Posts Tagged ‘Margaret Tahyar’

Volcker Rule: Observations on Interagency FAQs, OCC Interim Examination Guidelines

Editor’s Note: Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on a Davis Polk client memorandum.

More than six months after the release of final Volcker Rule regulations, banking organizations continue to grapple with a long list of interpretive questions and an opaque process for seeking clarity from the Volcker agencies. Regulatory silence broke for a brief moment this past week in the form of a short interagency FAQ and, from the OCC, interim examination guidelines for assessing banking entities’ progress toward Volcker Rule compliance during the conformance period.

Neither document is a significant source of new guidance or interpretive gloss. Nonetheless, the OCC guidelines evidence the staff’s intention to begin detailed inquiries into banks’ conformance efforts to date and suggest a higher standard for interim compliance than many may have expected. It remains to be seen whether the other Volcker agencies take the same approach.

…continue reading: Volcker Rule: Observations on Interagency FAQs, OCC Interim Examination Guidelines

Proposed Dodd-Frank Concentration Limit on Financial Institution M&A Transactions

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 11, 2014 at 9:00 am
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Editor’s Note: The following post is based on a Davis Polk publication by Luigi L. De Ghenghi, Randall Guynn, Margaret E. Tahyar and Andrew S. Fei; the full publication, including visuals, tables and flowcharts, is available here.

In May 2014, the Federal Reserve issued a proposal that would implement the financial sector concentration limit set forth in Section 622 of the Dodd-Frank Act. The proposal reflects the Financial Stability Oversight Council’s January 2011 Study and Recommendations Regarding Concentration Limits on Large Financial Companies.

The concentration limit generally prohibits a financial company from merging or consolidating with, acquiring all or substantially all of the assets of, or otherwise acquiring control of another company if the “liabilities” of the resulting financial company, calculated using methodologies in the proposal, exceed 10% of aggregate financial sector liabilities.

…continue reading: Proposed Dodd-Frank Concentration Limit on Financial Institution M&A Transactions

Who Knew that CLOs were Hedge Funds?

Editor’s Note: Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on a Davis Polk client memorandum.

U.S. financial regulators found themselves on the receiving end of an outpouring of concern from law makers last Wednesday about the risks to the banking sector and debt markets from the treatment of collateralized loan obligations (“CLOs”) in the Volcker Rule final regulations. Regulators and others have come to realize that treating CLOs as if they were hedge funds is a problem and we now understand from Governor Tarullo’s testimony that the treatment of CLOs is at the top of the list for the new interagency Volcker task force. But what, if any, solutions regulators will offer—and whether they will be enough to allow the banking sector to continue to hold CLOs and reduce the risks facing debt markets—remains to be seen.

…continue reading: Who Knew that CLOs were Hedge Funds?

Basel Committee’s Revisions to the Basel III Leverage Ratio

Editor’s Note: Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on the introduction to a Davis Polk client memorandum by Luigi L. De Ghenghi and Andrew S. Fei; the full publication, including visuals, tables, timelines and formulas, is available here.

In January 2014, the Basel Committee on Banking Supervision finalized its revisions to the Basel III leverage ratio. Compared to its June 2013 proposed revisions, the Basel Committee has made several important changes to the denominator of the Basel III leverage ratio, including with respect to the treatment of derivatives, securities financing transactions and certain off-balance sheet items.

…continue reading: Basel Committee’s Revisions to the Basel III Leverage Ratio

US Basel III Liquidity Coverage Ratio Proposal

Editor’s Note: Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on the overview of a Davis Polk visual memorandum; the complete publication, including diagrams, flowcharts, timelines, examples and comparison tables to illustrate key aspects of the US liquidity coverage ratio proposal, is available here.

Overview of U.S. Liquidity Coverage Ratio Proposal

  • The Federal Reserve, OCC and FDIC have issued a proposal to implement the Basel III liquidity coverage ratio (LCR) in the United States.
  • Part of the Basel III liquidity framework, the LCR requires a banking organization to maintain a minimum amount of liquid assets to withstand a 30-day standardized supervisory liquidity stress scenario.
  • The U.S. LCR proposal is more stringent than the Basel Committee’s LCR framework in several significant respects.
  • The U.S. LCR proposal contains two versions of the LCR:
    • A full version for large, internationally active banking organizations.
    • A modified, “light” version for other large bank holding companies and savings and loan holding companies (depository institution holding companies).
  • The proposed effective date is January 1, 2015, subject to a two-year phase-in period.
  • The comment period for the proposal ends on January 31, 2014.

