New rules were recently issued new regulations to assist US banks to improve their supervision and compliance with regulations. The approach recommended is systematic and specific to business companies and nonbank financial organizations.
The new regulations have been established to address some sensitive best practices that are often overlooked. These best practices include:
These new regulations are somehow interconnected to those authorized by Dodd Frank Act.
These new regulations are meant to be applied to:
Note: SLHCs (Savings and Loan Holding Companies) are not subject to compliance with these regulations, except with requirements for stress test.
In the near future, the Federal Reserve (FR) will issue regulations for foreign banking institutes and SLHCs as well. The expected regulations include:
a. Produce a plan for annual capital
b. Carryout stress tests
c. Maintain sufficient capital
Requirements will be implements by the FR in two phases:
Compliance with Interagency liquidity risk management guidelines issued in 2010 must be implemented as best practices. This means that companies will be required to carry out internal liquidity stress tests and manage risks associated with liquidity.
Compliance with Basel III liquidity rules issued by the FR must be implemented for qualitative liquidity.
The FR will conduct monitoring of stress tests using three scenarios in the economic and financial market. The results from these tests will be open to the public and will include information specific to the company. Supervisors at banks will need to follow some best practices to conduct successful stress tests.
These new compliance regulations for US banks are meant to improve the best practices associated with regulations.