Agencies Outline Regulatory Approach to S. 2155 Policy Changes

In addition to outlining their approach to company-run stress testing and enhanced prudential standards in light of the new regulatory reform law, the agencies today also announced how they intend to approach the implementation of several other provisions of S. 2155.

Consistent with the new law — which allows banks to risk weight at 150 percent only those high-volatility commercial real estate loans that fall under the statutory “HVCRE ADC” definition — regulators affirmed that banks may report only those loans when filing their Call Report and FR Y-9C. Alternatively, institutions and holding companies can report and risk-weight HVCRE exposures in a manner consistent with the current instructions to the Call Report and FR Y-9C until the agencies take further action, they said in a joint statement.

Regulators also clarified that they would not enforce existing final rules on the Volcker Rule, resolution planning or the treatment of municipal securities as high-quality liquid assets in ways that would contradict provisions included in the new law. They also announced that they will begin rulemaking to implement sections of the law raising the threshold for well-capitalized banks to be eligible for an 18-month examination cycle and treating certain municipal obligations as HQLA under the Liquidity Coverage Ratio. The agencies also said they are determining what further action is needed to implement the exemption for appraisal requirements for certain rural transactions.

“We understand these announcements are interim steps, and look forward to providing comment as agencies consider permanent changes to tailor these regulations going forward,” said ABA President and CEO Rob Nichols.