[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Notices]
[Pages 63626-63628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25289]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: Notice is hereby given of the final approval of a proposed 
information collection by the Board of Governors of the Federal Reserve 
System (Board) under OMB delegated authority, as per 5 CFR 1320.16 (OMB 
Regulations on Controlling Paperwork Burdens on the Public). Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the Paperwork Reduction Act Submission, supporting statements and 
approved collection of information instrument(s) are placed into OMB's 
public docket files. The Federal Reserve may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection that has been extended, revised, or implemented on or after 
October 1, 1995, unless it displays a currently valid OMB control 
number.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Acting Clearance 
Officer--John Schmidt--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3829. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.
    Final approval under OMB delegated authority of the extension for 
three years, with revision, of the following report:
    Report title: Annual Company-Run Stress Test information 
collection.
    Agency form number: FR Y-16.
    OMB control number: 7100-0356.
    Effective Date: March 31, 2015.
    Frequency: Annually.
    Reporters: Bank holding companies (BHCs), savings and loan holding 
companies (SLHCs) \1\ with average total consolidated assets of greater 
than $10 billion but less than $50 billion, and any affiliated or 
unaffiliated state member bank (SMB) with average total consolidated 
assets of more than $10 billion but less than $50 billion excluding SMB 
subsidiaries of covered companies.\2\
---------------------------------------------------------------------------

    \1\ SLHCs are not subject to Dodd-Frank Act annual company-run 
stress testing requirements until the calendar year after SLHCs 
become subject to regulatory capital requirements. All SLHCs except 
those substantially engaged in insurance underwriting or commercial 
activities are subject to capital requirements beginning in 2015. 
These ``covered SLHCs'' are required to report using the FR Y-16 
beginning in March 2017 (stress test as-of date September 30, 2016).
    \2\ ``Covered companies'' are defined as BHCs with at least $50 
billion in total consolidated assets and nonbank systemically 
important financial institutions, subject to annual supervisory 
stress tests and semi-annual company-run stress tests.
---------------------------------------------------------------------------

    Estimated annual reporting hours: 38,623 hours.
    Estimated average hours per response: 469 hours; 3,600 hours, one-
time implementation.
    Number of respondents: BHCs, 46; SLHCs, 11; SMBs, 10; and one-time 
implementation, 2.
    General description of report: This information collection is 
authorized pursuant to Section 165(i)(2) of the Dodd-Frank Act that 
specifically authorizes the Board to issue regulations implementing the 
annual stress testing requirements for its supervised institutions. 12 
U.S.C. 5365(i)(2)(C). More generally, with respect to BHCs, Section 
5(c) of the Bank Holding Company Act, 12 U.S.C. 1844(c), authorizes the 
Board to require a BHC and any subsidiary ``to keep the Board informed 
as to--(i) its financial condition, [and] systems for monitoring and 
controlling financial and operating risks. . . .'' Section 9(6) of the 
Federal Reserve Act, 12 U.S.C. 324, requires SMBs to make reports of 
condition to their supervising Reserve Bank in such form and containing 
such information as the Board may require. Finally, with respect to 
SLHCs, under Section 312 of the Dodd-Frank Act, 12 U.S.C. 5412, the 
Board succeeded to all powers and authorities of the OTS and its 
Director, including the authority to require SLHCs to ``file . . . such 
reports as may be required . . . in such form and for such periods as 
the [agency] may prescribe.'' 12 U.S.C. 1467a(b)(2).
    Obligation to Respond is Mandatory: Section 165(i)(2)(A) provides 
that ``financial companies that have total consolidated assets [meeting 
the asset thresholds] . . . and are regulated by a primary Federal 
financial regulatory agency shall conduct annual stress tests.'' 
Section 165(i)(2)(B) provides that a company required to conduct annual 
stress tests ``shall submit a report to the Board of Governors and to 
its primary financial regulatory agency at such time, in such form, and 
containing such information as the primary financial

[[Page 63627]]

regulatory agency shall require.'' 12 U.S.C. 5365(i)(2)(B).
    Confidentiality: As noted under Section 165(i)(2)(C)(iv), companies 
conducting annual stress tests under these provisions are ``require[d] 
. . . to publish a summary of the results of the required stress 
tests.'' 12 U.S.C. 5365(i)(2)(C)(iv). Regarding the information 
collected by the Board, however, as such information will be collected 
as part of the Board's supervisory process, it may be accorded 
confidential treatment under Exemption 8 of the Freedom of Information 
Act (FOIA), 5 U.S.C. 552(b)(8). This information also is the type of 
confidential commercial and financial information that may be withheld 
under Exemption 4 of FOIA, 5 U.S.C. 552(b)(4). As required information, 
it may be withheld under Exemption 4 only if public disclosure could 
result in substantial competitive harm to the submitting institution, 
under National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. 
Cir. 1974).
    Abstract: The annual FR Y-16 report collects quantitative 
projections of income, losses, assets, liabilities, and capital across 
three scenarios provided by the Board (baseline, adverse, and severely 
adverse) and qualitative supporting information on the methodologies 
and processes used to develop these internal projections.
    Current Actions: On July 15, 2014 the Federal Reserve published a 
notice in the Federal Register (79 FR 41276) requesting public comment 
for 60 days on the extension, with revision, of the FR Y-16. The 
Federal Reserve proposed the following revisions and clarifications to 
the FR Y-16 report for the report submission due annually beginning on 
March 31, 2015: (1) Add common equity tier 1 capital as a data item, 
(2) add common equity tier 1 risk based capital ratio as a data item, 
and (3) modify the reporting instructions to clarify a number of items. 
The comment period for this notice expired on September 15, 2014. The 
Federal received one comment letter addressing the proposed revisions 
of this information collection. The comment is summarized and addressed 
below.

