USA Law and Practice Contributed by: Edward P. O’Keefe, Neil T. Bloomfield, John A. Stoker and Kathryn (Kate) G. Wellman, Moore & Van Allen, PLLC
Category I, II, and III firms would be subject to a discretionary countercyclical capital buffer if imposed. Surcharges on GSIBs The Federal Reserve Board applies a capital surcharge to US GSIBs CET1 requirements. The surcharge is evaluated annually based on the GSIB’s assessed systemic importance during the prior year. Supplementary leverage ratio (SLR) Category I, II, and III organisations are subject to a minimum SLR of 3%. The SLR is calculated by dividing Tier 1 Capital by total leverage expo - sure. GSIBs are also subject to an enhanced SLR minimum requirement of 5%. Liquidity requirements Banking organisations are subject to liquidity risk management and net stable funding rules. The liquidity risk management rules establish a mini - mum liquidity coverage ratio (LCR) for Category I and II organisations to hold enough high-quality liquid assets that at least equal its projected net cash outflows during a 30-day stress period. Category III and IV organisations are subject to the LCR on a reduced basis. The LCR would also apply to large insured bank subsidiaries (at least USD10 billion of total assets) of a Category I, II, III, and IV holding company. The rule also establishes enhanced liquidity risk management testing requirements and standards. In addition, Category I and II organisations are required to maintain a minimum net stable fund - ing ratio (NSFR) of its available stable funding to its required stable funding of at least 100%. Category III and IV organisations are subject to the NSFR on a reduced basis. The NSFR would also apply to large insured bank subsidiaries (at
least USD10 billion of total assets) of a Category I, II, III, and IV holding company. Prompt Corrective Action Insured banks are subject to prompt corrective action (PCA) regulations that impose limitations on their activities for failing to meet identified regulatory capital minimums. The PCA frame - work assigns banks to one of five categories (from well-capitalised to critically undercapi - talised) measuring the institution against risk- based capital and leverage ratios. As a bank falls into lower capital categories, the PCA framework imposes increasingly severe restrictions and lim - itations on its activities and triggers supervisory response measures and directives. State-chartered Banks A state-chartered bank may also be subject to additional regulatory capital and liquidity require - ments imposed by applicable laws or regulations of its chartering state. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework The FDIC acts as the receiver or liquidator of failed banks. The decision to close a bank is usually made by the bank’s chartering agency. The FDIC will generally be appointed as the bank’s receiver and acts to protect the interest of depositors and to preserve and maximise the bank’s assets. The FDIC’s options to resolve a failed bank include: • Purchase and assumption transactions: The FDIC markets and receives bids for the failed bank’s assets and liabilities and assumption
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