Posts Tagged ‘OCC’

A Closer Look at US Credit Risk Retention Rules

Editor’s Note: David M. Lynn is a partner and co-chair of the Corporate Finance practice at Morrison & Foerster LLP. The following post is based on a Morrison & Foerster publication by Jerry Marlatt, Melissa Beck, and Kenneth Kohler.

In a flurry of regulatory actions on October 21 and 22, 2014, the Federal Deposit Insurance Corporation (the “FDIC”), the Office of the Comptroller of the Currency, the Federal Reserve Board, the Securities and Exchange Commission, the Federal Housing Finance Agency (the “FHFA”), and the Department of Housing and Urban Development (collectively, the “Joint Regulators”) each adopted a final rule (the “Final Rule”) implementing the credit risk retention requirements of section 941 of the Dodd-Frank Act for asset-backed securities (“ABS”). The section 941 requirements were intended to ensure that securitizers generally have “skin in the game” with respect to securitized loans and other assets.

…continue reading: A Closer Look at US Credit Risk Retention Rules

Ten Key Points from the Final Risk Retention Rule

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday November 2, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from PricewaterhouseCoopers LLP and is based on a PwC publication by Christopher Merchant, Frank Serravalli, and Daniel Sullivan.

This week six federal agencies (Fed, OCC, FDIC, SEC, FHFA, and HUD) finalized their joint asset-backed securities (ABS) risk retention rule. As expected, the final rule requires sponsors of ABS to retain an interest equal to at least 5% of the credit risk in a securitization vehicle.

1. A win for the mortgage industry: The final rule effectively broadens the original proposal’s exemption from risk retention requirements for Qualified Residential Mortgages (QRM) by tying the definition of QRM to the Consumer Finance Protection Bureau’s definition of Qualified Mortgage (QM). This alignment abandons the proposal’s most stringent requirements to obtain the QRM exemption, including that a residential mortgage have at least a 20% down payment. The final rule also provides an additional exemption for certain mortgages that would not meet the QRM standards, e.g., community-focused residential mortgages. The immediate impact of the rule on the industry is further muted, given the significant amount of mortgages issued by government sponsored entities (i.e., Fannie Mae, Freddie Mac, and Ginnie Mae) that are currently exempt from the rule’s requirements. It may however be too soon for the industry to celebrate, as the final rule states that the agencies will reassess the effectiveness of the QRM definition at reducing securitization risk at most four years from now, and every five years thereafter.

…continue reading: Ten Key Points from the Final Risk Retention Rule

Questions and Answers on the Liquidity Coverage Ratio

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday October 4, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Byungkwon Lim, partner in the Corporate Department at Debevoise & Plimpton LLP and leader of the firm’s Hedge Funds and Derivatives & Structured Finance Groups. This post is based on the introduction to a Debevoise & Plimpton Client Update; the full publication is available here.

On September 3, the Board of Governors of the Federal Reserve (the “Federal Reserve”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Office of the Comptroller of the Currency (the “OCC”) (collectively, the “Agencies”), released a final rule that applies a Liquidity Coverage Ratio (the “LCR”) to certain U.S. banking organizations (the “Final Rule”). The rule finalizes a proposal published by the Agencies on October 24, 2013 (the “Proposed Rule”), and includes a number of substantive and technical changes.

…continue reading: Questions and Answers on the Liquidity Coverage Ratio

Regulators Re-Propose Uncleared Swap Margin, Capital and Segregation Rules

Posted by Annette L. Nazareth, Davis Polk & Wardwell LLP, on Sunday September 28, 2014 at 8:04 am
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Editor’s Note: Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Davis Polk client memorandum; the complete publication, including sidebars and appendix, is available here.

