Monthly LRA Update: March 2026

REGULATORY DEVELOPMENTS

Basel III Endgame – Regulators Release Proposed Regulatory Capital Rules

As identified in our March 20 Ad Hoc LRA Update, the FDIC, Federal Reserve Board, and the OCC jointly announced the release of three separate regulatory capital rule proposals concerning the following:

• Basel III Regulatory Capital Framework (Regulatory Capital Rule: Category I and II Banking Organizations, Banking Organizations with Significant Trading Activity, and Optional Adoption for Other Banking Organizations);
• Standardized Approach for Risk-weighted Assets (Regulatory Capital Rules: Regulatory Capital and Standardized Approach for Risk-weighted Assets); and
• GSIB Surcharge (Regulatory Capital Rule: Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies; Systemic Risk Report (FR Y-15)).

The proposals are open for comment until June 18. We have reviewed the proposals in detail and created a summary that has three sections (the complete summary can be found here):

1. High Level Comparison of Proposed Rule to Current Rules
2. In Depth Review of Proposal for Certain Exposure Types
3. Overall Discussion Topics for BOLI

Standardized Approach Highlights

• Corporate exposures drop from 100% to 95%
• Securitizations become subject to SEC-SA
  • This is very similar to current SSFA
  • The floor drops to 15% from 20%
  • The “p” parameter is not increased, so overall, we anticipate lower RWs for exposures at the top of the capital structure
  • Calculating the Kg parameter under this proposal could be a little more challenging (though more so for the largest banks)
    • Residential real estate RWs are proposed to be based on LTV and whether or not the exposure is dependent on cash flows from the real estate
• Derivatives and Cleared Transactions – banks can either continue using the CEM or switch to the SA-CCR approach
• Investment fund exposures (which includes SA BOLI) are unchanged for Standardized Approach

Highlights for Advanced Approach Banks (“ERBA”)

• Proposes to only require banks to use the ERBA (not also calculate RWA under standardized approach)
• Investment grade corporate exposures drop from 100% to 65%
• Depository institution RWs generally increase from 20% to 30-40% (depending on specified factors)
• Equity exposures and investment fund exposures (which includes SA BOLI) are largely unchanged
• Investment fund exposures are subject to a 20% RW floor
• The proposal explicitly excludes SA BOLI from scope of the Market Risk Capital rules

Overall, we anticipate the proposal would result in slightly lower overall RWA for BOLI assets. The most significant impacts would be for large banks’ General Account exposures (dropping from 100% to 65%) and senior securitization exposures within SA BOLI (dropping from 20% to 15%).

OTHER DEVELOPMENTS

House Financial Services Committee Hearing on Financial Privacy Framework

On March 17, the House Committee on Financial Services held a hearing titled “Updating America’s Financial Privacy Framework for the 21^st Century.” The discussion centered around whether the Gramm-Leach-Bliley Act (GLBA) should be updated and whether a federal financial privacy law should preempt various state privacy laws.

Witnesses included a partner from Morrison Foerster (Nathan Taylor), whose written testimony included background information on financial privacy laws (including GLBA) and discussion of possible updates.

The committee also discussed preliminary draft legislation that would modify title V of the GLBA. It remains unclear to us whether any of the deliberations would have a direct or indirect impact on BOLI/COLI if passed. Aspects that we think merit ongoing monitoring include:

• Consumer Right to Access: Should individuals have a right to access (e.g., request a copy or disclosure) any non-public information that a financial institution maintains?
• Right to Delete or “Opt Out”: If individuals are granted rights under GLBA to request deletion of data, what scope and circumstances will apply?
• Scope and Applicability: Will revised legislation be in scope for insurance companies? Will “consumer/customer” include current and/or former employees?

The NAIC submitted a comment letter opposing the draft legislation, particularly as it relates to federal preemption. The NAIC noted that every state has adopted the NAIC’s Privacy of Consumer Financial and Health Information Regulation (Model #672).

The ACLI also released a statement. It appeared to be supportive of modernizing the GLBA but encouraged lawmakers to specifically address consumers’ ability to access life insurance services and products.