Federal Reserve Board, OCC and FDIC Issue RFI on Proposed Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements

On October 31, 2018, the Federal Reserve Board, OCC and FDIC (collectively, the Agencies) issued a request for information (RFI) seeking comments on a proposal that would establish risk-based categories for determining the applicability of the requirements under the Agencies’ regulatory capital rule, liquidity coverage ratio rule, and proposed net stable funding ratio rule for domestic large banking organizations (LBOs).

The proposed framework establishes four categories of standards for LBOs (i.e., banking organizations with more than $100 billion in total consolidated assets).  Banking organizations would be sorted into categories based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure.

Under the proposed rule, LBOs in the lowest risk category (banking organizations with $100 billion to $250 billion in total consolidated assets) would no longer be subject to the standardized liquidity requirements.  However, they would still remain subject to internal liquidity stress test requirements and regulatory liquidity risk management standards.  Moreover, supervisory stress tests would be performed on these organizations every two years, instead of annually.

LBOs in the next lowest risk category (banking organizations with $250 billion or more in total consolidated assets), would have their standardized liquidity requirements reduced to reflect their more stable funding profile but remain subject to a range of enhanced liquidity standards.  In addition, although these LBOs would continue to be subject to annual supervisory stress tests, they would be required to conduct internal stress tests every two years, instead of semi-annually.

Note that generally no changes would be made to the capital or liquidity requirements for LBOs in the highest two risk categories, which include banking organizations with $700 billion or more in total consolidated assets and LBOs classified as global systemically important banking organizations.

Comments must be received by January 22, 2019.