Bank Liquidity Guidance: Federal Banking Agencies Issue Guidance on Funds Transfer Pricing for Funding and Contingent Liquidity Risks

Sullivan & Cromwell LLP - March 22, 2016

The Federal Reserve, the FDIC, and the OCC (the “Agencies”) recently issued guidance on supervisory expectations for funds transfer pricing (“FTP”) practices related to the allocation of funding and contingent liquidity risks to a firm’s business lines, products, and activities.  The guidance applies to U.S. bank holding companies with total consolidated assets of $250 billion or more or foreign exposures of $10 billion or more, depository institutions with total consolidated assets of $250 billion or more, and foreign banking organizations with combined U.S. assets of $250 billion or more and is intended to address perceived weaknesses observed by the Agencies in some firms’ FTP practices and builds upon the Agencies’ 2010 “Interagency Policy Statement on Funding and Liquidity Risk Management.”