Which Organizations Are Affected?

…continue reading: US Basel III Liquidity Coverage Ratio Proposal

Proposed Changes to Basel III Leverage Ratio Framework

Editor’s Note: Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. The following post is based on the introduction to a Davis Polk client memorandum by Luigi L. De Ghenghi and Andrew S. Fei; the full publication, including visuals, tables, timelines and formulas, is available here.

On the heels of publishing the U.S. Basel III final rule, the U.S. banking agencies have proposed higher leverage capital requirements for the eight U.S. bank holding companies that have been identified as global systemically important banks (“Covered BHCs”) and their insured depository institution (“IDI”) subsidiaries. The higher leverage capital requirements, which we are calling the American Add-on, build upon the minimum Basel III supplementary leverage ratio in the U.S. Basel III final rule.

The proposed American Add-on would require a Covered BHC’s IDI subsidiaries to maintain a Basel III supplementary leverage ratio of at least 6% to be considered well-capitalized under the prompt corrective action framework. The American Add-on also requires Covered BHCs to maintain a leverage buffer that would function in a similar way to the capital conservation buffer in the U.S. Basel III final rule. A Covered BHC that does not maintain a Basel III supplementary leverage ratio of greater than 5%, i.e., a buffer of more than 2% on top of the 3% minimum, would be subject to increasingly stringent restrictions on its ability to make capital distributions and discretionary bonus payments. The proposed effective date of the American Add-on is January 1, 2018.

…continue reading: Proposed Changes to Basel III Leverage Ratio Framework

January 2013 Davis Polk Dodd-Frank Progress Report

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday January 21, 2013 at 9:40 am
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Editor’s Note: The following post comes to us from Margaret E. Tahyar and Gabriel D. Rosenberg of the Financial Institutions Group at Davis Polk & Wardwell LLP. This post discusses a Davis Polk report, which is available here. A post about the previous progress report is available here. Other posts about the Dodd-Frank Act are available here.

This posting, the January 2013 Davis Polk Dodd-Frank Progress Report, is one in a series of Davis Polk presentations that illustrate graphically the progress of the rulemaking work that has been done and is yet to occur under the Dodd-Frank Act. The Progress Report has been prepared using data from the Davis Polk Regulatory Tracker™, an online subscription service offered by Davis Polk to help market participants understand the Dodd-Frank Act and follow regulatory developments on a real-time basis.

In this report:

  • As of January 2, 2013, a total of 237 Dodd-Frank rulemaking requirement deadlines have passed. Of these 237 passed deadlines, 142 (59.9%) have been missed and 95 (40.1%) have been met with finalized rules.
  • In addition, 136 (34.2%) of the 398 total required rulemakings have been finalized, while 129 (32.4%) rulemaking requirements have not yet been proposed.
  • Rulemaking activity this month included an SEC final rule on requirements to search for lost securityholders and notification requirements with respect to unresponsive payees. The Federal Reserve released a proposed rule on enhanced prudential standards and early remediation requirements for foreign banking organizations and foreign nonbank financial companies.

Dodd-Frank Enhanced Prudential Standards for Foreign Banking Organizations

Editor’s Note: Margaret E. Tahyar is a partner in Davis Polk & Wardwell LLP’s Financial Institutions Group. This post is based on a client memorandum by a team of attorneys at Davis Polk; the full publication, including footnotes, is available here. Key aspects of the Federal Reserve’s proposal for foreign banks are illustrated in a set of Davis Polk visuals, available here.

Following closely on the heels of Federal Reserve Governor Daniel K. Tarullo’s November 2012 speech, the Federal Reserve has proposed a tiered approach for applying U.S. capital, liquidity and other Dodd-Frank enhanced prudential standards, including single counterparty credit limits, risk management, stress testing and early remediation requirements, to the U.S. operations of foreign banking organizations with total global consolidated assets of $50 billion or more (“Large FBOs”). Most Large FBOs would have to create a separately capitalized top-tier U.S. intermediate holding company (“IHC”) that would hold all U.S. bank and nonbank subsidiaries. A Large FBO with combined U.S. assets of less than $10 billion, excluding its U.S. branch and agency assets, would not be required to form an IHC.

