Economic Growth, Regulatory Relief, and Consumer Protection Act Signed into Law
On May 22 the House passed the wide-ranging financial regulatory bill called the Economic Growth, Regulatory Relief, and Consumer Protection Act. This version of the legislation is unchanged compared to the bill that was passed by the Senate (S. 2155) on March 15. President Trump signed the bill into law on May 24.
As we have reported previously, the bill includes these noteworthy provisions:
- Raising the asset-size threshold for enhanced prudential standards (e.g., resolution planning, stress testing, etc.) from $50 billion to $250 billion (Federal Reserve would have discretion to apply standards to bank holding companies with more than $100 billion of assets);
- Exempting banks with $10 billion to $50 billion of assets from requirements to perform company-run stress testing;
- Allowing a simplified capital standard for community banks with less than $10 billion of assets (i.e., a leverage ratio requirement between 8% and 10% would allow these institutions to opt out of risk-based capital requirements);
- Exempting banks with less than $10 billion of assets whose total trading assets and liabilities are less than 5% of total assets from the Volcker Rule; and
- Treating municipal securities as Level 2B high-quality liquid assets under the Liquidity Coverage Ratio rules, provided the securities are a) liquid and readily marketable, and b) investment grade.
Federal Reserve Board Proposes Revisions to the Volcker Rule
On May 30 the Federal Reserve Board issued a press release requesting comment on proposed revisions to requirements relating to the Volcker rule. The proposed changes were jointly developed by the Federal Reserve Board, CFTC, FDIC, OCC, and the SEC, and include these changes:
- Tailoring the rule’s compliance requirements based on the size of a firm’s trading assets and liabilities;
- Providing more clarity by revising the definition of “trading account” in the rule;
- Clarifying that firms that trade within appropriately developed internal risk limits are engaged in permissible market making or underwriting activity;
- Limiting the impact of the Volcker rule on the foreign activity of foreign banks; and
- Simplifying the trading activity information that banking entities are required to provide to the agencies.
The proposed revisions do not appear to impact the treatment or regulatory exemption applicable to separate account BOLI under the existing Volcker Rule regulations.
The comment period will be 60 days following publication in the Federal Register.
Social Security Administration Announces Schedule for Release of Additional Records
As a follow up to last month’s update, on May 14 the Social Security Administration (SSA) announced its schedule for release of additional death records to the publicly available Limited Access Death Master File (LADMF) during 2018. The records are for deaths currently maintained in SSA records that the SSA determined should be included in the LADMF. Two sets of records, totaling approximately 3 million records, were added in April. The additional 5 million records will be added according to the following schedule:
- 2 million records to be added on May 26
- 2 million records to be added on June 30
- Slightly more than 1 million records to be added on August 4.
It is our understanding that the additional records are for deaths that were previously unreported due to missing or illegible information in the original paperwork. We also understand that the first set of 1 million records added had dates of death spanning from 1937 to 1976.
As you may recall, since November 1, 2011 the SSA has not included death records received through contracts with the states in the LADMF. It is unclear if any of the additional 8 million records will include records that may have been incorrectly excluded as being state reported records.
NAIC Statutory Accounting Principles (E) Working Group Focuses on Private Placement Variable Products – Update
During a meeting held on May 24, the NAIC Statutory Accounting Principles (E) Working Group recommended the adoption of the previously exposed revisions to SSAP No. 56. This change will require insurers to separately disclose total separate account assets between products that are registered with the SEC and those that are not registered (i.e., “private placements). The change will also add a new disclosure table for non-registered policies, categorizing the amounts as 1) Private Placement Variable Annuity; 2) Private Placement Life Insurance; and 3) Other.
Separately, the NAIC staff exposed new proposed revisions to SSAP No. 21. Under this exposure, insurers that own ICOLI policies would need to meet two requirements in order to continue the current practice of recognizing the values fully as admitted assets. The two requirements proposed are
- The policies must comply with IRC §7702; and
- Where the owner of the policy is not subject to investment risk (meaning the net realizable value does not change as a result of market fluctuations).
The exposure is open for public comment through June 22. Full details and a summary of previously received comment letters were included in the meeting materials.
As we previously noted, this topic is primarily of interest to insurers and agents. It does not directly impact BOLI owners.