How the Fed Reviews SCCL Submissions

How the Fed Reviews SCCL Submissions

1. Overview

The Single-Counterparty Credit Limits (SCCL) rule was designed by the Federal Reserve to reduce systemic risk by limiting the credit exposure of large banking organizations to a single counterparty. To comply, firms submit quarterly reports using the FR 2590 form. But submission is only half the story. The Federal Reserve conducts a detailed review of each filing to ensure compliance, data accuracy, and sound risk management practices.

Understanding how the Fed reviews these submissions is essential for risk officers, compliance teams, and regulatory reporting professionals. The review process goes far beyond checking a box. It is a structured, multi-step evaluation that scrutinizes everything from data quality to exposure aggregation methods.

2. Regulatory Requirement

The SCCL rule, found under 12 CFR Part 252, Subpart H, requires covered companies to limit their aggregate net credit exposure to any single counterparty. Covered companies must monitor and report this exposure through the FR 2590 report every quarter.

Each FR 2590 submission must be certified by a senior officer, often the Chief Financial Officer, who attests that the report is complete and accurate. This certification underscores the seriousness of the report and the expectation that internal control systems are in place to ensure data integrity.

3. Common Challenges

Many institutions find the internal review process challenging due to the complexity of SCCL calculations and the Federal Reserve’s high expectations for data quality. Here are some of the most common issues:

  • Data Consistency: Differences between FR 2590 and other regulatory filings (like the FR Y-9C or FFIEC 009) can raise red flags.
  • GAAP Consolidation / SCCL Aggregation: Improper GAAP consolidation of counterparties, as well as improper aggregation due to control or economic interdependence, can result in inaccurate exposure reporting.
  • Inadequate Daily Monitoring: Although the report is quarterly, firms are expected to comply with SCCL limits every day. Some firms may not have the systems in place to support this.
  • Weak Internal Controls: Lack of formal processes for exposure calculation, data sourcing, and error checking can result in corrections and follow-up from the Fed.

4. Peer Approaches

Firms that perform well in SCCL reviews often share several best practices:

  • Automated Validation Tools: These firms use tools that automatically check for arithmetic errors, subtotal mismatches, and outliers versus prior periods.
  • Cross-Report Reconciliation: They compare FR 2590 data with overlapping data in reports like FR Y-9C, FR Y-15 and FFIEC 009 before submission.
  • Robust Governance: Successful firms have internal review committees that examine SCCL exposures and trends before certifying the report.
  • Supervisory Engagement: Leading institutions proactively engage with their Federal Reserve supervisory teams to clarify expectations and address potential concerns early.

5. GLOBAL ABAS View

At GLOBAL ABAS, we interpret the Federal Reserve's SCCL review process as a layered framework built on data integrity, control, and proactive supervision. The process includes:

  • Executive Certification: A senior officer must certify the data, which requires a solid audit trail and confidence in the accuracy of the calculations.
  • Internal Controls: Firms must have strong processes for sourcing data, calculating exposures, and identifying risk mitigation.
  • Post-Submission Scrutiny: The Fed performs a detailed review, including arithmetic checks, consistency with previous filings, and alignment with other reports.
  • Confidential Supervisory Review: Beyond data checks, FR 2590 reports inform broader supervisory assessments of a firm’s risk practices and exposure concentrations.
  • Daily Compliance Expectation: Even though the FR 2590 is filed quarterly, firms must maintain daily compliance with SCCL thresholds. Systems must be in place to flag breaches in real time.
  • Cross-Report Validation: The Fed compares FR 2590 data against other regulatory reports to catch any inconsistencies and confirm the accuracy of reported exposures.
  • Supervisory Follow-Up: If discrepancies are found, the Fed may request resubmissions or conduct targeted reviews of exposure methodologies, interaffiliate treatments, and counterparty consolidation logic.

In our experience, firms that anticipate these layers of review and build their SCCL programs accordingly are best positioned to avoid regulatory issues and demonstrate strong risk governance.

6. Final Thoughts

The Federal Reserve’s review of SCCL submissions is not a routine check. It is a detailed process that touches on multiple aspects of a firm’s risk management program. From data validation to supervisory oversight, the Fed uses FR 2590 filings as a tool to assess both compliance with limits and the overall health of a firm’s credit risk processes.

For institutions subject to SCCL, success depends on more than just submitting the report on time. It requires daily compliance, robust systems, detailed documentation, and the ability to withstand in-depth regulatory scrutiny. Firms that invest in strong governance and transparent methodologies will be better prepared for the Fed’s reviews and follow-ups.

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.

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