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From Banking and Finance Law Daily, December 11, 2015

Fed adopts revisions to systemic risk data collection as proposed

By Lisa M. Goolik, J.D.

The Federal Reserve Board has approved revisions to the Banking Organization Systemic Risk Report (FR Y-15), which collects systemic risk data from institutions which are subject to enhanced prudential standards under Section 165 of the Dodd-Frank Act. The Fed has adopted the revisions as proposed, effective Dec. 31, 2015. However, in light of some concerns regarding the implementation date, the Fed is extending the submission date for the end-2015 report from 65 calendar days to 90 calendar days after the Dec. 31, 2015, as-of date.

Commenter’s concerns. The FR Y-15 report collects systemic risk data from U.S. bank holding companies (BHCs) and savings and loan holding companies (SLHCs) with $50 billion or more of total consolidated assets and any U.S.-based organizations designated as global systemically important banks (G-SIBs) that do not otherwise meet the consolidated assets threshold for BHCs.

On July 9, 2015, the Fed requested comment on proposed revisions to FR Y-15. The Fed published an additional notice on Aug. 20, 2015, extending the comment period and requesting public comment on amendments to Schedule G that would align the definition of short-term wholesale funding with the definition in the final G-SIB surcharge rule (see Banking and Finance Law DailyJuly 8, 2015, and Aug. 19, 2015).

The Fed received four comment letters: three from trade associations and one from a banking organization. According to the Fed, in general, the comments focused on the implementation of the proposed changes, the confidentiality of liquidity-related items, the move from annual to quarterly reporting, and the scope of application. Commenters requested delayed implementation of the new definitions, confidential treatment of certain liquidity data and quarterly reports, a phase-in of the quarterly reporting requirement, and an increased reporting threshold.

For the most part, the Fed adopted the revisions as proposed; however, to address the commenters’ concerns, the Fed agreed to:

  • extend the submission date for the end-2015 report from 65 calendar days to 90 calendar days after the Dec. 31, 2015, as-of date;
  • extend the effective date of revised Schedule G from June 30, 2016, to Dec. 31, 2016, to correspond with implementation of the Complex Institution Liquidity Monitoring Report;
  • delay disclosing the more granular short-term funding data within Schedule G until the first reporting date after the liquidity coverage ratio disclosure standard has been implemented; and
  • in instances where data is sourced from another report that is not yet due to be submitted at the time the FR Y-15 is due, allow respondents to submit the FR Y-15 with the data items from the other report left blank, so long as respondents resubmit the missing information when available.

Delayed implementation. The Fed rejected commenters’ arguments that respondents need six-to-nine months after a final notice is published to revise and validate their reporting systems, and that changes to items which measure total activity over the reporting period are difficult to implement mid-year. The Fed noted that the vast majority of the proposed changes either align definitions with other existing regulatory requirements or provide clarification to ensure uniform reporting.

In addition, the Fed commented that delaying the implementation date of the proposed changes would cause data collected in the United States to be inconsistent with the global data used for G-SIB identification and calculation of the G-SIB surcharge.

Confidentiality. Two commenters argued that Schedule G, which would collect data related to a firm’s use of short-term wholesale funding, contains sensitive liquidity information. The commenters requested that Schedule G be kept confidential. However, the Fed responded that the data in Schedule G does not present confidentiality concerns because the data is aggregate rather than granular data, averaged over a 12-month period, and reported with a 50-day or 65-day delay.

The Fed also noted that the data serves the important policy goal of providing valuable insight into the domestic systemic risk landscape and encourages market discipline regarding incremental changes in systemic risk.

Reporting frequency. The Fed also adopted quarterly reporting, starting with the reporting period ending March 31, 2016. Some commenters argued that the increased frequency is unnecessary because the systemic footprint of a BHC is unlikely to change significantly on a quarterly basis.

The Fed disagreed, stating an institution’s systemic profile is not necessarily static throughout the year, especially to the extent that a firm takes active steps to reduce their systemic footprint. Large year-over-year changes have been observed in the past, said the Fed. Thus, quarterly reporting allows for a “more robust” assessment of a firm’s overall systemic footprint.

Reporting threshold. The Fed defended also the $50 billion reporting threshold, stating that the threshold is consistent with the asset threshold in Section 165. “The report was primarily designed to monitor, on an ongoing basis, the systemic risk profile of institutions subject to enhanced prudential standards,” explained the Fed.

MainStory: TopStory BankHolding BankingOperations DoddFrankAct FinancialStability FederalReserveSystem PrudentialRegulation SecuritiesDerivatives

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