2018/2019 Edition of the Global Regulatory Update

Treasury and Trade Solutions 54 Supplementary Leverage Ratio (SLR) Relief: EGRRCPA provides that for “custody banks” (which is defined as banks “predominantly engaged in custody, safekeeping and asset servicing activities”), the U.S. banking agencies must revise their rules to exclude custody-related deposits with certain central banks from the definition of “total leverage exposure” (the denominator of the SLR). It is largely expected that only 3 U.S. banks will qualify as “custody banks”: Bank of New York Melon, State Street and Northern Trust. It is not clear how the U.S. banking agencies will implement these changes to the SLR, or how they will proceed with the currently outstanding proposal to recalibrate the U.S. SLR (see below). Treatment of Municipal Securities under the Liquidity Coverage Ratio (LCR): EGRRCPA requires the U.S. banking agencies to revise the U.S. LCR rule to allow investment grade and “liquid and readily marketable” (as defined under the existing U.S. LCR rules) to be consider Level 2B assets for purposes of the LCR. (Note: this change is likely to have an immaterial impact on Citi’s LCR). U.S. Treasury Report: A Financial System that Creates Economic Opportunities: Banks and Credit Unions This report primarily serves as a “blueprint” for the U.S. banking regulatory agencies. The report includes recommendations only; it is up to the regulators to act. Having said that, we are starting to see the U.S. banking regulators take steps to act on some of the recommendations. Examples of actions taken by the U.S. banking regulators and/or will be taken by the U.S. banking regulators as a result of EGRRCPA that correspond to the U.S. Treasury’s recommendations include: 1. Treasury’s recommendation for an increased threshold to require participation in U.S. stress tests (was previously $10 billion) was raised as part of ECGRRCPA to $50 billion. Treasury’s similar recommendation to raise the thresholds for “enhanced prudential standards” was also increased under ECGRRCPA, as summarized above. 2. EGGRPA requires investment grade monies to be included as Level 2B assets, consistent with the Treasury recommendation. 3. In August 2017, the Federal Reserve Board issued proposals which would revise its supervisory expectations for bank holding company boards of directors as well as bank management, consistent with Treasury’s recommendation to “restore balance in the relationship between regulators, boards and bank management”.