Single-Counterparty Credit Limits: Industry Comment and Relief Act Lead to Tailored Final Rule
June 28, 2018
On June 14, 2018, the Federal Reserve issued a Final Rule establishing single-counterparty credit limits for large bank holding companies and foreign banking organizations.
After separate proposals in 2011, 2012 and 2016, the Final Rule implements Section 165(e) of the Dodd-Frank Act and is the first application of Section 165’s “enhanced prudential standards” since Congress raised the EPS application threshold from $50 billion to $250 billion of assets in the Economic Growth, Regulatory Relief and Consumer Protection Act. The Final Rule sets the baseline SCCL threshold for BHCs (and FBOs) at $250 billion.
In addition to the EPS threshold-related changes, the Federal Reserve also made a number of key modifications to its last proposal in 2016, including changes designed to streamline SCCL compliance and reduce burden in response to industry comments. The Final Rule also reflects changes to address concerns that the regulations, as proposed in 2016, would have subjected FBOs to multiple and possibly conflicting layers of SCCL.