, 2022, for any other FBO subject to the final SCCL rule, from January 1, 2020, and July 1, 2020, respectively.

The final SCCL rule allows an FBO to satisfy its SCCL requirements by certifying that it meets SCCL standards established by its home country supervisor that are consistent with the Basel Committee on Banking Supervision large exposures framework (BCBS Standard).  After the Board adopted the final SCCL rule, several foreign firms explained that the BCBS Standard might not be fully implemented in the FBO’s home countries before the initial compliance dates of the final SCCL rule.  The foreign firms explained that it would be burdensome to build a framework to comply with the final SCCL rule, in the interim, while the FBO’s home countries implement the BCBS Standard.  The Board, agreeing that creating two largely redundant SCCL frameworks would be burdensome, proposed to modify the initial compliance dates for the SCCL applicable to FBOs by eighteen months.  The Board explained that the additional time provides a reasonable period for foreign firms to either comply with the final SCCL rule or certify that it complies with a home-country SCCL standard that is consistent with the BCBS Standard.