The IHC would be subject to U.S. capital, liquidity and other enhanced prudential standards on a consolidated basis. In addition, the Federal Reserve would have the authority to examine any IHC and any subsidiary of an IHC. Although the U.S. branches and agencies of a Large FBO’s foreign bank would not be required to be held beneath the IHC, they too would be subject to liquidity, single counterparty credit limits and, in certain circumstances, asset maintenance requirements. Large FBOs not required to form an IHC would also be subject to many of the new enhanced prudential standards.

This memorandum provides an overview of key aspects of the Federal Reserve’s proposal, which would become effective on July 1, 2015. We invite you to also read the accompanying diagrams and tables for a visual representation of these new requirements, available here. The comment period for the proposal ends on March 31, 2013.

…continue reading: Dodd-Frank Enhanced Prudential Standards for Foreign Banking Organizations

December 2012 Dodd-Frank Progress Report

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday December 19, 2012 at 8:53 am
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Editor’s Note: The following post comes to us from Margaret E. Tahyar and Gabriel D. Rosenberg of the Financial Institutions Group at Davis Polk & Wardwell LLP. This post discusses a Davis Polk report, which is available here. A post about the previous progress report is available here. Other posts about the Dodd-Frank Act are available here.

This posting, the December 2012 Davis Polk Dodd-Frank Progress Report, is one in a series of Davis Polk presentations that illustrate graphically the progress of the rulemaking work that has been done and is yet to occur under the Dodd-Frank Act. The Progress Report has been prepared using data from the Davis Polk Regulatory Tracker™, an online subscription service offered by Davis Polk to help market participants understand the Dodd-Frank Act and follow regulatory developments on a real-time basis.

In this report:

  • As of December 3, 2012, a total of 237 Dodd-Frank rulemaking requirement deadlines have passed. Of these 237 passed deadlines, 144 (61%) have been missed and 93 (39%) have been met with finalized rules.
  • In addition, 133 (33.4%) of the 398 total required rulemakings have been finalized, while 132 (33.2%) rulemaking requirements have not yet been proposed.
  • Although no rulemaking requirements were met in November, there was a flurry of regulatory activity in the form of no-action relief and other guidance, particularly by the CFTC with regards to Title VII implementation.

Fed Governor Tarullo Foreshadows Foreign Banks Proposal

Posted by Margaret E. Tahyar, Davis Polk & Wardwell LLP, on Wednesday December 12, 2012 at 9:03 am
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Editor’s Note: Margaret E. Tahyar is a partner in Davis Polk & Wardwell LLP’s Financial Institutions Group. This post is based on a Davis Polk publication; key features of Governor Tarullo’s proposal are illustrated in a Davis Polk graphic, available here.

In an unprecedented and provocative speech, Federal Reserve Governor Daniel K. Tarullo foreshadowed a proposal from the Federal Reserve Board that could fundamentally change the way foreign banks are regulated in the United States. As previewed, the proposal would require foreign banks with large operations in the U.S. to create a separately capitalized top-tier U.S. intermediate holding company (“IHC”) that would sit on top of all U.S. bank and nonbank subsidiaries. The IHC would be required independently to meet all U.S. capital and liquidity requirements as well as other enhanced prudential standards required by the Dodd-Frank Act. While the U.S. branches and agencies of a foreign bank would not be part of the IHC, they would be subject to “certain additional measures,” especially regarding liquidity. Governor Tarullo noted that the “all-important details” of the proposal are still under discussion and anticipated the release of a notice of proposed rulemaking “in the coming weeks.”

If the Federal Reserve actually adopts a proposal along the lines outlined in Governor Tarullo’s speech, it could have profound negative implications not only for the operations of foreign banks in the United States, but also for U.S. banking organizations doing business outside the United States. It would likely contribute and add fuel to the growing trend towards regionalization of global banking, thereby complicating and increasing the cost of providing cross-border banking services.

…continue reading: Fed Governor Tarullo Foreshadows Foreign Banks Proposal

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