Indemnified Securities Lending

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6 before and 6 after, select square
 Capital bullet

– Risk Weighted Assets and Leverage Ratio aspects to regulatory capital Arial 14 pts, paragraph spacing of
– More severe requirements (finalized and proposed) for 8 G-SIBs 6 after, select hyphen bullet

– Standardized approach under US rules

• Applies to US institutions and FBO
• Significantly increased capital requirements for indemnified securities lending
• Haircut-based approach to exposure calculation
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• Counterparty risk weights of 20% (banks) or 100% (others) 6 after, select round bullet
• TLAC will further exacerbate
• Possible Standardized floor (S-CAR)

 Large Exposures/Single Counterparty Credit Limits

– Limits counterparty concentration to a percentage of capital
– Haircut-based approach for securities lending exposures
• Treatment of non cash collateral a big factor

 No NSFR/LCR impact expected (hopefully)

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of 48 after, bold faced

Basel Committee Limits on Large

Exposures
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spacing

Finalized – April 2014

Intended full Implementation –
January 1, 2019

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 Single-Counterparty Exposure Limits: Basel
Framework – Counterparties/Limits

 Places limits on consolidated exposure to counterparties – daily limit / monthly compliance reports
 General limit of 25% of banking group’s Tier 1 Capital of exposure to any single counterparty (and
affiliates)
– E.g., December 31, 2012 – Bank Tier 1 capital = $150 B
– Bank standard exposure limit $37.5 B

 More stringent limit of 15% of credit exposure of G-SIBs to other G-SIBs

– Bank $150 B current exposure limit = $15 B

 Note – US proposal from January, 2012 would impose a 10% limit, but U.S. agencies may
reconsider based on Basel

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 Arial 28 pts, paragraph spacing
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FRB FBO Rules

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 Overview and Key Themes

 24 U.S. top-tier bank holding companies and approximately 100 FBOs would be subject to all of or
some aspects of the enhanced standards

 Federal Reserve projected in the rule between 15 and 20 of those FBOs would be required
to form a U.S. IHC
 SNL found that FBOs had 17 U.S. subsidiaries with more than $50 billion in assets at the end of 2013
 Compliance costs estimated to foreign banks could be up to €300 million

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 Overview

 Adopted by the Federal Reserve Board, OCC and FDIC

 Imposes a minimum quantitative liquidity standard
– Full LCR for the very largest banks
– Modified LCR for “smaller” large banks

 Requires banks to hold enough eligible High Quality Liquid Assets (“HQLA”) to cover “Total Net Cash
Outflows”
 “Super-equivalent” to the 2013 Basel III LCR for the Full LCR banks
– Phases in by January 1, 2017 rather than January 1, 2019
– More stringent standards for HQLA
– More stringent treatment of outflows to address maturity mismatch (“peak-day” vs average)

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 Central Counterparties; New Counterparties

 Central counterparties can allow for aggregate netting allowing for a more holistic approach that
lessens overall obligations, rather than having to apply the rules on a transaction-by-transaction basis.
 One potential downside of central counterparties is the need to post margin, and the implications of
margin under the rule sets.
 Looking to new counterparties, especially non-financial corporate clients and public sector entities,
can provide some relief, especially with regard to longerterm funding needs.
 It is unclear how actively those clients want to participate in the financial markets.

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 (Supplementary) Leverage Ratio

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 Central Counterparties; New Counterparties

 Central counterparties can allow for aggregate netting allowing for a more holistic approach that
lessens overall obligations, rather than having to apply the rules on a transaction-by-transaction basis.
 One potential downside of central counterparties is the need to post margin, and the implications of
margin under the rule sets.
 Looking to new counterparties, especially non-financial corporate clients and public sector entities,
can provide some relief, especially with regard to longerterm funding needs.
 It is unclear how actively those clients want to participate in the financial markets.

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 Central Counterparties; New Counterparties

 Designed to reflect stability of liabilities across 2 dimensions:

– Funding tenor – Generally, long term deemed more stable
– Funding type/Counterparty – Retail generally more stable than wholesale

 Timing:
– Basel Committee: NSFR will become a minimum standard by January 1, 2018.
– Federal Reserve anticipates finalizing a rule in 2015.

 Applies to all banks, thrifts, BHCs, and SLHs subject to Advanced Approaches Rule
 Published September 3, 2014
 Public disclosure begins January 1, 2015
 Pillar 1 treatment by January 1, 2018
 Meant as a “complementary measure” to the risk-based framework

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 President & CEO Arial 16 pts for title
Joe von Rosenberg Arial 18 pts for Name

Coordinator of Senior VP Coordinator of

Senior VP &
Operations & Marketing & Marine Engineering
Chief Financial Officer
Technical Services Product Development & Maintenance
Dalton Berry Kelsey Short Mike Wilson Bob Stockton

General Managers
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Tom Wittmann Abbeville VP & Controller
Clyde Gilbert
Charles Anderson Cameron

Pryor Bailey Moss Point

Steve Jones Reedville

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