MEMORANDUM TO: Board of Directors

FROM: Doreen R. Eberley, Director 

Division of Risk Management Supervision

SUBJECT: Final Rule. Changes to applicability thresholds for regulatory capital and liquidity

requirements

Recommendation: Staff is presenting for approval of the Federal Deposit Insurance Corporation

(FDIC) Board of Directors (FDIC Board) a request to publish the attached interagency final rule that

revises the criteria for determining the applicability of regulatory capital and liquidity requirements to

large U.S. banking organizations and to the U.S. intermediate holding companies of certain foreign

banking organizations. The final rule establishes four risk-based categories for determining the

applicability of requirements under the agencies' regulatory capital rule and liquidity coverage ratio

(LCR) rule. Under the final rule, such requirements increase in stringency based on measures of size,

cross jurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance

sheet exposure. The final rule applies tailored regulatory capital and liquidity requirements to

depository institution holding companies and U.S. intermediate holding companies with $100 billion or

more in total consolidated assets as well as to certain depository institutions.

Recommendation: FDIC staff is requesting that the FDIC Board approve the final rule and authorize its

publication in the Federal Register with an effective date of 60 days after publication in the Federal

Register.

Con r:

Nicholas J. Podsiadly

General Counsel
2 

Discussion: 

I. Overview of the Notices of Proposed Rulemaking

On December 21, 2018, the Office of the Comptroller of the Currency (OCC), Board of Governors 

of the Federal Reserve System (Federal Reserve), and Federal Deposit Insurance Corporation (FDIC) 

(together, the agencies) published a proposal to revise the criteria for determining the applicability of 

requirements under the capital rule, LCR rule, and the proposed net stable funding ratio (NSFR) rule for 

U.S. banking organizations with $100 billion or more in total consolidated assets, based on four riskbased categories (domestic proposal).1

 Using the risk profile of the top-tier U.S. banking organization, 

Category I would have been based on global systemically important bank (GSIB) scores, whereas 

Categories II through IV would have been based on size and levels of cross-jurisdictional activity, 

nonbank assets, off-balance sheet exposure, and weighted short-term wholesale funding (together with 

size, the risk-based indicators). Capital and liquidity requirements for depository institution 

subsidiaries, if applicable, would have been based on the risk profile of the top-tier U.S. banking 

organization. 

Subsequently, on May 24, 2019, the agencies published a proposal to revise the criteria for 

determining the applicability of capital and liquidity requirements with respect to the U.S. operations of 

foreign banking organizations (foreign bank proposal).2 This proposal also included certain changes to 

the domestic proposal.3 The foreign bank proposal was largely consistent with the domestic proposal, 

with certain adjustments to reflect the unique structures through which foreign banking organizations 

operate in the United States. For example, for liquidity, the foreign bank proposal would have applied 

 

1

 83 FR 66024 (Dec. 21, 2018).

2

 84 FR 24296 (May 24, 2019). 

3 Specifically, under the foreign bank proposal, the Federal Reserve proposed applying standardized liquidity requirements to 

a U.S. depository institution holding company that would have been subject to Category IV standards if the depository 

institution holding company significantly relies on short-term wholesale funding.
3 

LCR requirements to certain foreign banking organizations with combined U.S. assets of $100 billion or 

more.4

 Additionally, in the foreign bank proposal the Federal Reserve requested comment on whether 

and how it should approach applying standardized liquidity to U.S. branch and agency networks. The 

proposals were consistent with considerations and factors set forth under section 165 of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act),5 as amended by the Economic 

Growth Regulatory Relief and Consumer Protection Act (EGRRCPA).6

II. General Summary of Comments and Key Revisions 

The agencies received 17 public comments on the domestic proposal and 28 public comments on 

the foreign bank proposal from U.S. and foreign banking organizations, public entities (including a 

foreign central bank and a U.S. state regulator), public interest groups, private individuals, and other 

interested parties. 

