[Federal Register Volume 80, Number 141 (Thursday, July 23, 2015)]
[Proposed Rules]
[Pages 43637-43642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18038]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 80, No. 141 / Thursday, July 23, 2015 / 
Proposed Rules  

[[Page 43637]]



FEDERAL RESERVE SYSTEM

12 CFR Parts 225 and 252

[Regulations Y and YY; Docket No. R-1517]
RIN 7100 AE 33


Amendments to the Capital Plan and Stress Test Rules

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Notice of proposed rulemaking with request for comment.

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SUMMARY: The Board invites comment on a notice of proposed rulemaking 
to revise the capital plan and stress test rules for large bank holding 
companies and certain banking organizations with total consolidated 
assets of more than $10 billion. The proposed changes would apply 
beginning with the 2016 capital plan and stress test cycles. For all 
banking organizations, the proposal would remove the tier 1 common 
capital ratio requirement. For large bank holding companies, the 
proposal would modify the stress test capital action assumptions. For 
banking organizations subject to the advanced approaches, the proposal 
would delay the incorporation of the supplementary leverage ratio for 
one year and indefinitely defer the use of the advanced approaches 
risk-based capital framework in the capital plan and stress test rules. 
For bank holding companies with total consolidated assets of more than 
$10 billion but less than $50 billion and savings and loan holding 
companies with total consolidated assets of more than $10 billion, the 
proposal would eliminate the fixed assumptions regarding dividend 
payments for company-run stress tests and delay the application of 
stress testing for these savings and loan holding companies for one 
year. The proposal would also make certain technical amendments to the 
capital plan and stress test rules to incorporate changes related to 
other rulemakings.

DATES: Comments must be received on or before September 24, 2015.

ADDRESSES: When submitting comments, please consider submitting your 
comments by email or fax because paper mail in the Washington, DC area 
and at the Board may be subject to delay. You may submit comments, 
identified by Docket No. R-1517, by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include docket 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert de V. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper form in 
Room 3515, 1801 K Street NW. (between 18th and 19th Street NW.), 
Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Associate Director, (202) 
263-4833, Constance Horsley, Assistant Director, (202) 452-5239, Mona 
Touma Elliot, Manager, (202) 912-4688, Page Conkling, Senior 
Supervisory Financial Analyst, (202) 912-4647, Joseph Cox, Senior 
Financial Analyst, (202) 452-3216, or Hillel Kipnis, Financial Analyst, 
(202) 452-2924, Division of Banking Supervision and Regulation; Laurie 
Schaffer, Associate General Counsel, (202) 452-2272, Christine Graham, 
Counsel, (202) 452-3005, or Julie Anthony, Senior Attorney, (202) 475-
6682, Legal Division, Board of Governors of the Federal Reserve System, 
20th Street and Constitution Avenue NW., Washington, DC 20551. Users of 
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Board's capital planning and stress testing regime is an annual 
assessment of a banking organization's capital planning and capital 
adequacy on a post-stress basis and a cornerstone of the Board's 
supervisory program for bank holding companies with total consolidated 
assets of $50 billion or more (large bank holding companies).\1\ The 
Board's capital planning and stress testing regime consists of two 
related programs: The Comprehensive Capital Analysis and Review (CCAR), 
which is conducted pursuant to the Board's capital plan rule (12 CFR 
225.8), and Dodd-Frank Act stress testing, which is conducted pursuant 
to the Board's stress test rules (subparts B, E, and F of Regulation 
YY). In CCAR, the Board assesses the internal capital planning 
processes of large bank holding companies and their ability to maintain 
sufficient capital to continue their operations under expected and 
stressful conditions. Large bank holding companies must submit annual 
capital plans to the Board, which the Board may object to on either 
quantitative or qualitative grounds. If the Board objects to a large 
bank holding company's capital plan, the large bank holding company may 
not make any capital distributions unless the Board indicates in 
writing that it does not object to such distributions.
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    \1\ 12 CFR 225.8. The changes in this proposed rulemaking would 
also apply to nonbank financial companies supervised by the Board 
that become subject to the capital planning and stress test 
requirements as well as to U.S. intermediate holding companies of 
foreign banking organizations in accordance with the transition 
provisions of the final rule incorporating enhanced prudential 
standards for U.S. bank holding companies and foreign banking 
organizations with total consolidated assets of $50 billion or more. 
(79 FR 17240 (March 27, 2014)). For simplicity, this preamble 
discussion of proposed amendments generally refers only to large 
bank holding companies.
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    Dodd-Frank Act stress testing is a forward-looking quantitative 
evaluation of the impact of stressful economic and financial market 
conditions on the capital adequacy of banking organizations.\2\ As part 
of Dodd-Frank Act stress testing, the Board conducts supervisory stress 
tests of large bank holding companies, and these bank holding companies 
also must conduct annual and mid-cycle company-run stress tests. In 
addition, bank holding

