Banking and Finance Law Daily Liquidity profile disclosure requirements adopted for large institutions
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Tuesday, December 20, 2016

Liquidity profile disclosure requirements adopted for large institutions

By Andrew A. Turner, J.D.

Large banking organizations will be required to publicly disclose their liquidity coverage ratios (LCRs) and some of the factors that go into calculating that ratio with Federal Reserve Board approval of a final rule. Large financial institutions that are subject to the liquidity coverage ratio rule will be required to disclose publicly, on a quarterly basis, quantitative information about its LCR calculation and a discussion of the factors that have a significant effect on its LCR. The implementation timeline for the disclosure requirements includes compliance dates ranging from April 2017 through October 2018.

The amendments require large banking organizations to disclose their consolidated LCRs each quarter based on averages over the prior quarter. Firms also are required to disclose their consolidated high-quality liquid assets (HQLA) amounts, broken down by HQLA category. Additionally, firms are required to disclose their projected net stressed cash outflow amounts, including retail inflows and retail deposit outflows, derivatives inflows and outflows, and several other measures.

The LCR rule applies to bank holding companies and certain savings and loan holding companies that, in each case, have $50 billion or more in total consolidated assets or $10 billion or more in total consolidated on-balance sheet foreign exposure. Nonbank financial companies the Financial Stability Oversight Council has designated for Fed supervision are also covered if the Fed has made the companies subject to the rule. A modified LCR requirement applies to certain smaller, less complex banking organizations.

Transition and timing. While generally similar to the rule proposed in November 2015, in response to comments, the final rule extends the implementation timeline of the public disclosure requirements by nine months. The effect of this extension will be:

  • covered companies that have $700 billion or more in total consolidated assets or $10 trillion or more in assets under custody will be required to comply with the public disclosure requirements beginning on April 1, 2017;
  • other covered companies, other than modified LCR holding companies, will be required to comply with the public disclosure requirements beginning on April 1, 2018;
  • modified LCR holding companies that are currently subject to the modified LCR rule will be required to comply with the public disclosure requirements beginning on Oct. 1, 2018; and
  • a covered company that becomes subject to the LCR rule in the future will be required to make its first public disclosures for the calendar quarter that starts on its LCR rule compliance date (i.e., three months after the company becomes subject to the LCR rule).

Modified LCR holding companies also would benefit from an extended LCR rule compliance requirement. They would not become subject to the modified LCR rule until one year after they passed the $50 billion threshold.

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