On September 3, 2014, U.S. banking regulators re-proposed margin, capital and segregation requirements applicable to swap entities [1] for uncleared swaps. [2] The new proposed rules modify significantly the regulators’ original 2011 proposal in light of the Basel Committee on Banking Supervision’s and the International Organization of Securities Commissions’ (“BCBS/IOSCO”) issuance of their 2013 final policy framework on margin requirements for uncleared derivatives and the comments received on the original proposal. The revised proposal:

…continue reading: Regulators Re-Propose Uncleared Swap Margin, Capital and Segregation Rules

Volcker Rule: Agencies Release New FAQ

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday September 27, 2014 at 6:22 am
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Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Eric M. Diamond, Joseph A. Hearn, and Ken Li. The complete publication, including appendix, is available here.

[On September 10, 2014], the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission (collectively, the “Agencies”) provided an addition to their existing list of Frequently Asked Questions (“FAQs”) addressing the implementation of section 13 of the Bank Holding Company Act of 1956, as amended, commonly known as the “Volcker Rule.”

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Risk Governance: Banks Back to School

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday September 14, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Dan Ryan, Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP, and is based on a PwC publication.

On September 2, 2014, the Office of the Comptroller of the Currency (“OCC”) finalized its risk governance framework for large banks and thrifts (“Guidelines”) that was proposed in January 2014. [1] The Guidelines formalize the heightened risk management standards that the OCC has been communicating through the supervisory process for several years, but do so somewhat more flexibly than the January proposal (“proposal”) did. Although many firms have been working to enhance their risk management programs to meet the proposal and supervisory communications, most still have work to do in order to meet the Guidelines’ requirements.

The Guidelines maintain the proposal’s emphasis on risk governance at the bank level to ensure safety and soundness, and affords the OCC greater flexibility (prescribed under regulations) to take enforcement actions in response to a bank’s compliance failure. The responsibility to oversee risk management remains with the Board of Directors which retains its ultimate risk governance oversight role; however, the Guidelines clarify that the Board need not take on responsibility for day-to-day managerial duties as the proposal had suggested.

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Dodd-Frank At 4: Where Do We Go From Here?

Editor’s Note: David M. Lynn is a partner and co-chair of the Corporate Finance practice at Morrison & Foerster LLP. The following post is based on a Morrison & Foerster publication; the complete text, including appendix, is available here.

Where do we go from here? As we mark another milestone in regulatory reform with the fourth anniversary of the enactment of the Dodd-Frank Act, it strikes us that although most studies required to be undertaken by the Act have been released and final rules have been promulgated addressing many of the most important regulatory measures, we are still living with a great deal of regulatory uncertainty and extraordinary regulatory complexity.

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Banking Agencies Release Limited Volcker Rule Guidance

Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Robert W. Reeder III, Camille L. Orme, Whitney A. Chatterjee, and C. Andrew Gerlach. The complete publication, including appendix, is available here.

On June 10, 2014, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (collectively, the “Banking Agencies”) and the Securities and Exchange Commission (the “SEC”) released substantially identical Frequently Asked Questions (“FAQs”) addressing six topics regarding the implementation of section 13 of the Bank Holding Company Act of 1956, as amended, commonly known as the “Volcker Rule.”

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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

Interim Final Rule Exempts Some CDOs from Volker Rule Restrictions

Editor’s Note: H. Rodgin Cohen is a partner and senior chairman of Sullivan & Cromwell LLP focusing on acquisition, corporate governance, regulatory and securities law matters. This post is based on a Sullivan & Cromwell publication by Mr. Cohen, Mitchell S. Eitel, Eric M. Diamond, and Joseph A. Hearn.

Earlier this evening [January 14, 2014], the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency (the “OCC”), Federal Deposit Insurance Corporation (such three agencies together, the “Banking Agencies”), Securities and Exchange Commission, and Commodity Futures Trading Commission (the “CFTC” and, collectively, the “Agencies”) issued an interim final rule (the “Interim Final Rule”) regarding the treatment of certain collateralized debt obligations backed by trust preferred securities (“TruPS-backed CDOs”) under the final rule (the “Final Rule”) implementing Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), commonly known as the “Volcker Rule.” The Volcker Rule imposes broad restrictions on proprietary trading and investing in and sponsoring private equity and hedge funds (“covered funds”) by banking organizations and their affiliates.

…continue reading: Interim Final Rule Exempts Some CDOs from Volker Rule Restrictions

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