FRB, FDIC release public sections of 2018 Resolution Plans of the four LISCC FBOs

On July 9, 2018, the Board of Governors of the Federal Reserve System (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “Agencies”) released the public sections of the resolution plans for the four foreign banking organizations’ (“FBOs”) overseen by the Large Institution Supervision Coordinating Committee (“LISCC”).1 The four FBOs were required to submit their plans by July 1, 2018, which included both private and public sections.

The 2018 public sections are comparatively longer than those submitted in the firms’ last full submissions in 2015—a total of 214 pages in 2018 compared to 162 pages in 2015—and contain significant new details about the FBOs’ completed and forthcoming enhancements to resolution planning capabilities. This expansion was largely expected as this submission marked the FBOs’ first reaction to regulatory guidance published in April 2017 2 and FAQs in September 2017 3 (collectively “2017 FBO Guidance”) that was specifically directed at these four banks.


The 2017 FBO Guidance is generally consistent with the guidance previously issued to the eight US global systemically important banks (“US G-SIBS”) for 2017.4 Most notably in the 2017 FBO Guidance, the Agencies incorporated Supervision and Regulation (SR) Letter 14-1 (Principles and Practices for Recovery and Resolution Preparedness),5 which previously was technically applicable to US-GSIBs only. The guidance contained in SR 14-1 outlines specific and more substantive expectations for resolution capabilities.6 While overall the 2017 FBO guidance follows that for the US G-SIBs, it contains certain modifications and tailoring to address issues unique to FBOs such as the relationship and alignment between the US and group resolution plans, the role of branch entities, and guidance for permissible parent support.
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2018 Dodd-Frank Act Stress Test (DFAST): Our take

The Federal Reserve (“Fed”) released the results of its Dodd-Frank Act Stress Tests (DFAST) that measure the potential impact of adverse or severely adverse economic conditions on the performance and condition of the 35 Bank Holding Companies (BHCs) and Intermediate Holding Companies (IHCs)1 subject to the rule.  These results will be followed on June 28, 2018 by the Fed’s conclusions regarding the adequacy of bank capital plans as evaluated through the Comprehensive Capital Analysis and Review (CCAR).

Key takeaways for the severely adverse scenario results include:

  • All firms exceeded minimum required capital under stress for the fourth year in a row.
  • This year’s test had a higher stress impact than previous years resulting in lower post-stress minimum capital levels, reversing an improving trend. The increase in stress was evidenced by:
    • Higher loss rates on loans (6.4% vs 5.8%)
    • Higher global market shock (GMS) losses (up 22%)2
    • Lower offsetting tax benefits in loss and recovery periods from the new tax law (32 basis points (bp) on risk-weighted assets (RWA) on average)
    • Declines in other comprehensive income (OCI) (30bp on RWA in aggregate)
  • These more stressful results were somewhat offset by lower growth in risk-weighted assets and higher pre-provision net revenue.
  • Impact from changes in law. In response to provisions in the recently passed regulatory relief legislation (S.2155, Economic Growth, Regulatory Reform, and Consumer Protection Act (“EGRRCPA”)), the Fed excluded the three firms below the $100 billion asset threshold3, and announced they would also exclude those firms from the CCAR results.
  • The supplementary leverage ratio was more constraining than last year. For most firms, post-stress supplemental leverage ratios were closer to minimum levels than last year and all firms exceeded the minimum ratio of 3.0 percent.

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Legal entity reporting: Common challenges and banking industry practices

Optimizing your legal entity regulatory reporting process

Background for legal entity reporting

Depending upon the legal entity structure and headquarters of a parent bank, several different reporting forms are used to identify legal entities and associated information, including their purpose and type of legal form. This information is used for monitoring compliance with laws and regulations including by the Federal Reserve Board of Governors (“Federal Reserve”): the Dodd-Frank Act, the Sarbanes-Oxley Act, the Gramm-Leach-Bliley Act, Regulation Y (Bank Holding Companies and Change in Bank Control), Regulation YY (Enhanced Prudential Standards), and Regulation QQ (Resolution Plans).  This information is also an important component in regulators determining an institution’s level of complexity.

As events occur that affect a firm’s organizational structure, a report is filed to record the event driven (FR Y-10, Report of Changes in Organizational Structure).  Annually, the end of the parent company fiscal year, a report is submitted that includes an organization chart and information concerning shareholders and public financial statements (FR Y-6, Annual Report of Holding Companies1, and FR Y-7, Annual Report of Foreign Banking Organizations2).  The information from the event-driven forms are compared to the annual organizational chart. All of this information is commonly referred to as banking structure data.

