Office of the Comptroller of the Currency (OCC)

Yale University

OCC Bulletin 2019-52 | November 1, 2019Applicability Thresholds forRegulatory Capital and LiquidityRequirements: Final RuleHome > News & Events > NewsroomToChief Executive Officers of All National Banks, Federal Savings Associations,and Federal Branches and Agencies; Department and Division Heads; AllExamining Personnel; and Other Interested PartiesSummaryThe Office of the Comptroller of the Currency, the Board of Governors of the FederalReserve System, and the Federal Deposit Insurance Corporation (collectively, theagencies) published a final rule in the Federal Register on November 1, 2019, thatrevises the framework for determining the applicability of regulatory capital andstandardized liquidity requirements for large U.S. banking organizations, the U.S.intermediate holding companies (IHC) of certain foreign banking organizations, andcertain of their depository institution subsidiaries.The final rule is effective as of December 31, 2019.6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 1/6Note for Community BanksThis final rule does not apply to community banks.HighlightsThis interagency final rule adopts, with certain changes, the tailoring frameworkproposed on December 21, 2018, for domestic banking organizations and onMay 24, 2019, for the U.S. IHCs of certain foreign banking organizations. Theframework establishes four risk-based categories for determining theapplicability of requirements under the agencies’ regulatory capital rule andliquidity coverage ratio (LCR) rule. Under the framework, requirements areapplied to banking organizations (and certain of their subsidiary national banksand federal savings associations) based on five risk-based indicators—assetsize, cross-jurisdictional activity, weighted short-term wholesale funding,nonbank assets, and off-balance-sheet exposure—measured at the level of theU.S.-based top-tier banking organization.For capital, requirements applied to top-tier banking organizations also apply totheir subsidiary national banks and federal savings associations. LCRrequirements applicable to the top-tier banking organizations also apply totheir subsidiary national banks and federal savings associations with totalconsolidated assets of $10 billion or more.Category I standards apply to U.S. global systemically important bank holdingcompanies (GSIB).Category I banking organizations must calculate risk-based capital ratiosusing both the advanced approaches and the standardized approach andare subject to (1) the U.S. leverage ratio, (2) the requirement to recognizeelements of accumulated other comprehensive income (AOCI) inregulatory capital, (3) the requirement to expand the capital conservationbuffer by the amount of the countercyclical capital buffer, if applicable, (4)6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 2/6enhanced supplementary leverage ratio standards, and (5) the GSIBsurcharge.Category I banking organizations are subject to the full LCR requirement.Category II standards apply to U.S. banking organizations and U.S. IHCs with totalconsolidated assets of $700 billion or more or cross-jurisdictional activity of $75billion or more that do not qualify as U.S GSIBs.Category II capital requirements are the same as Capital I capitalrequirements, with the exception that U.S. IHCs are not required tocalculate risk-based capital requirements using the advanced approachesunder the capital rule and instead use the generally applicable capitalrequirements. Category II domestic holding companies and theirsubsidiary national banks and federal savings associations are required touse the advanced approaches capital framework.Category II banking organizations are subject to the full LCR requirement.Category III standards apply to U.S. banking organizations and U.S. IHCs that donot meet the criteria for Category I or II and have total consolidated assets of$250 billion or more. These standards also apply to U.S. banking organizationsand U.S. IHCs with total consolidated assets of at least $100 billion and $75billion weighted short-term wholesale funding, nonbank assets, or off-balance-sheet exposure.Category III capital requirements under the final rule include (1) thegenerally applicable risk-based capital requirements; (2) the U.S. leverageratio; (3) the supplementary leverage ratio; and (4) the countercyclicalcapital buffer. Category III banking organizations are not required to applyadvanced approaches capital requirements and may opt out of recognizingAOCI in regulatory capital.A banking organization subject to Category III standards with weightedshort-term wholesale funding of $75 billion or more is subject to the fullLCR requirement, while a Category III banking organization with weighted6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 3/6short-term wholesale funding of less than $75 billion is subject to areduced LCR requirement, calibrated at 85 percent of the full LCRrequirement.Category IV standards apply to U.S. banking organizations and U.S. IHCs withtotal consolidated assets of $100 billion or more that do not meet thethresholds for one of the other three categories.Category IV capital requirements consist of the generally applicable risk-based capital requirements and the U.S. leverage ratio. The capitalrequirements applicable to Category IV banking organizations are largelythe same as the capital requirements applicable to banking organizationsbelow the Category IV threshold.The final rule applies a reduced LCR requirement, calibrated at 70 percentof the full LCR requirement, to a Category IV banking organization withweighted short-term wholesale funding of at least $50 billion but less than$75 billion, and applies no LCR requirement to Category IV bankingorganizations with less than $50 billion in weighted short-term wholesalefunding.BackgroundMany of the agencies’ current rules, including the capital rule, the LCR rule, and theproposed net stable funding ratio (NSFR) rule, differentiate among bankingorganizations based on one or more risk indicators, such as total asset size andforeign exposure.The capital rule categorizes banking organizations into two groups: (i) bankingorganizations subject solely to the standardized approach, which have totalconsolidated assets of less than $250 billion and total on-balance-sheet foreignexposure of less than $10 billion (standardized approach banking organizations),and (ii) advanced approaches banking organizations, which are generally bankingorganizations with $250 billion or more in total consolidated assets or $10 billion ormore in total on-balance-sheet foreign exposure, together with depository6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 4/6institution subsidiaries of banking organizations meeting those thresholds(advanced approaches banking organizations). Standardized approach bankingorganizations must calculate risk-weighted assets using the relatively simplestandardized approach and must calculate a leverage ratio that measures regulatorycapital relative to on-balance-sheet assets. Advanced approaches bankingorganizations must use the standardized approach to determine their risk-basedcapital ratios but are also subject to additional requirements, including therequirement to calculate a supplementary leverage ratio, which measures regulatorycapital relative to on-balance-sheet and certain off-balance-sheet exposures.The LCR rule currently distinguishes between banking organizations based on totalasset size and foreign exposure. The full LCR requirement generally applies toadvanced approaches banking organizations and to their depository institutionsubsidiaries with total consolidated assets equal to $10 billion or more. Theproposed NSFR requirement would apply to the same banking organizations as thecurrent LCR requirement.Further InformationPlease contact Mark Ginsberg, Senior Risk Expert, or Venus Fan, Risk Expert, CapitalPolicy Division, at (202) 649-6370; James Weinberger, Technical Expert, Treasury andMarket Risk, at (202) 649-6360; or Carl Kaminski, Special Counsel, Henry Barkhausen,Counsel, or Daniel Perez, Senior Attorney, Chief Counsel’s Office, at (202) 649-5490. Jonathan V. GouldSenior Deputy Comptroller and Chief CounselRelated Link“Changes to Applicability Thresholds for Regulatory Capital and LiquidityRequirements”6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 5/6Topic(s): CAPITAL CAPITAL MARKETS LAWS & REGULATIONS LIQUIDITYOCC REGULATIONS TREASURY & MARKET RISKGet updatesEnter your email Subscribe6/11/24, 11:47 AM Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule | OCChttps://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-52.html 6/6

Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule

https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=4979&context=ypfs-documents2

Applicability Thresholds for Regulatory Capital and Liquidity Requirements: Final Rule

Abstract

Similar works

Full text

Available Versions

Yale University