US Reg Round Up: 11/02/2025

Federal Reserve

Federal reserve board releases hypothetical scenarios for 2025 annual stress test - 5 February 2025

The Federal Reserve Board has announced the release of hypothetical scenarios for its 2025 annual stress test, aimed at ensuring large banks can continue to lend to households and businesses during a severe recession. The stress test evaluates banks' resilience by estimating potential losses, net revenue, and capital levels under hypothetical economic scenarios spanning two years. This year, 22 banks will be tested under a severe global recession scenario, which includes heightened stress in both commercial and residential real estate markets, as well as in corporate debt markets. A significant rise in unemployment (peaking at 10%) will accompany severe market volatility, a widening of corporate bond spreads, and declines in asset prices (33% for house prices and 30% for commercial real estate). In addition to the primary stress test, two exploratory analysis scenarios will probe additional risks in the banking system. These analyses, which will not affect capital requirements, include:

1. Assessing the banking system’s resilience to credit and liquidity shocks in the non-bank financial institution sector during a severe global recession.
2. Evaluating the impact of a market shock, hypothesizing the failure of five large hedge funds amid reduced global economic activity and higher inflation. This second element will apply only to the largest and most complex banks.

Federal bank regulatory agencies announce second public outreach meeting for regulatory review - 31 January 2025

The Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board (FRB), and Office of the Comptroller of the Currency (OCC) have announced that they will hold a virtual public outreach meeting on March 6, 2025, as part of their review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). The EGRPRA mandates these agencies to review their regulations every 10 years, gathering public input to identify outdated or unnecessary regulatory requirements.

Federal Reserve issues fomc statement - february 2025 - 29 January 2025

The Federal Open Market Committee (FOMC) has released a statement following its meeting, confirming that economic activity continues to expand at a solid pace. The unemployment rate remains low, and labour market conditions stay strong. However, inflation remains somewhat elevated. Despite the uncertainties in the economic outlook, the FOMC remains attentive to risks on both sides of its mandate. In line with its goals, the FOMC has decided to maintain the target range for the federal funds rate at 4.25% to 4.5%. The Committee emphasized that any future changes to the federal funds rate will depend on incoming data, the evolving economic outlook, and the balance of risks. Additionally, the FOMC will continue its process of reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. The FOMC reiterated its strong commitment to supporting maximum employment and returning inflation to its 2% target. The Committee will closely monitor developments related to labour market conditions, inflation pressures, inflation expectations, and financial and international factors. It is prepared to adjust monetary policy as needed to ensure the attainment of its goals.

Securities and Exchange Commission

Exemption from reporting certain PII to the consolidated audit trail - 10 February 2025

The SEC has issued an exemption from the requirement to report certain personally identifiable information (PII), including names, addresses, and years of birth, to the Consolidated Audit Trail (CAT) for natural persons. This exemption is aimed at reducing security risks, as bad actors could misuse this information in the event of a breach. Originally, these data points were required for generating unique anonymized customer IDs and identifying individuals responsible for trades. However, the SEC has determined that the exclusion of this information will not hinder the CAT's ability to meet its objectives. The CAT will still generate reliable anonymized customer IDs without this PII.

Exemption From Exchange Act Rule 13f-2 and Related Form SHO - 7 February 2025

The SEC has granted a temporary exemption from Rule 13f-2 under the Securities Exchange Act and reporting on Form SHO. This exemption postpones the filing deadline for initial Form SHO reports from institutional investment managers until Feb. 17, 2026, for the January 2026 reporting period. The original compliance date for these filings was Jan. 2, 2025. Rule 13f-2 requires institutional investment managers to file Form SHO for certain equity securities within 14 days of each month’s end. The SEC will publish aggregated data from these reports on EDGAR. The exemption allows filers additional time to address operational and compliance challenges following the release of new technical standards in December 2024. The SEC emphasized that the exemption aims to ensure the accuracy and completeness of the data collected, while still taking action against illegal short selling activities.

Extension of Form PF amendments compliance date - 29 January 2025

The SEC, in coordination with the CFTC, has extended the compliance date for the amendments to Form PF, originally scheduled for March 12, 2025. The new compliance deadline is set for June 12, 2025. Form PF is used by certain SEC-registered investment advisers to private funds, including those also registered with the CFTC. This extension aims to alleviate administrative and technological burdens, providing additional time for filers to prepare and test for compliance with the new amendments.

SEC publishes annual staff report on nationally recognized statistical rating organizations - 28 January 2025

The SEC's Office of Credit Ratings (OCR) has published its annual Staff Report on Nationally Recognized Statistical Rating Organizations (NRSROs), which summarizes the findings of NRSRO examinations and addresses the state of competition, transparency, and conflicts of interest within the industry. The report provides an overview of the SEC's oversight of credit rating agencies, highlighting areas such as the appropriateness of rating methodologies, surveillance practices, and policies to manage potential conflicts of interest. The report also includes a review of commercial real estate rating activity and securities ownership policies for NRSRO employees and directors. The findings are presented to Congress and the public, ensuring transparency and accountability in the credit rating industry.

The Office of the Superintendent of Financial Institutions

OSFI Defers Basel III Standardized Capital Floor Increase - 12 February 2025

OSFI will defer increases to the Basel III standardized capital floor level ("output floor") until further notice. The floor will remain at 67.5%, and banks will be given at least two years' notice before any increase resumes. While reaffirming its commitment to Basel III principles, OSFI acknowledges uncertainty about when other jurisdictions will fully implement the framework. Given this, OSFI will not extend Canada’s implementation lead. The Basel III capital framework enhances banking resilience, supports economic growth, and ensures fair competition across jurisdictions. OSFI continues to adjust capital buffers for systemically important banks and small and medium-sized banks as needed and remains ready to act based on economic conditions.