On September 3, 2014, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (collectively, the “Agencies”) each adopted a final rule (the “Final Rule”) to establish a quantitative minimum liquidity coverage ratio (the “LCR”) for certain large, internationally active banking organizations. The LCR’s stated purpose is to ensure that banking organizations have an adequate amount of unencumbered high-quality liquid assets that is equal to or exceeds anticipated net cash outflows during a hypothetical 30-day stress period.

This memorandum focuses on the LCR’s application to brokered deposits, including brokered time deposits and brokered sweep deposits. Although the Final Rule includes some changes in response to public comment, the provisions of the Final Rule applicable to brokered deposits are largely similar to the rule initially proposed in October 2013 (the “Proposed Rule”). The memorandum

• Provides an overview of the banking institutions required to comply with the LCR and the timing of LCR implementation;
• Reviews definitions and run-off rates;
• Highlights certain changes to the Proposed Rule relevant to brokered deposits; and
• Reviews the limited guidance in the Adopting Release applicable to brokered deposits and identifies several unanswered questions raised by the Agencies’ lack of guidance with respect to the depositor information needed for banks to comply with the LCR.

If you have any questions or concerns regarding the attached memorandum please contact Paul Clark at Seward & Kissel at (202) 737-8833.