FRB Issues Final Rule Amending Regulation HH, Revises Policy on Payment System Risk

The Board of Governors of the Federal Reserve System (“FRB”) issued a final rule amending Regulation HH risk-management standards for financial market utilities that have been designated as systemically important by the Financial Stability Oversight Council, and over which the FRB has standard-setting authority pursuant to Dodd-Frank. The FRB also announced final revisions to Part I of the Federal Reserve Policy on Payment System Risk, which applies to financial market infrastructures more generally, including those that are operated by Federal Reserve Banks.

Key amendments to the rule and revisions to the policy include the following: (i) establishing separate standards to address credit and liquidity risk, (ii) new requirements for recovery and orderly wind-down planning, (iii) a new standard for general business risk, (iv) a new standard for tiered participation arrangements, and (v) heightened transparency and disclosure requirements.

The final rule and revised policy will become effective on December 31, 2014.

See: Text of the Final Rule; Policy on Payment System Risk; FRB Press Release.