Many commenters supported the proposals as meaningfully tailoring prudential standards. Many 

commenters, however, expressed the view that the proposed framework remained too stringent. For 

example, some commenters argued that smaller regional banking organizations should not be subject to 

certain prudential standards under the proposals and that many Category IV standards should be 

eliminated. By contrast, other commenters argued that the proposals had tailored standards in a way that 

would weaken the safety and soundness of large banking organizations and increase risks to U.S. 

financial stability, and asserted that the agencies had gone beyond the changes required by EGRRCPA. 

 

4 Combined U.S. assets means the sum of the consolidated assets of each top-tier U.S. subsidiary of the foreign banking 

organization (excluding any company whose assets are held pursuant to section 2(h)(2) of the Bank Holding Company Act, 

12 U.S.C. 1841(h)(2), if applicable) and the total assets of each U.S. branch and U.S. agency of the foreign banking 

organization, as reported by the foreign banking organization on the Capital and Asset Report for Foreign Banking 

Organizations (FR Y–7Q). Capital requirements, by contrast, would have considered only the assets of the U.S. intermediate 

holding company of the foreign banking organization.

5

 Pub. L. 111–203, 124 Stat. 1376 (2010), § 165, codified at 12 U.S.C. 5365.

6

 Pub. L. 115–174, 132 Stat. 1296 (2018). 
4 

In addition, some commenters expressed the general view that the thresholds set forth in the proposal 

should be further justified. 

In response to the foreign bank proposal, commenters generally argued that the proposal would 

unfairly increase requirements applicable to foreign banking organizations. These commenters also 

expressed the general view that certain aspects of the foreign bank proposal were inconsistent with the 

principle of national treatment and argued that the proposals should defer more broadly to compliance 

with home country standards applicable to the parent foreign banking organization. In particular, 

commenters argued that the foreign bank proposal should not determine the applicability of the LCR and 

proposed NSFR requirements based on the risk profile of the foreign banking organization’s combined 

U.S. operations. These commenters asserted that the final rule should instead be based on the U.S. 

intermediate holding company. These commenters also generally opposed the possible application of a 

standardized liquidity requirement to U.S. branches and agencies of foreign banking organizations. By 

contrast, other commenters criticized the foreign bank proposal for reducing the stringency of standards 

beyond the changes required by EGRRCPA. 

The final rule combines both the domestic and foreign proposals into a single rule and largely 

adopts the proposals, with certain adjustments in response to the comments, including: 

• Application of the LCR based on the activities of the U.S. intermediate holding company 

rather than its combined U.S. operations – see Section IV of this Board Memo. 

• An extension of the transition period for an increase in the stringency of LCR requirements – 

see Section VI of this Board Memo; 

Additionally, in line with the proposed rule, the reduced LCR is finalized with the following reductions: 

• The reduced Category III liquidity requirements are set with an 85 percent outflow rate. 

• The reduced Category IV liquidity requirements are set with a 70 percent outflow rate. 
5 

III. Overview of the Final Rule 

The final rule establishes four risk-based categories7

 for determining the regulatory capital and 

liquidity requirements applicable to large U.S. banking organizations and the U.S. intermediate holding 

companies of foreign banking organizations, which apply generally based on indicators of size, crossjurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance sheet 

exposure. The final rule measures these indicators based on the risk profile of the top-tier U.S. banking 

organization. Under the final rule, the capital and liquidity requirements that apply to U.S. intermediate 

holding companies and their depository institution subsidiaries generally align with those applicable to 

similarly situated U.S. banking organizations. 