Summary of Public Comment

    The Federal Reserve received one comment letter on the proposed 
revisions to the FR Y-16 from a modeling service provider. The 
commenter questioned the introduction of the new regulatory capital, 
risk-weighted asset, and regulatory capital ratio calculations in the 
FR Y-16 for the March 2015 report; asserting that $10-50 billion 
companies will lack relevant data for the proposed new capital items 
and definitions in advance of when these items are required to be 
reported in the Consolidated Report of Condition and Income (Call 
Report: OMB No. 7100-0036) and the Consolidated Financial Statements 
for Holding Companies (FR Y-9C: OMB No. 7100-0128), which will lead to 
inaccurate and misleading company projections.

Detailed Discussion of Public Comment

A. Proposed Revisions

    On July 2, 2013, the Federal Reserve approved revised risk-based 
and leverage capital requirements for banking organizations that 
implement the Basel III regulatory capital reforms and certain changes 
required by the Dodd-Frank Act (revised capital framework).\3\ The 
revised capital framework introduces the new common equity tier 1 
capital component and a new common equity tier 1 risk-based capital 
ratio, revises the definition of regulatory capital items, and changes 
the calculation of risk-weighted assets. All banking organizations that 
are not subject to the advanced approaches rule must begin to comply 
with the revised capital framework beginning on January 1, 2015.\4\ 
Under the Federal Reserve's final stress test rule,\5\ banking 
organizations would be required to reflect the new capital rules, 
including the new common equity tier 1 capital component and ratio, in 
their company-run stress test planning horizon as the revised capital 
framework becomes applicable. However, on September 30, 2013, the 
Federal Reserve provided BHCs and SMBs with total consolidated assets 
of more than $10 billion but less than $50 billion (other than state 
member banks that are subsidiaries of BHCs with total consolidated 
assets of $50 billion or more) with a one-year transition period to 
incorporate the revised capital framework into their company-run stress 
tests (interim final stress test rule).\6\ Therefore, the FR Y-16 did 
not require companies to include the effects of the revised capital 
framework for the initial 2014 stress test cycle.
---------------------------------------------------------------------------

    \3\ See Regulatory Capital Rules: Regulatory Capital, 
Implementation of Basel III, Capital Adequacy, Transition 
Provisions, Prompt Corrective Action, Standardized Approach for 
Risk-weighted Assets, Market Discipline and Disclosure Requirements, 
Advanced Approaches Risk-Based Capital Rule, and Market Risk Capital 
Rule (July 2, 2013), available at: http://www.federalreserve.gov/newsevents/press/bcreg/20130702a.htm.
    \4\ A banking organization is subject to the advanced approaches 
rule if it has consolidated assets greater than or equal to $250 
billion, if it has total consolidated on-balance sheet foreign 
exposures of at least $10 billion, or if it elects to apply the 
advanced approaches rule.
    \5\ See final rule on annual company-run stress test 
requirements for banking organizations with total consolidated 
assets over $10 billion other than covered companies 77 FR 62378 
(October 12, 2012) (codified at 12 CFR part, 252 subpart H).
    \6\ See 78 FR 59791 (September 30, 2013).
---------------------------------------------------------------------------

