The federal bank regulatory agencies are requesting comment on a proposed rule that would implement a quantitative liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision. The requirement is designed to promote the short-term resilience of the liquidity risk profile of international banking organizations and enhance improvements in the measurement and management of liquidity risk.
Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter is applicable only to depository institutions with $10 billion or more in total consolidated assets that are consolidated subsidiaries of internationally active banking organizations.
The proposed rule:
Establishes a short-term quantitative minimum LCR that assesses exposures to contingent liquidity events.
Provides enhanced information about liquidity risk to managers and supervisors, allowing for more effective oversight and supervision of liquidity risk and appropriate supervisory responses.
Facilitates a more orderly resolution of a covered company in the event of a failure.
Requires covered companies to maintain an amount of high quality liquid assets, consisting of Level 1, Level 2A, and Level 2B liquid assets, that is not less than 100 percent of the institutions total net cash outflows over a prospective 30-day period.
Accounts for asset risk and promotes diversification with haircuts and caps.
Addresses liquidity risk by applying a series of shocks, with prescribed run-off and inflow rates against a banks assets, obligations, and other funding sources.
Requires covered companies to notify their primary federal regulator when a liquidity shortfall exists (or when the LCR drops below 100 percent).
Establishes transitions requiring covered companies to comply with a minimum liquidity coverage ratio of 80 percent as of January 1, 2015, 90 percent as of January 1, 2016, and 100 percent thereafter.
FDIC-Supervised Banks (Commercial and Savings)
Bobby Bean, Associate Director, or Kyle Hadley, Chief, Exam Support Section, Division of Risk Management Supervision, Capital Markets Branch, at BBean@fdic.gov, KHadley@fdic.gov,or (202) 898-6888