Table I: Scoping Criteria for Categories of Regulatory Capital and Liquidity 

Requirements

Category U.S. Banking Organizations† Foreign Banking Organizations‡

I U.S. GSIBs and their depository institution subsidiaries N/A

II $700 billion or more in total consolidated assets; or $75 billion or more in cross-jurisdictional 

activity; and do not meet the criteria for Category I standards

III $250 billion or more in total consolidated assets; or $75 billion or more in weighted short-term 

wholesale funding, nonbank assets, or off-balance sheet exposure; and do not meet the criteria 

Category I or II standards 

IV $100 billion or more in total consolidated assets, and do not meet the criteria Category I, II or III 

standards

† For U.S. banking organizations, the applicable category of regulatory capital and liquidity requirements is determined at 

the top-tier banking organization level, and generally applies to any depository institution subsidiary of such holding 

company for purposes of capital or to subsidiary institutions with $10 billion or more in assets for liquidity requirements.

‡ For foreign banking organizations, the applicable category of regulatory capital and liquidity requirements is determined at 

the top-tier U.S. intermediate holding company level, and generally applies to any depository institution subsidiary of such 

holding company for purposes of capital or to subsidiary depository institutions with $10 billion or more in assets for 

liquidity requirements.

 

7 The proposals also sought comment on an alternative approach that would have used a single, comprehensive score based 

on the GSIB identification methodology, which is currently used to identify U.S. GSIBs. The final rule adopts the proposed 

indicators-based approach for assigning Category II, III, or IV standards to a banking organization and does not rely on any 

other risk-based indicators. 
6 

IV. Discussion of the Risk-based indicators and Other Key Requirements. 

A. Risk-based indicators 

To determine the applicability of the Category II, III, or IV standards, the proposals considered a 

banking organization’s level of five risk-based indicators: size, cross-jurisdictional activity, nonbank 

assets, off-balance sheet exposure, and weighted short-term wholesale funding. For capital standards, 

the proposals would have used the risk profile of the U.S. top-tier banking organization to measure the 

risk-based indicators. For liquidity standards, the domestic proposal would have also used the risk 

profile of the U.S. top-tier banking organization to measure the risk-based indicators, whereas, the 

foreign bank proposal would have determined the category of liquidity standards applicable to a foreign 

banking organization with respect to its intermediate holding company based on the risk profile of its 

combined U.S. operations.

1. Size 

The proposals would have tailored the application of capital and liquidity requirements based on 

the size of a banking organization as measured by total assets. A banking organization’s size provides a 

measure of the extent to which stress at its operations could be disruptive to the U.S. market and present 

significant risks to U.S. financial stability. The failure of a large banking organization in the U.S. also 

may give rise to challenges that complicate the resolution process due to the size and diversity of its 

customer base and the number of counterparties that have exposure to the banking organization. Last, 

the size indicator is consistent with Section 165 of the Dodd-Frank Act, as amended by EGRRCPA,

which establishes thresholds based on total consolidated assets.8

 The final rule adopts this measure as

proposed.9

 

8 See generally 12 U.S.C. 5635 and EGRRCPA § 401.

9 The size risk-based indicator is unchanged from the proposal. However, the final rule applies liquidity standards with 

respect to a U.S. intermediate holding company based on the risk profile of the intermediate holding company, rather than the
7 

2. Cross-jurisdictional activity

The proposals would have included a measure of cross-jurisdictional activity to determine the 

application of more stringent standards under Category II. For U.S. banking organizations, the domestic 

proposal defined cross-jurisdictional activity as the sum of cross-jurisdictional claims and liabilities. In 

recognition of the structural differences between foreign and domestic banking organizations, the 

foreign bank proposal would have adjusted the measurement of cross-jurisdictional activity for foreign 

banking organizations to exclude intercompany liabilities and collateralized intercompany claims.10 

Specifically, claims on affiliates would be reduced by the value of any financial collateral in a manner 

consistent with the agencies’ capital rule.

11 Under the final rule cross-jurisdictional activity is finalized 

as proposed and is based on the instructions to the form FR Y-15 and, by reference, to the form FFIEC 

009. 

3. Nonbank Assets

The proposals would have considered the level of nonbank assets in determining the applicable 

category of standards for foreign and domestic banking organizations. The amount of a banking 

organization’s activities conducted through nonbank subsidiaries provides an indication of the 

organization’s business and operational complexity. 

