Regulatory Reporting Awareness Flashcards
In the US, the laws and regulations governing external financial reporting are primarily found in which SIX acts?
- The Bank Holding Company Act
- The Securities Act of 1933
- The Securities Act of 1934
- The Basel Regulatory Capital Framework (Basel III)
- The Federal Reserve Act
- The Dodd-Frank Act
Describe what the Bank Holding Company (BHC) Act entails.
- Regulates the actions of BHCs and grants the Federal Reserve supervising mandate
- Defines the BHCs in scope for Fed supervision
- Authorizes the Fed to collect information and issue regulations
- Gives the Fed the authority to take actions against BHCs to prevent these entities from engaging in unsafe or unsound practices or to address violations of law
Describe what the Securities Act of 1933 entails.
- Requires investors to be provided with material financial and other information concerning securities publicly offered for sale
- Prohibits deceit, misrepresentations, or other fraudulent practices in the sale of securities
Describe what the Securities Exchange Act of 1934 entails.
- Established the US Securities and Exchange Commission (SEC)
- Regulates the trading of securities in secondary markets (e.g. NYSE, NASDAQ)
- Requires issuers to provide quarterly and annual financial filings with the SEC (Form 10-Q and Form 10-K)
- Requires filing of announcements of major current events to notify shareholders (Form 8-K)
Describe what the Federal Reserve Act entails.
- Established the Federal Reserve System, with the Federal Reserve Board (FRB) as its governing body
- Appointed FRB to oversee the health of its member banks and the overall economy
- Requires member banks to file various regulatory reports with FRB
What is Basel III?
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision that are aimed to strengthen the regulation, supervision and risk management of banks.
What did Basel III establish?
- defined a standardized approach for calculating risk weighted assets
- established stringent regulatory capital requirements
- instituted leverage ratio requirements intended to constrain excess leverage in the banking system
- introduced a capital conservation buffer requirement
The Dodd-Frank Act requires the FRB to conduct an annual supervisory stress test of BHCs with total consolidated assets of more than ___________.
$50 billion
The Dodd-Frank Act requires BHCs with total consolidated assets of more than $10billion to……
conduct stress tests at least annually
The Dodd-Frank Act requires 1.________________ and 2.________________ to submit resolution plans (i.e. Living Wills) to the FRB and the Federal Deposit Insurance Corporation
- BHCs with total consolidated assets of more than $50billion, and
- nonbank financial companies designated by the Financial Stability Oversight Council for FRB supervision
What is a Living Will per the Dodd-Frank Act?
A Living Will must describe the BHC’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company.
What is the Sarbanes Oxley (SOX) Act of 2002?
The SOX Act of 2002 is a US federal law under the governance of the US SEC and applicable to the quarterly and annual financial statements of SEC registrants.
What is Section 302 of the SOX Act?
Corporate Responsibility for the Financial Reports
What does Section 302 of the SOX Act require?
It requires the principal executive officer and the principal financial officer to include a certification in their annual and quarterly reporting that the financial statements fairly represent, in all material respects,the financial condition and results of operations
What is Section 404 of the SOX Act?
Management Assessment of Internal Controls
What does Section 404 of the SOX Act require?
It requires issuance of an annual internal control report that include an assessment regarding the effectiveness of internal controls over financial reporting
What does the Federal Deposit Insurance Corporation Improvement Act (FDICIA) require?
It requires an adequate system of internal control which needs to be reviewed by management for ongoing effectiveness.
Institutions that are subject to both FDICIA and SOX 404 internal control reporting requirements are permitted to prepare a single internal control report to satisfy both, if certain conditions are met.
What does the FRB’s CCAR CFO Attestation require?
It requires that the CFO or equivalent senior officer make an attestation that:
- effective internal controls provide reasonable assurance as to the material accuracy of the FR Y-14 data, and
- regular control assessments are being performed by management
What does CCAR stand for?
Comprehensive Capital Analysis and Review
Who are our primary regulators?
- FRB - Board of Governors of the Federal Reserve System
- OCC - Office of the Comptroller of the Currency
- FDIC- Federal Deposit Insurance Corporation
What is the FFIEC?
Federal Financial Institutions Examination Council
It is an interagency bond empowered to:
1. prescribe uniform principles, standards and report forms for the federal examination of financial institutions and,
2. to make recommendations to promote uniformity in the supervision of financial institutions
Which agencies constitute the FFIEC?
- FRB
- OCC
- FDIC
- NCUA - National Credit Union Administration
- CFPB - Consumer Financial Protection Bureau
Describe the role and responsibilities of the FDIC.
The FDIC is an independent agency created by the US Congress to maintain stability and public confidence in the nation’s financial system by:
* insuring deposits
* examining and supervising financial institutions for safety and soundness and consumer protection
* making large and complex financial institutions resolvable
* managing receiverships
Describe the role and responsibilities of the FRB.
- influence monetary and credit conditions in the US economy to ensure maximum employment, stable prices and moderate long-term interest rates
- supervise and regulate banking institutions to ensure safety of the US banking and financial system and to protect consumers’ credit rights
- maintain financial system stability and contain systemic risk
- provide financial services to depository institutions, the US govt and foreign official institutions
What is the OCC?
The OCC is an independent bureau within the US Department of Treasury that serves to charter, regulate and supervise all national banks, federal savings associations, federal branches and agencies of foreign banks
What are the responsibilities of the OCC?
- to monitor banks and ensure that they are operating safely and meeting all requirements
- to monitor capital, asset quality, management, earnings, liquidity, sensitivity to market risk, information technology, compliance and community reinvestment
