In this Weekly Roundup Issue. The Federal Deposit Insurance Corporation (FDIC) issued a proposed rule to impose a special assessment pursuant to systemic risk determination; The Board of Governors of the Federal Reserve System (Federal Reserve), Office of the Comptroller of the Currency (OCC), FDIC, and the Conference of State Bank Supervisors (CSBS) will jointly host an “Ask the Regulators” webinar on funding and liquidity risk management on May 24; and the Securities and Exchange Commission’s (SEC) Division of Examinations (EXAMS) issued a risk alert concerning LIBOR-transition preparedness. These and other developments are discussed in more detail below.
Regulatory Developments
FDIC Issues a Proposed Rule on Special Assessment Pursuant to Systemic Risk Determination
On May 11, the FDIC issued a notice of proposed rulemaking to impose a special assessment to recover the cost of protecting uninsured depositors of Silicon Valley Bank and Signature Bank. The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods, beginning with the first quarterly assessment period of 2024.
FDIC estimates that approximately $15.8 billion of the total cost of the Silicon Valley Bank and Signature Bank failures is attributable to the protection of uninsured depositors. Banking organizations with total assets over $50 billion would pay more than 95 percent of the special assessment. No banking organizations with total assets under $5 billion would be subject to the special assessment.
The proposed rule provides opportunity for public comment for 60 days following publication in the Federal Register.
“The proposal applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits. The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy.”
- FDIC Chairman Martin J. Gruenberg
Supervisory Update on Funding and Liquidity Risk Management Webinar Announced
On May 24 at 2:00 p.m., Eastern time, the Federal Reserve, OCC, FDIC, and the CSBS will jointly host an “Ask the Regulators” webinar on funding and liquidity risk management. The webinar is open to banking organizations. Representatives of these organizations will discuss the rising interest rate environment’s impacts on bank balance sheets and funding risk, prudent liquidity risk management practices, and expectations for supervisory reviews.
During the webinar, there will be a Q&A session. Participants are encouraged to submit questions in advance via email at asktheregulators@stls.frb.org. Questions received by May 19 will receive priority for responses from the panelists.
Registration for the webinar is now available at: Ask the Regulator Registration Link.
SEC Issues Risk Alert Concerning LIBOR-Transition Preparedness
On May 11, the SEC’s EXAMS published a Risk Alert regarding a series of examinations to assess investment adviser and investment company (firms) preparedness for the cessation of LIBOR. LIBOR is scheduled to be discontinued after June 30, 2023.
EXAMS observed certain practices firms have implemented to address the transition away from LIBOR. Key takeaways include:
- Firms with significant exposures have formed cross-functional LIBOR transition working groups, often overseen by a risk governance committee, created detailed written transition plans with work streams and timelines, and completed comprehensive impact assessments on investment and operational exposures;
- Firms have planned their level of engagement with service providers, sub-advisers, and third-party managers according to the importance of such entity to the firm’s business or the level of exposure at such entity;
- Where applicable, many firms took a global approach to contract identification, looking broadly at LIBOR exposure across subsidiaries and affiliates;
- Many firms used third-party service providers with specialized skills in document review to identify fallback provisions, etc.
EXAMS concluded that firms have made significant efforts to prepare for the transition away from LIBOR, implementing a variety of practices depending on their business models and client base.
New York CRPTO Bill Would Prohibit Many Digital Asset Activities and Impose Sweeping Market Structure Changes
On May 5, New York Attorney General Letitia James released a bill for consideration by the New York State Legislature that would implement comprehensive and far-reaching regulation of digital asset activities in the state.
If enacted as currently drafted, the Crypto Regulation, Protection, Transparency, and Oversight Act (the CRPTO Act) would, among other things, amend the New York General Business Law to (i) establish registration requirements for a number of categories of digital asset market participants; (ii) impose significant market structure reforms, effectively prohibiting the direct market access paradigm common in the digital asset industry; (iii) impose listing standards and disclosure requirements; (iv) target conflicts of interest, including in the context of digital asset “influencers”; and (v) expand and solidify the New York Attorney General’s (NYAG’s) enforcement tool kit with respect to digital asset markets. As currently drafted, the CRPTO Act would require significant changes to existing business models for digital asset market participants to continue offering services in New York.
To read more about the proposed CRPTO Act in a recent client alert.
Horizon Scan for Private Investment Funds: Key Recent and Expected Funds, Regulatory and Tax Developments to Look Out For
In the second edition of Goodwin’s Horizon Scan, our team focuses on some of the principal recent and expected developments and changes that we expect to be of interest to those in the non-listed funds sector. They have grouped the topics under the following headings: UK and EU funds; sustainable finance (UK, EU, and US); regulatory issues (UK and EU); tax topics (UK and EU); and US specific developments (for non-US fund managers marketing in the US and other than ESG). They additionally share related topics and anticipated developments to look out for this year that will also likely impact the private funds industry.
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