Under the proposals, nonbank assets would have been measured as the average amount of assets 

in consolidated nonbank subsidiaries and equity investments in unconsolidated nonbank subsidiaries.12 

 

combined U.S. operations of the foreign banking organization, as discussed in Section IV.E of this note. In fact, for foreign 

banking organizations, each of the risk-based indicators is applied in the final rule based on the risk profile of the 

intermediate holding company, rather than the combined U.S. operations of the foreign banking organization. 

10 Specifically, the proposal would have excluded from the cross-jurisdictional activity indicator all intercompany claims of a 

foreign banking organization secured by financial collateral, in accordance with the capital rule. 

11 See 12 CFR 3.37 (OCC); 12 CFR 217.37 (Federal Reserve); 12 CFR 324.37 (FDIC).

12 For a foreign banking organization, nonbank assets would have been measured as the average amount of assets in 

consolidated U.S. nonbank subsidiaries and equity investments in unconsolidated U.S. nonbank subsidiaries.
8 

The proposals would have excluded from this measure assets in a national bank, state member bank, and 

state nonmember bank, as well as assets in other depository institution subsidiaries, including a federal 

savings association, federal savings bank, or state savings association. The proposals also would have 

excluded assets of subsidiaries of these depository institutions, as well as assets held in each Edge or 

Agreement Corporation that is held through a bank subsidiary. The final rule adopts this measure as

proposed. 

4. Off-Balance Sheet Exposure 

The proposals would have included off-balance sheet exposure as a risk-based indicator to 

complement the measure of size. This indicator provides a measure of the extent to which customers or 

counterparties may be exposed to a risk of loss or suffer a disruption in the provision of services 

stemming from off-balance sheet activities. In addition, off-balance sheet exposure can lead to 

significant future draws on liquidity, particularly in times of stress. Under the proposals, off-balance 

sheet exposure would have been measured as the difference between total exposure, calculated in 

accordance with the instructions to the FR Y–15 or equivalent reporting form, and total consolidated 

assets. The final rule adopts this measure as proposed. 

5. Weighted short-term wholesale funding 

The proposed weighted short-term wholesale funding indicator would have measured the amount 

of a banking organization’s short-term funding obtained generally from wholesale counterparties. 

Reliance on short-term, generally uninsured funding from more sophisticated counterparties can make a 

banking organization more vulnerable to large-scale funding runs. The proposals would have calculated 

this indicator as the weighted average amount of funding obtained from wholesale counterparties in the 

same manner as currently reported by holding companies on the FR Y-15 reporting form. The final rule 

adopts this measure as proposed. 
9 

B. Application and calibration of the risk-based indicators 

The proposed risk-based indicators would have determined the application of capital and 

liquidity requirements under Categories II, III, and IV. A high level in a single indicator warrants the 

application of more stringent standards to mitigate those risks and support the overall purposes of each 

category because each indicator serves as a proxy for various types of risk. 

The proposals employed fixed nominal thresholds, including total asset thresholds of $100 

billion, $250 billion, and $700 billion, along with $75 billion thresholds for each of the other risk-based 

indicators. The $75 billion threshold is based on the degree of concentration this amount represents for 

each banking organization relative to total consolidated assets. That is, a threshold of $75 billion 

represents at least 30 percent and as much as 75 percent of total consolidated assets for banking 

organizations with between $100 billion and $250 billion in total consolidated assets. 

The final rule retains the application and calibration of these thresholds as proposed. 

C. The risk-based categories 

1. Category I 

Under the domestic proposal, Category I standards would have applied to U.S. GSIBs. Category 

I standards included the most stringent standards relative to those imposed under the other categories, to 

reflect the heightened risks that banking organizations subject to Category I standards pose to U.S. 

financial stability. The requirements applicable to U.S. GSIBs remained unchanged from existing 

requirements. The final rule adopts the scoping criteria for Category I as proposed. 

