What is FR 2590? Regulatory Scope and Purpose

What is FR 2590? Regulatory Scope and Purpose

1. Overview

FR 2590 is the reporting form required under the Single Counterparty Credit Limits (SCCL) rule. The Federal Reserve Board (FRB) created it to monitor how much exposure large banks have to any one counterparty. The purpose is to reduce the risk that one large firm's failure could threaten the financial system. FR 2590 helps ensure that large institutions identify and manage their biggest credit risks and remain within set regulatory limits.

2. Regulatory Requirement

The SCCL rule and FR 2590 were finalized as part of the broader reforms following the 2008 financial crisis. These rules align with international standards developed by the Basel Committee on Banking Supervision (BCBS).

The rule sets limits on how much credit exposure a large banking organization can have to a single counterparty, based on the firm’s capital strength:

  • 25% of Tier 1 capital for most large institutions, irrespective of whether a counterparty is designated as a GSIB or a major counterparty
  • 15% for global systemically important banks (GSIBs) when the counterparty is also a GSIB or a major counterparty

The FR 2590 must be filed quarterly. It includes detailed reporting on the top 50 counterparties by exposure. These reports must be certified by a senior officer, typically the CFO.

Firms subject to FR 2590 include:

  • US GSIBs
  • US bank holding companies with $250 billion or more in total consolidated assets
  • Foreign banking organizations (FBOs) with global assets of $250 billion or more
  • US intermediate holding companies (IHCs) with $50 billion or more in assets

3. Common Challenges

Many firms find it difficult to comply with FR 2590 because of its technical and operational demands. Common challenges include:

  • Data aggregation: Gathering data across business units and systems is complex, especially for daily monitoring.
  • Exposure calculation: Measuring exposure for derivatives and securities financing transactions (SFTs) requires advanced models.
  • Counterparty identification: Classifying and grouping counterparties, especially those with control or economic ties, can be unclear.
  • Risk-shifting and mitigation: Properly applying and documenting collateral, guarantees, and derivatives takes careful work.

4. Peer Approaches

Leading firms have tackled these challenges with structured, technology-driven methods:

  • Centralized data management: Creating a single source of truth for counterparty and exposure data improves accuracy.
  • Stronger risk infrastructure: Tools and processes are built to calculate exposures daily and support risk oversight.
  • Cross-functional teams: Compliance, risk, finance, and IT work together to implement SCCL and FR 2590 requirements.
  • Automation: Systems are used to reduce manual work and ensure timely, accurate reporting.

5. GLOBAL ABAS View

At GLOBAL ABAS, we believe SCCL and FR 2590 compliance should be integrated into a firm’s overall risk strategy. Our key recommendations:

  • Be proactive: Regular assessments and mock reporting help firms identify issues early.
  • Build scalable systems: Infrastructure should be flexible enough to grow with business needs and changing rules.
  • Strengthen controls: Good internal checks and clear accountability are essential for ongoing compliance.

GLOBAL ABAS supports clients with technical guidance and implementation strategies to meet these goals effectively.

6. Final Thoughts

FR 2590 plays a key role in helping regulators assess and limit the risk of concentrated credit exposures. It is more than just a form. It is a window into how firms manage risk, and whether they are prepared to handle stress events.

As regulations evolve, firms that adopt strong systems, clear processes, and robust governance will be better positioned to succeed. Compliance should not be seen as a burden, but as an opportunity to strengthen risk discipline across the organization.

Take the next step: To learn more about how GLOBAL ABAS can support your SCCL compliance program, visit our website or subscribe for future updates.

Disclaimer: This blog post is for informational purposes only and reflects our understanding of the SCCL rule and FR 2590 reporting as of the date of publication. It does not constitute legal, regulatory, or professional advice. Institutions should consult with internal and external advisors and refer directly to the SCCL rule (12 CFR Part 252, Subpart H) and FR 2590 instructions for specific guidance. GLOBAL ABAS disclaims any liability for actions taken or not taken based on this information.

Consult a GLOBAL ABAS Consulting, LLC professional regarding your specific issues and questions. Your feedback will help us improve the SCCL Compliance Lab. Please let us know what you think in the Comment below. Copyright © 2025 GLOBAL ABAS Consulting, LLC. All rights reserved.

Comments

Post a Comment

Popular posts from this blog

GAAP Consolidation vs. SCCL Aggregation: A Two-Step Framework for Identifying a Single Counterparty

Image
GAAP Consolidation vs. SCCL Aggregation: A Two-Step Framework for Identifying a Single Counterparty 1. Overview The Single Counterparty Credit Limits (SCCL) rule sets strict limits on how much credit exposure a large U.S. bank holding company or intermediate holding company (IHC) can have to any single counterparty. To comply with this rule, firms must correctly identify what counts as “a single counterparty.” This is not always straightforward. Some counterparties are part of complex corporate structures. Others may not be consolidated under accounting rules but are still closely tied through control relationship or economic interdependence. The SCCL rule addresses this challenge through a two-step framework: Step 1: Determine the counterparty based on GAAP consolidation (specifically, for the counterparty type of "company"). Step 2: Aggregate additional exposures based on control relationship or economic interdependence. 2. Regulatory Requirement Th...
Read more

What is SCCL? A Beginner’s Guide

Image
What is SCCL? A Beginner’s Guide 1. Overview The Single-Counterparty Credit Limits (SCCL) rule is a key regulation issued by the Federal Reserve. It is designed to make sure that large banks do not take on too much credit risk with any single borrower or trading partner. In simple terms, SCCL limits how much a bank can lend or be exposed to any one counterparty. The goal is to reduce the chance that the failure of a large counterparty, like a major financial institution, could threaten the health of a bank or even the broader financial system. SCCL is part of the broader set of rules under the Dodd-Frank Act aimed at making the financial system safer. You can think of SCCL as a diversification rule for credit exposure. Just like investors are encouraged not to put all their money in one stock, SCCL requires banks to spread their credit risk across different counterparties. 2. Regulatory Requirement The SCCL rule ...
Read more

SCCL vs. Large Exposures Framework: Key Differences

Image
SCCL vs. Large Exposures Framework: Key Differences 1. Overview The Single Counterparty Credit Limits (SCCL) rule and the Basel Large Exposures Framework (LEF) are both designed to reduce the risk that a bank suffers significant losses due to its exposure to a single counterparty. Both frameworks aim to promote financial stability by limiting how much credit risk a bank can have with one firm or group of connected firms. However, while they share a common goal, the U.S. SCCL rule and the Basel LEF differ in how they define exposures, set limits, and require reporting. The Basel LEF sets a global standard. The SCCL rule builds on that foundation but introduces more specific and often stricter requirements in the U.S. context. 2. Regulatory Requirement Basel Large Exposures Framework (LEF): Applies to internationally active banks under Basel III. Limits exposure to any single counterparty or group of connected counterparties to 25% of the bank’s Tier 1 capital. Re...
Read more