On July 17, the Federal Register published proposed changes to the Volcker Rule that were jointly approved by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission. As described in greater detail in the June 1,

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued an interpretive letter clarifying that payments of variation margin, price alignment amounts and other payments in satisfaction of outstanding exposures on a counterparty’s cleared swap positions constitute “settlement” under the Commodity Exchange Act (CEA) and CFTC Regulation 39.14. The CEA and CFTC Regulation 39.14 provide that a derivatives clearing organization (DCO) must effect a settlement at least once each business day and ensure that settlements are final when effected.
Continue Reading

On September 1, the Board of Governors of the Federal Reserve System adopted a final rule that will affect the rights of counterparties that enter into Qualified Financial Contracts (QFC) (e.g., derivatives, stock loans and repurchase agreements) with banks that have been designated as global systemically important banking organizations (GSIBs). This rule, which was proposed in 2016, would prohibit US GSIBs and their subsidiaries, and the US subsidiaries, branches, and agencies of foreign GSIBs, from entering into a QFC unless the counterparty to the contract has agreed contractually:

  • to abide by the 48-hour stay of QFC termination found in Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act;
  • to allow transfer of the QFC in the event of a resolution of its counterparty; and
  • to refrain from exercising cross-default termination rights arising from the resolution of an affiliate of its GSIB counterparty.


Continue Reading

On June 16, 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2016-13, Topic 326, Financial Instruments – Credit Losses, which implemented the current expected credit losses methodology (CECL) for estimating allowances for credit losses. This new accounting standard applies to all banks, savings associations, credit unions and financial institution holding companies, regardless of size, that are required to file regulatory reports that conform to US generally accepted accounting principles (GAAP).
Continue Reading

On December 12, the Federal Deposit Insurance Corporation, Federal Reserve Board and Office of the Comptroller of the Currency issued joint final rules permitting these federal banking agencies to conduct examinations every 18 months instead of every 12 months for qualifying insured depository institutions with less than $1 billion in total assets. These final rules are intended to reduce regulatory compliance costs for smaller insured depository institutions while still maintaining safety and soundness standards. Interim final rules have been in effect since February 29, which are identical to the joint final rules.
Continue Reading

On September 8, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) issued a report (Report) that they were required to prepare pursuant to section 620 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). The primary purpose of the Report is to inform Congress concerning the investment and other activities that a banking entity may engage in under federal and state law, so it provides a useful summary of current regulatory framework for banks. The Report is also required to include recommendations as to (1) whether each activity or investment has or could have a negative effect on the safety and soundness of the banking entity or the US financial system; (2) the appropriateness of the conduct of each activity or type of investment by banking entities; and (3) additional restrictions as may be necessary to address risks to safety and soundness arising from the activities or types of investments.
Continue Reading