2. Category II

The proposals would have assigned Category II standards to banking organizations with 

$700 billion in total assets or $100 billion or more in total assets and $75 billion or more in crossjurisdictional activity. Banking organizations that engage in significant cross-jurisdictional activity 
10 

present complexities that support the application of more stringent standards relative to those that would 

apply under Category III. In addition, application of consistent prudential standards across jurisdictions 

to banking organizations with significant size or cross-jurisdictional activity helps to promote 

competitive equity among U.S. banking organizations and their foreign peers. The final rule adopts the 

scoping criteria for Category II as proposed. 

3. Category III

Under the proposals, Category III standards would have applied to banking organizations that are 

not subject to Category I or II standards and that have total assets of $250 billion or more. They also 

would have applied to banking organizations with $100 billion or more in total assets and $75 billion or 

more in nonbank assets, weighted short-term wholesale funding, or off-balance-sheet exposure. 

Category III standards reflect the heightened risk profiles of these banking organizations relative to 

smaller and less complex banking organizations. The final rule adopts the scoping criteria for Category 

III as proposed. 

4. Category IV

Under the proposals, Category IV standards would have applied to top-tier U.S. banking 

organizations with $100 billion or more in total assets that do not meet the thresholds for any other 

category. The final rule includes Category IV because banking organizations subject to this category of 

standards generally have greater scale and operational and managerial complexity relative to smaller 

banking organizations. Category IV standards are being finalized as proposed. 

D. Treatment of Depository Institution Subsidiaries 

The proposals generally would have applied the same category of standards to top-tier U.S. 

banking organizations and their depository institution subsidiaries. Standardized liquidity requirements 

would apply only to depository institutions with $10 billion or more in total assets that are subsidiaries 
11 

of banking organizations subject to Category I, II, or III standards. The treatment of depository 

institution subsidiaries is being finalized as proposed. 

E. Specific aspects of the foreign bank proposal 

1. Liquidity standards based on combined U.S. operations 

The foreign bank proposal would have determined the category of liquidity standards applicable 

to a foreign banking organization with respect to its U.S. intermediate holding company based on the 

risk profile of its combined U.S. operations.13 In response to specific commenters’ concerns, the final 

rule determines the applicability of liquidity standards with respect to a U.S. intermediate holding 

company based on the risk profile of the intermediate holding company, rather than the combined U.S. 

operations of the foreign banking organization. Specifically, the final rule applies full LCR or reduced 

LCR requirements to a U.S. intermediate holding company based on a risk profile measured by the five 

risk-based indicators. The agencies believe this approach helps to enhance the focus and efficiency of 

standardized liquidity requirements relative to the proposal, because liquidity requirements that apply to 

a U.S. intermediate holding company will be based on the U.S. intermediate holding company’s own 

risk profile. As discussed in the foreign bank proposal, the agencies may develop and propose a 

standardized liquidity requirement for the U.S. branches and agencies of a foreign banking 

organization.14 

 

13 Combined U.S. operations consist of the foreign banking organizations U.S. subsidiaries, including any U.S. intermediate 

holding company, and U.S. branch and agency operations. 

14 As part of that process, the agencies intend to further consider how to most appropriately address concerns regarding the 

liquidity risk profiles of foreign banking organizations’ U.S. operations, including through the use of existing supervisory 

processes, other relevant regulations and international coordination, as well as developments in the U.S. activities and 

liquidity risk management practices of foreign banking organizations.
12 

2. The treatment of inter-affiliate transactions 

Except for cross-jurisdictional activity, which would have excluded liabilities and certain 

collateralized claims with affiliates, the proposed risk-based indicators would have included transactions 

between a foreign banking organization’s combined U.S. operations and non-U.S. affiliates. Similarly, 

except for cross-jurisdictional activity, a U.S. intermediate holding company would have included 

transactions with affiliates outside the U.S. intermediate holding company when reporting its risk-based 

indicators. For purposes of the risk-based indicators, the final rule adopts the treatment of inter-affiliate 

transactions as proposed. 