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The end game draws closer for new insurance capital regimes

Posted by Andrew Mais, senior manager, Deloitte Services LP, on June 28, 2016

Who is Leon Lett? He is the football player who almost got the record for the longest fumble return in Super Bowl history – 64 yards. But Lett started celebrating just before reaching the end zone, Don Beebe knocked the ball out of his hand and the play ended as a fumble, not a touchdown.

After an unexpected and spectacular play, there may be an all too human tendency to start celebrating before crossing the goal line. Some US insurers have watched with concern over the years as it seemed international supervisors were about to impose non-US influenced supervisory regimes on their operations. Now they may feel like the beneficiary of a Hail Mary pass after the Federal Reserve’s (Fed) recent issuance of its Advance Notice of Proposed Rulemaking on capital standards for insurance systemically important financial institutions (SIFIs) and for the other insurers it supervises, those with savings and loan holding companies (SLHCs).

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FRB, FDIC issue feedback on 2015 resolution plans of eight US G-SIBs

Posted by Marlo Karp, Deloitte Advisory Partner on April 15, 2016.

On April 13, 2016, the Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC) announced credibility determinations and released firm-specific feedback on the 2015 resolution plans submitted by eight US global systemically important banks (G-SIBs) under Section 165(d) of Dodd-Frank.

In conjunction with this announcement, the FRB and FDIC released guidance for the next full plan submissions for these eight US G-SIBs, which are due by July 1, 2017.

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FRB Issues Guidance Consolidating Capital Planning Expectations for All Large Financial Institutions

Posted by David Wright, Deloitte Advisory Director on January 26, 2016.

Ever since the first bank stress tests were conducted during the financial downturn, regulatory expectations for capital planning and stress testing have been evolving as both bank supervisors and the industry have gained knowledge and experience. Over the years, those rising expectations have been communicated through examination letters, regulations, range of practice guidance, and capital planning instructions. While those various communications were helpful, they were not memorialized in one set of comprehensive guidance, nor did they address how expectations might differ depending on a firm’s size and complexity—until now.

On December 21, 2015, the Federal Reserve Board (FRB) released guidance—in the form of two Supervision and Regulation Letters (SR Letters)—that consolidates the capital planning expectations for all large financial institutions and clarifies differences in those expectations based on firm size and complexity.

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OCC Proposes Guidelines to Expand Recovery Planning Requirements to the Largest National Banks

Recovery Planning
Posted by Robert Burns, Deloitte Advisory Director on January 21, 2016.

On December 17, 2015, the Office of the Comptroller of the Currency (OCC) proposed Guidelines to establish standards for recovery planning that would apply to insured national banks, insured federal savings associations, and insured federal branches of foreign banks with more than $50 billion in assets.
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Federal Reserve proposes rule to require largest banks to hold minimum amounts of unsecured long-term debt

Federal Reserve proposes rule to require largest banks to hold minimum amounts of unsecured long-term debt
Posted by David Wright on November 5, 2015.

On October 30, 2015, the Board of Governors of the Federal Reserve System (Federal Reserve) unanimously approved an important proposed rule that seeks to improve the likelihood that the largest banking organizations can fail without the use of taxpayer funds or destabilizing the financial system. The proposal would establish new Total Loss-Absorbing Capacity (TLAC) and related Long-Term Debt (LTD) requirements for US banking organizations deemed to be “global systemically important banks” (GSIBs) as well as US Intermediate Holding Companies (IHCs) of foreign GSIBs. In her prepared remarks for the Federal Reserve’s open meeting on the proposal, Chair Janet Yellen argued that the new rules, in conjunction with other regulatory efforts to improve the resolvability of GSIBs, would “substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these firms.”

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Proposed CCAR attestation change would be about more than just forms

CCAR attestation change would be about more than just forms
Posted by David Wright, on October 05, 2015.

Download the report

Expectations for the largest banks continue to rise with the latest Federal Reserve proposal for CFOs to attest to the integrity and accuracy of the firm’s regulatory stress testing reports. On September 16, 2015, the Fed published a proposal in the Federal Register to revise the FR Y-14A/Q/M Capital Assessments and Stress Testing Reports.  While proposed changes to reporting forms and instructions are typically viewed as a routine process, the inclusion of a CFO attestation of the filed reports, for both the actual data as well as the projections, raises the bar on expectations and accountability and reflects the Federal Reserve’s ongoing concerns with data quality.

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Fed FAQs for FBOs

The Securities and Exchange Commission Reforms Money Market Rules

On June 26, 2014, the Federal Reserve (Fed) published answers to a list of frequently asked questions (FAQs) from foreign banking organizations (FBOs) that face enhanced prudential standards — including formation of an intermediate holding company (IHC) for non-branch U.S. operations and submission of an Implementation Plan. Many of the questions were generated from a town hall meeting the Fed conducted in May 2014 to help selected FBOs understand the planning requirements and timing associated with the enhanced standards.

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