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Banking Agencies Detail Approach to Rule Enforcement Affected By Financial Reform Legislation's picture
Commentary by Mark Chorazak

On July 6, the Federal Reserve Board ("FRB"), the FDIC and the Office of the Comptroller of the Currency detailed an interim approach to rules and reporting requirements jointly administered by the agencies that are impacted by the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Relief Act").

This interim approach affects company-run stress testing, resolution plans, the Volcker rule, high volatility commercial real estate exposures ("HVCRE"), examination cycles, municipal obligations as high-quality liquid assets ("HQLA"), and other provisions of the Relief Act. It will apply until agency rules are amended to implement the changes provided for in the Relief Act.

  • Company Run Stress Testing: The agencies are extending the deadlines for company-run stress testing regulatory requirements for depository institutions with less than $100 billion total assets until November 25, 2019;
  • Resolution Plans: The FRB and the FDIC will not enforce any resolution planning requirements that are inconsistent with the Relief Act;
  • Volcker Rule: The agencies will not enforce any Volcker provisions inconsistent with the Relief Act, and will engage in rulemaking to implement the statutory amendments;
  • High Volatility Commercial Real Estate (HVCRE) Exposures: Depository institutions will only be required to report HVCRE exposures in a manner consistent with the Relief Act. Institutions may use "reasonable" estimates to determine if an HVCRE exposure meets the new definition of an "HVCRE ADC loan," which requires a 150% risk weight;
  • Examination Cycle: The agencies will engage in rulemaking to implement the revised asset threshold ($3 billion) that determines which institutions are eligible for an 18-month examination cycle; and
  • Municipal Obligations as High-Quality Liquid Assets (HQLA): While engaging in rulemaking to implement liquidity regulations that provide for revised treatment of certain HQLAs, the agencies will not require institutions to exclude HQLAs from liquidity calculations that they anticipate will meet the new statutory definition of HQLAs.

In a separate statement, the FRB described additional requirements that certain smaller, less complex banking organizations will be exempt from in accordance with the Relief Act.


Almost immediately after the Relief Act was enacted, questions surfaced on how aspects of the new law would square with the banking agencies’ existing regulations and guidance.  The banking agencies’ recent statement answers some of these questions, but not all.  For example, while the Relief Act amended the asset threshold for stress testing applicability under Section 165 of the Dodd-Frank Act, it did not address the asset threshold cited in the banking agencies’ supervisory guidance on stress testing from May 2012 (77 Fed. Reg. 29458) (May 17, 2012).  The stress testing requirements imposed under that guidance were not issued under Section 165 or any other provision of the Dodd-Frank Act that was modified by the Relief Act.  Staff should continue reviewing existing supervisory guidance to identify additional opportunities for clarification.

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