V. Capital and Liquidity Requirements for Large U.S. and Foreign Banking Organizations 

A. Capital requirements that apply under each category 

1. Category I capital requirements

The domestic proposal would not have changed the capital requirements applicable to U.S. 

GSIBs and their depository institution subsidiaries. Therefore, such banking organizations would have 

remained subject to the most stringent capital requirements. 

 The final rule maintains the capital requirements applicable to U.S. GSIBs and their depository 

institution subsidiaries. U.S. GSIBs and their depository institution subsidiaries must calculate riskbased capital ratios using both the advanced approaches and the standardized approach and are subject 

to the U.S. leverage ratio. Such banking organizations are also subject to the requirement to recognize 

elements of accumulated other comprehensive income (AOCI) in regulatory capital; the requirement to 

expand the capital conservation buffer by the amount of the countercyclical capital buffer, if applicable; 

and enhanced supplementary leverage ratio standards. In addition, U.S. GSIB holding companies are 

subject to the GSIB surcharge.
13 

2. Category II capital requirements 

The proposals generally would have maintained the capital requirements applicable to banking 

organizations of a very large size or that engage in significant cross-jurisdictional activity under 

Category II. Similar to Category I, capital requirements under Category II included the requirements to 

recognize elements of AOCI in regulatory capital and to expand the capital conservation buffer by the 

amount of the countercyclical capital buffer, if applicable. Banking organizations subject to Category II 

capital requirements also would have been required to comply with the advanced approaches capital 

requirements, generally applicable risk-based capital requirements, and the supplementary leverage 

ratio.15 As under prior requirements, U.S. intermediate holding companies subject to Category II capital 

requirements would not have been required to calculate risk-based capital requirements using the 

advanced approaches under the capital rule, and would instead have used the generally applicable capital 

requirements for calculating risk-weighted assets due to the compliance burden of applying such 

requirements under both U.S. and home-country capital standards.16 In summary, the Category II 

capital requirements are being finalized as proposed. 

3. Category III capital requirements

Under the proposals, Category III capital requirements would have included the generally 

applicable risk-based capital requirements, supplementary leverage ratio, and the countercyclical capital 

buffer. The advanced approaches risk-based capital requirements would not have applied to banking 

 

15 With respect to the agencies’ regulatory capital requirements, the BCBS recently completed revisions to its capital 

standards, including the methodologies for credit risk, operational risk, and market risk. The agencies are considering how to 

most appropriately implement these standards in the United States, including potentially replacing the advanced approaches 

with risk-based capital requirements based on the Basel standardized approaches for credit risk and operational risk. Any 

such changes to applicable risk-based capital requirements would be subject to notice and comment through a future 

rulemaking.

16 After adoption of Regulation YY, and its general exemption for U.S. intermediate holding companies from calculating 

risk-weighted assets under the advanced approaches, depository institution subsidiaries of U.S. intermediate holding 

companies were similarly exempted by order from calculating advanced approaches risk-weighted assets. 
14 

organizations subject to Category III requirements, and banking organizations subject to this category 

would have been permitted to make an election to opt out of the requirement to recognize elements of 

AOCI in regulatory capital. The proposals sought comment on various elements of Category III capital 

requirements, including the advantages and disadvantages of retaining the supplementary leverage ratio 

and countercyclical capital buffer, and the optional recognition of AOCI in regulatory capital. 

U.S. intermediate holding companies and their depository institution subsidiaries would be 

subject to the same capital requirements as U.S. banking organizations under Category III. Banking 

organizations subject to Category III requirements would not be required to apply advanced approaches 

risk-based capital requirements. The models for applying these requirements are costly to build and 

maintain, and the removal of these requirements is not expected to materially change the amount of 

capital that these banking organizations would be required to maintain. 

