Liquidity Coverage Ratio Proposed Banking Regulations (Pre-Fed. Reg. Version)

The Office of the Comptroller of the Currency ("OCC"), the Board of Governors of the Federal Reserve System ("Board"), and the Federal Deposit Insurance Corporation ("FDIC") proposed new rules to strengthen the liquidity positions of large financial institutions. The proposal would for the first time create a standardized minimum liquidity requirement for large, internationally active and systemically important banking organizations (i.e., banking organizations with more than $250 billion in total assets or more than $10 billion in on-balance sheet foreign exposure, and to their consolidated subsidiaries that are depository institutions with $10 billion or more in total consolidated assets), as well as nonbank financial companies designated by the Financial Stability Oversight Council. These institutions would be required to hold minimum amounts of high-quality liquid assets, such as central bank reserves and government and corporate debt that can be converted easily and quickly into cash. Each institution would be required to hold liquidity in an amount equal to or greater than its projected cash outflows, minus its projected cash inflows during a short-term stress period.

On its own, the Board also is proposing a modified liquidity coverage ratio standard that is based on a 21-calendar day stress scenario rather than a 30-calendar day stress scenario for bank holding companies and savings and loan holding companies without significant insurance or commercial operations that, in each case, have $50 billion or more in total consolidated assets.

Comments Due: January 31, 2014.

See: Proposed Rule Release.See also: Information and Webcast from the October 24 Open Meeting; Statement by Chairman Ben S. Bernanke; Statement by Governor Daniel K. Tarullo; Current FAQ: What Is the Difference between a Bank's Liquidity and Its Capital?