FR 2052a Final Rule – What you need to know - Vermeg
FR 2052a Final Rule – What you need to know

FR 2052a Final Rule – What you need to know

2022-06-07

On March 29, 2021, the Federal Reserve Board (FRB) issued a proposed revision to the FR 2052a report, which was adopted largely as proposed in December 2021.  The revised rule adds new reporting requirements that address the recently finalized Net Stable Funding Ratio (NSFR) requirements, specifications for calculating Liquidity Coverage Ratio (LCR) and aligns the reporting of the Liquidity Risk Management Standards.  The expansion of the FR 2052a report will require integration of a balance sheet data and processes; tighter alignment with the LCR and NSFR data and calculation processes; and increased monitoring and control of data across multiple FRB reports and regulations, (e.g. Regulatory Capital, Regulation D, FR Y-9C and FR Y-14).

Revisions made can be categorized as product scope changes, product reclassifications, revised product definitions and additional reporting frequency.  The final rule introduces 3 new tables (Supplemental Balance Sheet, Supplemental Derivatives and Collateral and Supplemental Liquidity Risk Management) as well as 32 new products added.  Several products have been reclassified from the Supplemental Information table to the Supplemental Derivatives and Collateral table and likewise from the Supplemental table to the Supplemental Liquidity table.  There will be additional reporting frequencies introduced for specific tables.  Institutions would report Supplemental Balance Sheet and Supplemental Liquidity Risk Management tables on a monthly or quarterly basis depending on category level.  In addition, several products have revised instructions.

Below is a summary of the impact of the final rule:

Reporting Requirements

  • The FRB will use the FR 2052a to construct a complete accounting view balance sheet
  • LCR & NSFR ratios with supporting data reportable in the FR 2052a report
  • Increased focus on derivatives by reporting gross derivative balance sheet values & cumulative settlements to date
  • New reporting requirement to report assets pledged to Central Counterparties (CCPs) under loss sharing commitments

Data Impact

Data warehouse & supply chains will need to be enriched with new data sourcing for the following:

  • General Ledger and collateral management data
  • LCR & NSFR data elements
  • Balance sheet values & cumulative settlements
  • CCP commitment data

Operational & Control Impacts

  • Data availability from systems that are not designed to support a daily reporting process
  • New controls needed to confirm consistency across regulatory reports and regulations
  • Certain data elements may require increased involvement of line of business requiring reconciliations & other controls to be put in place
  • Derivative valuation & flow projections will increase reliance on valuation models, processes will need to be aligned for daily/monthly reporting frequencies

In addition, the final rule has added new data fields unrelated to the LRM standards:

 

Field NamePurpose

GSIB Field

Captures whether the counterparty is designated as a Globally Systemically Important Bank (GSIB)
Loss Absorbency Field)Distinguish tier 2 capital instruments from other long-term liabilities
Business Line Field (Cat I Only)Captures business line responsible for FR 2052a exposure
Collateral Level FieldDifferentiates the derivative assets/liabilities from variation margin posted/received
Accounting Designation FieldDesignates type of accounting treatment for unencumbered inventory
TLACDistinguish Total Loss-Absorbing Capacity (TLAC) instruments from other long-term liabilities
Collection ReferenceCollection designation applicable to a reported adjustment (applicable only on the Supplemental Balance Sheet table)
Maturity OptionalityTo identify transactions with certain types of embedded optionality (Evergreen, Extendible, Accelerated & Non-Accelerated)
Netting EligibleIdentify balances of variation margin posted/received eligible for netting
Product ReferenceIndicate the product designation applicable to the reported adjustment (applicable only on the Supplemental Balance Sheet table)
Sub-product ReferenceIndicate the Sub-product designation to the reported adjustment (applicable only on the Supplemental Balance Sheet table)
Risk WeightDesignate the standard risk weight of unsecured/secured lending transactions

 

The Board has finalized the effective dates for the revisions as May 1, 2022 for Category I banks and October 1, 2022 for Category II-IV banks.

The adopted changes in the final rule emphasize the need to integrate financial and risk data, and further illustrates the need for enhanced controls to ensure reporting requirements are met and data provided is complete and accurate across FRB reports and regulations. Planning, data sourcing, and automation implementation should begin immediately in order to accommodate the complexity of implementing such changes.

VERMEG offers a comprehensive end-to-end solution that includes capabilities for calculation, preparation, validation and electronic submission of data. Our automated solution provides a 13-report schedule solution based on sub-ledger and general ledger sourced data.  Each report has a detailed audit trail supported by the calculated data elements as well as a summary view for ease of review.