In addition, the proposal would have removed the mandatory application of the requirement to 

recognize AOCI in regulatory capital for certain banking organizations subject to Category III capital 

requirements. Such banking organizations would have been provided an opportunity to make a one-time 

election to opt out of such requirement in the first regulatory report filed after the effective date for the 

final rule. A banking organization that is currently required to recognize AOCI in regulatory capital and 

that does not make such an AOCI opt-out election would continue to include all applicable AOCI 

components in regulatory capital. Category III standards are being finalized as proposed. 

4. Category IV capital requirements 

Under the proposals, Category IV capital requirements would have included the generally 

applicable risk-based capital requirements and the U.S. leverage ratio. The proposals would not have 

applied the countercyclical capital buffer and the supplementary leverage ratio to Category IV banking 

organizations. In this manner, the requirements applicable to banking organizations subject to 
15 

Category IV would maintain the risk-sensitivity of the current capital regime and resiliency of these 

banking organizations’ capital positions, and would recognize that these banking organizations, while 

large, have lower indicators of risk relative to their larger peers. As a result, and as noted above, 

banking organizations subject to Category IV capital requirements would generally have the same 

capital requirements under the risk-based capital framework as banking organizations with less than 

$100 billion in total consolidated assets. 

The agencies did not receive any comments specific to the capital requirements that would apply 

to banking organizations subject to Category IV standards. These standards are being finalized as 

proposed. 

B. Liquidity requirements applicable to each category 

1. Category I liquidity requirements 

As proposed, U.S. GSIBs would have been subject to Category I standards because they pose the 

highest risks to U.S. financial stability. The domestic proposal did not include changes in the liquidity 

requirements currently applicable to U.S. GSIBs. Under the domestic proposal, U.S. GSIBs would also 

have been included in the scope of application of the full set of requirements described in the proposed 

NSFR rule. In addition, consistent with current requirements, a U.S. GSIB’s depository institution 

subsidiary with $10 billion or more in total consolidated assets would have remained subject to the full 

LCR requirements. The liquidity requirements for firms in Category I are being finalized as proposed.17 

2. Category II liquidity requirements

The proposals would have applied full LCR requirements to banking organizations subject to 

Category II standards and would also have applied full LCR requirements to their depository institution 

 

17 Comments regarding the NSFR proposal will be addressed in the context of any final rule to adopt a net stable funding 

ratio requirement for large U.S. banking organizations and U.S. intermediate holding companies.
16 

subsidiaries with total consolidated assets of $10 billion or more. Under the proposals, banking 

organizations subject to Category II standards would also have been included in the scope of application 

of the full requirements of the proposed NSFR rule. While these banking organizations generally do not 

present the same degree of systemic risk as U.S. GSIBs, the very large size or the cross-jurisdictional 

activity of these organizations present risks that make it appropriate to apply more stringent liquidity 

standards. The Category II liquidity requirements are being finalized as proposed. 

3. Category III liquidity requirements

Under the proposals, Category III liquidity requirements would have reflected the elevated risk 

profile of banking organizations subject to this category relative to smaller and less complex banking 

organizations. A banking organization subject to Category III with weighted short-term wholesale 

funding of $75 billion or more would have been subject to the full set of LCR and proposed NSFR 

requirements applicable under Categories I and II. A banking organization subject to Category III with 

less than $75 billion in weighted short-term wholesale funding would have been subject to reduced LCR 

and proposed NSFR requirements.18 The level of the LCR and proposed NSFR requirements applicable 

to a depository institution subsidiary with total consolidated assets of $10 billion or more of a banking 

organization subject to Category III standards would have been the same as the level that would apply to 

the parent banking organization.19 

A banking organization subject to the reduced LCR requirement would have been required to 

hold a lower minimum amount of high-quality liquid assets (HQLA) than under the full LCR. All other 

 

