The Federal Reserve Board Amends Stress Test Rules

On Friday, October 17, 2014, the Federal Reserve Board (the "Board") issued a final rule modifying the regulations for capital planning and stress testing and released instructions for the 2015 capital planning cycle. The final rule amends the timing of the capital plan and stress test rules applicable to bank holding companies with $50 billion or more in total consolidated assets and the company-run stress test rules applicable to bank holding companies with more than $10 billion but less than $50 billion in total consolidated assets and savings and loan holding companies and state member banks with more than $10 billion in total consolidated assets. For the 2015 capital plan cycle, these entities are required to submit capital plans on or before January 5, 2015, unchanged from prior years. However, starting with the 2016 capital plan cycle, these entities will be required to submit their capital plans and stress testing results on or before April 5.

The final rule also makes amendments limiting the ability of a bank holding company with $50 billion or more in total consolidated assets to make capital distributions under the capital plan rule if the bank holding company's net capital issuances are less than the amount indicated in its capital plan. In addition, the final rule clarifies the application of the capital plan rule to a bank holding company that is a subsidiary of a U.S. intermediate holding company of a foreign banking organization and the characteristics of a stressed scenario to be included in company run stress tests.

Read the Board press release. 

Agencies Adopt Joint Credit Risk Retention Rule

On Wednesday, October 22, 2014, the Board, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission adopted a joint final rule implementing the credit risk retention requirements of Section 15G of the Securities Exchange Act of 1934, as added by Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 15G generally requires the securitizer of asset-backed securities to retain not less than 5 percent of the credit risk of the assets collateralizing the asset-backed securities. Section 15G includes a variety of exemptions from these requirements, including an exemption for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as “qualified residential mortgages,” as such term is defined by the agencies by rule.

Read the joint press release.

© 2014 Perkins Coie LLP