    The Federal Reserve proposed to revise the FR Y-16 by adding a 
common equity tier 1 capital data item to the Balance Sheet Schedule 
for each scenario and a common equity tier 1 risk-based capital ratio 
data item to the Summary Schedule and the Balance Sheet Schedule for 
each scenario in order to reflect the requirements of the revised 
capital framework over the stress test planning horizon. These 
revisions would be effective for the 2015 stress test cycle (with 
reporting in March 2015). In addition, the Federal Reserve proposed to 
clarify the FR Y-16 instructions to emphasize that companies should 
transition to the revised capital framework requirements in its 
company-run stress test projections in the quarter in which the 
requirements become effective. Specifically, companies would be 
required to transition to the revised capital framework and begin 
including the common equity tier 1 capital data item and common equity 
tier 1 risk-based capital ratio data item in projected quarter two (1st 
quarter 2015) through projected quarter nine (4th quarter 2016) for 
each supervisory scenario for the 2015 stress test cycle to be reported 
by March 31, 2015.
    The commenter indicated that requiring the use of the revised 
capital framework over the planning horizon in the March 2015 FR Y-16 
report will introduce volatility and ambiguity of a respondent's 
processes and results. Specifically, by requiring the reporting of the 
common equity tier 1 capital component and ratio beginning with 
projected quarter two (1st quarter 2015) of the planning horizon before 
these items are reported in the Call Report and the FR Y-9C will cause 
the companies to rely on pro forma estimates that will lead to 
inaccurate and misleading projections.\7\ In addition, the commenter 
asserted that because the changes to the Call Report and FR Y-9C risk-
weighted asset schedules are in a proposed status, there will be 
difficulties for companies to produce accurate estimates without 
further guidance on the transition to the revised capital framework for 
this FR Y-

[[Page 63628]]

16 line item.\8\ Lastly, the commenter indicated that the required 
public disclosure of the regulatory capital ratios over the planning 
horizon under different capital rules will cause confusion among bank 
shareholders and the general public.\9\
---------------------------------------------------------------------------

    \7\ The reporting submission date for the March 2015 Call Report 
is 30 calendar days after March 31, while the submission date for 
the March 2015 FR Y-9C is 40 calendar days after March 31.
    \8\ See 79 FR 35634 (June 23, 2014) and 79 FR 45808 (August 6, 
2014).
    \9\ Per the Board's final stress test rule, $10-50 billion 
companies are required to publicly disclose the beginning value, 
ending value, and minimum value of each regulatory capital ratio 
over the planning horizon.
---------------------------------------------------------------------------

    The Federal Reserve believes that the proposed additional items to 
the FR Y-16 would not place an undue burden on $10-50 billion 
institutions as they have already been given additional time to 
incorporate the revised capital framework into their company-run stress 
tests. The interim final stress test rule on September 30, 2013 
specifically provided $10-50 billion banking organizations with a one-
year transition period to incorporate the revised capital framework 
into their company-run stress tests. The one-year transition period 
decreased the operational complexity and risk of error for these 
companies for the initial 2014 stress test cycle by allowing them to 
focus on implementing stress testing processes without reflecting the 
revised capital rules over the planning horizon. The one-year 
transition also allowed companies additional time to evaluate the 
revised capital framework's effect on their regulatory capital items 
reported in the Call Report and FR Y-9C. Further, the Call Report and 
FR Y-9C regulatory capital schedules were revised effective March 2014 
to reflect the revised capital framework for regulatory capital items 
for advanced approaches institutions; all other institutions, including 
$10-50 billion institutions, are required to report the same revised 
regulatory capital schedule for March 31, 2015. In addition, the FR Y-
16 reporting form and instructions has been updated to reference the 
applicable Call Report and FR Y-9C report items that should be reported 
over the planning horizon, including the new items that were created to 
capture the revised capital framework. The Federal Reserve will adjust 
the FR Y-16 schedules to be consistent with the final FR Y-9C and Call 
Report risk-weighted asset schedule changes once they are published. 
These adjustments are necessary to align the subcomponents of 
standardized risk-weighted assets with total standardized risk-weighted 
assets and will likely alleviate confusion about calculating projected 
total risk-weighted assets over the planning horizon. Lastly, the 
public disclosure by companies of the stress test results using the new 
capital rules applicable in the projected quarters of the planning 
horizon is required by the Board's final stress test rule and the 
Federal Reserve believes that this public disclosure will be 
informative to the public.
    In summary, the Federal Reserve will implement the FR Y-16 data 
items for the March 2015 report to reflect the revised capital 
framework as proposed. Specifically, the Federal Reserve will add the 
common equity tier 1 capital data item to the Balance Sheet Schedule 
for each scenario and a common equity tier 1 risk-based capital ratio 
data item to the Summary Schedule and the Balance Sheet Schedule for 
each scenario. The Office of the Comptroller of the Currency and 
Federal Deposit Insurance Corporation plan to make similar changes to 
their $10-50 billion company Dodd-Frank Act stress test reporting forms 
(OCC DFAST 10-50 report: OMB No. 1557-0311 and FDIC DFAST 10-50 report 
OMB No. 3064-0189) to reflect the revised capital framework for the 
March 2015 report.

B. Technical Changes/Other Items

    In response to a few technical, non-substantive comments received, 
some additional minor changes will be made in the final reporting form 
and instructions. These changes include clarified reporting 
instructions for the disallowed deferred tax asset and unrealized gains 
(losses) on available-for-sale (AFS) securities line items and updated 
descriptions of the total capital and total risk-based capital line 
items.

    Board of Governors of the Federal Reserve System, October 20, 
2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-25289 Filed 10-23-14; 8:45 am]
BILLING CODE 6210-01-P