Proposed Agency Information Collection Activities; Comment Request (FED proposes to extend – with revisions – reporting requirements of institutions in connection with the single-counterparty credit limit rule)

On September 11, 2023, the Board of Governors of the Federal Reserve System (FED) published in the Federal Register a consultation on a proposed extension – with revisions – of its filing requirement (Form FR 2590) under its „single-counterparty credit limit rule (SCCL rule)“ which sets limits to the level of exposure large domestic and foreign banks can have to another counterparty. Specifically, the form has to be filed quarterly, annually, and upon violation of the rule and mainly includes the following:
– Information on the institution,
– Information on the counterparties,
– Counterparty exposure by different securities / business operations,
– Risk mitigating items (i.e. collateral), and
– The ratio of aggregate net credit exposures to the eligible capital base.
Pursuant to the FR statement, the FED proposes to extend the filing requirement for three years with the following key amendments:
(1) The FED proposes to revise its instructions to clarify that a filing institution who is a Foreign Banking Organization (FBO) subject to a large exposure standard of its home-country supervisor, in line with the Basel Committee on Banking Supervision (BCBS) framework, can indicate this fact on line 1 of the FR 2590 form without needing extra documentation. However, the FED may request additional information or reporting on counterparty credit exposures from the institution, if so needed.
(2) The FED further proposes to revise its instructions to clarify that organizations subject to the SCCL rule should use the tier 1 capital amount reported in their financial statements for the same reporting period as the one to which Form FR 2590 applies. For instance, if an institution is submitting an SCCL form for Q1 of a given year, it should use the tier 1 capital reported in its Q1 financial statements. The same principle applies to total consolidated assets. If significant changes occur within a quarter due to unexpected events like asset deterioration, institutions should adjust their net credit exposure to counterparties based on their actual tier 1 capital or assets.
(3) The FED proposes to revise the instructions to clarify that institutions should keep a physical or electronic copy of the manually signed and attested printout of the data they submit for a period of three years after submission. The signed cover page of the FR 2590 form will be enough to meet the signature and attestation requirement.
(4) The FED proposes the addition of Table B in Schedule M-1. This table will enable institutions using the standardized approach for counterparty credit risk (SA-CCR) to accurately report their exposure and collateral related to derivative transactions as required in the form.
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As these are only the key proposed changes to Form FR 2590 and corresponding instructions, please refer to the original legal document for more detailed, comprehensive information.