In this week’s newsletter, we provide a snapshot of the principal US, European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.

US Board of Governors of the Federal Reserve System Extends Comment Period for Proposed Countercyclical Capital Buffer Framework

On January 29, 2016, the US Board of Governors of the Federal Reserve System extended the comment period to March 21, 2016, for the proposed policy statement describing the Federal Reserve Board's framework in setting the Countercyclical Capital Buffer. The original deadline for submission of comments was February 19, 2016. The Federal Reserve Board first announced it was soliciting public comment on the proposed policy statement on December 21, 2015. The CCyB is a macro-prudential tool that raises capital requirements on internationally active banking institutions when the risk of above-normal losses in the future is elevated. The proposed policy statement describes various financial-system vulnerabilities as well as issues for Federal Reserve Board consideration in setting the buffer.

The proposed policy statement is available at:  http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151221b1.pdf and the appendix to the statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151221b2.pdf.

US Federal Reserve Board Extends Comment Period on "Total Loss-Absorbing Capacity" Proposal

On January 29, 2016, the Federal Reserve Board extended the comment period to February 19, 2016, for its proposed rule to strengthen the ability of the largest domestic and foreign banks operating in the United States to be resolved without extraordinary government support or taxpayer assistance. The original deadline for submission of comments was February 1, 2016. The proposed rule requires US Global Systemically Important Banks and the US operations of foreign GSIBs to meet a long-term debt requirement, a "Total Loss-Absorbing Capacity" requirement and a requirement that the parent holding company of a domestic GSIB avoid entering into various financial arrangements that would create obstacles to an orderly resolution. These requirements would strengthen the ability of those banks to withstand financial stress and failure without imposing losses on taxpayers. The proposed rule also includes regulatory capital deductions for firms regulated by the Federal Reserve Board that hold unsecured debt of the parent holding companies of domestic GSIBs.

The Federal Register notice is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160129b1.pdf.

US Federal Reserve Board Releases Supervisory Scenarios for 2016 Comprehensive Capital Analysis and Review and Dodd-Frank Act Stress Test Exercises

On January 28, 2016, the US Federal Reserve Board released supervisory scenarios for the 2016 Comprehensive Capital Analysis and Review and Dodd-Frank Wall Street Reform and Consumer Protection Act stress test exercises. The Federal Reserve Board also issued instructions to firms participating in CCAR. CCAR assesses the capital planning processes and capital adequacy of the largest US-based bank holding companies, including the firms' planned capital actions. The Dodd-Frank Act stress tests are a forward-looking component to help evaluate whether firms have sufficient capital. Firms are required to use the supervisory scenarios in both the stress tests conducted as part of CCAR and those required by the Dodd-Frank Act. The outcomes are measured under three scenarios: severely adverse, adverse and baseline. This year, CCAR will include 33 bank holding companies with $50 billion or more in total consolidated assets, all of which are required to submit their capital plans and stress testing results to the Federal Reserve Board on or before April 5, 2016. The Federal Reserve Board will announce the results of its supervisory stress tests by June 30, 2016, with the exact date to be announced later.

The Federal Reserve Board press release is available at: http://www.federalreserve.gov/newsevents/press/bcreg/20160128a.htm the CCAR summary instructions are available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160128a1.pdf?_sm_au_=iVVR7nBMts6MMSFH and the Dodd-Frank Act stress test exercises are available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160128a2.pdf?_sm_au_=iVVR7nBMts6MMSFH. The 2016 macro scenario tables are available at: http://www.federalreserve.gov/newsevents/press/bcreg/2016-macro-scenario-tables.zip.

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