18 A range of 70 to 85 percent was proposed.

19 For example, a depository institution subsidiary with $10 billion in total consolidated assets of a banking organization 

subject to the reduced LCR requirements under Category III standards would also be subject to the reduced LCR 

requirements. In the case of a depository institution that is not a consolidated subsidiary of a banking organization that would 

have been subject to Category I, II, or III standards, the applicable category of standards would have depended on the riskbased indicators of the depository institution. For example, if the depository institution meets the criteria for Category III 

standards but has weighted short-term wholesale funding of less than $75 billion, the depository institution would have been 

subject to the proposed reduced LCR requirements.
17 

requirements under the LCR rule would have generally remained the same. For example, these banking 

organizations would have been required to calculate an applicable LCR on each business day, include 

the maturity mismatch add-on in the LCR calculation and take into account the amount of subsidiary’s 

HQLA that is automatically includable in the top-tier company’s HQLA amount up to the reduced 

amount of the subsidiary’s outflows. The Category III liquidity requirements are being finalized as 

proposed, with an 85 percent outflow rate for Category III banking organization with less than $75 

billion of weighted short-term wholesale funding. 

4. Category IV liquidity requirements

The foreign bank proposal would have required certain banking organizations that meet the 

criteria for Category IV and that have weighted short-term wholesale funding of $50 billion or more to 

comply with a reduced LCR requirement and a monthly, rather than daily, calculation requirement. The 

proposals would not have applied Category IV liquidity requirements to standalone depository 

institutions or to depository institution holding companies or foreign banking organizations with less 

than $50 billion in weighted short-term wholesale funding, or their subsidiary depository institutions. 

 The application of LCR requirements is appropriate for Category IV banking organizations with 

significant reliance on short-term wholesale funding, albeit at a reduced level given their lower potential 

systemic impact. In the final rule, the LCR is calibrated at a level equivalent to 70 percent of the 

minimum level required under the full LCR. The final rule retains the maturity mismatch requirement 

and the proposed limitation on the amount of subsidiary’s HQLA that is automatically includable in the 

top-tier banking organization’s HQLA amount, equal to an amount up to the reduced amount of the 

subsidiary’s net outflows. The Category IV liquidity requirements are being finalized as proposed.20 

 

20 Additionally, the final rule rescinds the Federal Reserve’s modified LCR requirements. 
18 

5. Timing of LCR Calculations and Public Disclosure Requirements 

The proposal would have required banking organizations subject to Category I, Category II, or 

Category III standards to calculate an LCR on each business day. Banking organizations subject to 

Category IV standards with $50 billion or more in weighted short-term wholesale funding would have 

been required to calculate a monthly LCR. The final rule adopts these requirements as proposed. 

VI. Transitions 

Under the proposals, standards would have applied based on the average levels over the 

preceding four calendar quarters, and a banking organization could have transitioned between categories 

at any quarter-end following a change in one or more of these average amounts. Consistent with the 

previous LCR rule, changes in LCR requirements that resulted from a change in category generally 

would have taken effect on the first day of the second quarter. The proposals would also have 

maintained the transition period for a banking organization to commence calculating the LCR each 

business day one year after becoming subject to an applicable category. In response to comments, the 

final rule extends the transition period for an increase in the stringency of LCR requirements. Under the 

final rule, a banking organization must meet the increased requirements from the first day of the third 

quarter following the date it becomes subject to a revised category. For a banking organization that 

becomes subject to Category I, II or III, the final rule retains the one-year transition period for the 

banking organization to begin calculating the LCR each business day. The final rule also eliminates

from the LCR rule the provision that a banking organization remains subject to the rule until its primary 

federal supervisor determined that application of the rule would not be appropriate. 

Conclusion: FDIC staff is requesting that the FDIC Board approve the final rule and authorize its 

publication in the Federal Register with an effective date of 60 days after publication in the Federal 

Register. 
19 

Staff Contacts

RMS

Benedetto Bosco ext. 8-6853 

Mike Spencer ext. 8-7041 

Michael Maloney ext. 8-6516 

Eric Schatten ext. 8-7063 

Andrew Carayiannis ext. 8-6692

Legal

Michael B. Phillips ext. 8-3581 

Gregory S. Feder ext. 8-8724 

Andrew B. Williams II ext. 8-3591 

Suzanne J. Dawley ext. 8-6509