Capital Commitment Subscription Facilities and the Proposed Liquidity Coverage Ratio
20 December 2013
Mayer Brown Legal Update
On November 29, 2013, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation published a proposed rule designed to improve the liquidity of large financial institutions. The proposed rule for the first time aims to require banking organizations with $250 billion or more in total assets and certain other large or systemically important banking or other institutions to hold sufficient high-quality liquid assets to meet their liquidity needs for a 30-day stress scenario. As with many of the statutory and regulatory requirements emanating from the financial crisis, applying these requirements to capital commitment subscription credit facilities requires both seasoned familiarity with facility structures and reasoned judgment as to the application. This Legal Update seeks to set out the applicable criteria and the appropriate classifications for facilities with respect to the liquidity coverage ratio.