Enhanced prudential standards

KPMG is currently working with financial services companies to address EPS-specific planning, project management, and tactical implementation activities.

How ready is your financial organization for the increasing oversight that is part of Enhanced Prudential Standards?

The execution of compliance activities to address the Enhanced Prudential Standards rule is well underway.

But meeting the Enhanced Prudential Standards rule is a complex challenge. Implementation involves multiple entities, has broad business impacts to operations, technology, process, and governance, and must be developed under an extremely tight deadline with uncertain regulatory interpretation.

As one of the leading advisors for Enhanced Prudential Standards implementation, KPMG has performed an assessment of affected organizations such as Foreign Banking Organizations and non-bank Systematically Important Financial institutions (SiFis). Our findings show varying degrees of implementation maturity. We believe impacted organizations face strong headwinds to comply with impending regulatory deadlines.

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Enhanced prudential standards background


The final Enhanced Prudential Standards rule, published by the Federal Reserve Board on March 27, 2014, establishes a number of enhanced prudential standards for large U.S. bank holding companies, foreign banking organizations, and other impacted institutions to improve the resiliency of their operations. These standards must be adhered to by July 1, 2016 and include areas such as:

  • Governance,
  • Intermediate Holding Company,
  • Risk Management,
  • CCAR/Stress Testing,
  • Liquidity/LCR,
  • Regulatory Reporting, and
  • Resolution Planning.

Additionally, Foreign Banking Organizations exceeding specific asset thresholds and with significant U.S. presence may be required to establish an Intermediate Holding Company (IHC) over their U.S. subsidiaries, which is intended to facilitate consistent supervision and regulation of the foreign bank’s U.S. operations.  In addition, the organizations classified as SiFis need to remain diligent as there are Enhanced Prudential Standards rules specific to their organizations and some that have yet to be written and the impact unknown.

Significant challenges


Organizations face significant challenges in the implementation of Enhanced Prudential Standards in these four areas:

  • Risk and Regulatory
  • Process and Capability
  • People and Capacity
  • Infrastructure and Technology

Additional challenges include:

  • Understanding considerations and determining the level of impact;
  • Identifying the level of change required to support new governance and infrastructure;
  • Developing reporting across the U.S. for risk management, including stress testing, capital, and liquidity planning;
  • Assessing and building the infrastructure for data modeling and governance implications, data quality, and regulatory reporting requirements.

Success criteria


Successful compliance with Enhanced Prudential Standards-specific activities requires:

  • Consistent approaches and infrastructure across U.S. operations to address similar risk, oversight, and information needs addressing operations and the IHC.
  • A risk management framework and governance structure that is proactive and tied explicitly to business strategy.
  • Processes and technology to support compliance with Enhanced Prudential Standards.

Once this success criteria is accomplished, then overall operational resiliency is achieved.

KPMG can help


KPMG is currently working with financial services companies to address Enhanced Prudential Standards-specific planning, project management, and tactical implementation activities. Our strength lies in our delivery experience and capabilities cutting across each of the discrete, in-scope Enhanced Prudential Standards requirements. We offer a full suite of cross-functional services to address all aspects of Enhanced Prudential Standards implementation.

KPMG’s methodology and approach is based upon deep knowledge of Enhanced Prudential Standards rules and regulations, and experience working with all impacted organizations in the marketplace.

The Enhanced Prudential Standards leadership team has years of experience working as regulators with the Federal Reserve Board in the formulation and application of Enhanced Prudential Standards, and conducting compliance assessments of organizations. In addition, KPMG has an experienced team of professionals working in the financial services industry and with regulatory agencies.