[[Page 43638]]

companies with total consolidated assets of more than $10 billion but 
less than $50 billion, savings and loan holding companies with total 
consolidated assets of more than $10 billion, and state member banks 
with total consolidated assets of more than $10 billion must conduct 
annual company-run stress tests.\3\
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    \2\ See 12 U.S.C. 5365(i)(1) and 12 CFR part 252.
    \3\ 77 FR 62378 (October 12, 2012) (codified at 12 CFR part 252, 
subparts E and F). The stress test requirements apply to savings and 
loan holding companies that are subject to the minimum regulatory 
capital requirements in 12 CFR part 217. The Board has not applied 
capital requirements to savings and loan holding companies that are 
substantially engaged in commercial activities or insurance 
underwriting activities to date. The Board is currently working on 
developing an appropriate capital regime for those institutions.
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    This proposal invites comment on targeted adjustments to the 
Board's capital plan and stress test framework that would apply for the 
2016 capital plan and stress test cycles. The Board notes that is 
considering a broad range of issues relating to the capital plan and 
stress test rules, including how the rules interact with other elements 
of the regulatory capital rules and whether any modification may be 
appropriate. However, the Board does not anticipate proposing another 
rulemaking that would affect the 2016 capital plan and stress test 
cycle beyond what is contained in this proposal. The Board would 
propose any changes resulting from the considerations described above 
through a separate rulemaking. Any such changes would take effect no 
earlier than the 2017 capital plan and stress test cycle.
    For all banking organizations, the proposal would remove the tier 1 
common capital ratio requirement in the capital plan and stress test 
rules. For large bank holding companies, the proposal would modify the 
stress test capital action assumptions under the stress test rules. For 
banking organizations subject to the advanced approaches, the proposal 
would delay the incorporation of the supplementary leverage ratio for 
one year and indefinitely defer the use of advanced approaches in the 
capital plan and stress test rules.\4\ For the company-run stress test 
rules, the proposal would eliminate the fixed dividend payment 
assumptions for bank holding companies with total consolidated assets 
of more than $10 billion but less than $50 billion and savings and loan 
holding companies with total consolidated assets of more than $10 
billion, and would delay the application of the company-run stress test 
requirements to these savings and loan holding companies for one stress 
test cycle. The proposal would also make certain technical amendments 
to the capital plan and stress test rules to incorporate changes 
related to other rulemakings.
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    \4\ The supplementary leverage ratio requirement applies only to 
banking organizations subject to the advanced approaches. A banking 
organization is subject to the advanced approaches if it has 
consolidated assets of at least $250 billion or if it has total 
consolidated on-balance sheet foreign exposures of at least $10 
billion. The proposed amendments to the company-run stress test 
rules apply to large bank holding companies, bank holding companies 
with total consolidated assets of more than $10 billion but less 
than $50 billion, savings and loan holding companies with total 
consolidated assets of more than $10 billion, and state member banks 
with total consolidated assets of more than $10 billion; however, 
the capital plan and supervisory stress test rules only apply to 
large bank holding companies at this time.
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II. Proposed Revisions to the Capital Plan and Stress Test Rules for 
All Banking Organizations

    The proposal would remove the requirement that a banking 
organization demonstrate its ability to maintain a pro forma tier 1 
common capital ratio of five percent of risk-weighted assets under 
expected and stressed scenarios. When the Board adopted the tier 1 
common requirement as part of the capital plan and stress test rules, 
the Board noted that it expected the tier 1 common ratio to remain in 
force until the Board adopted a minimum common equity capital 
requirement. In 2013, the Board revised its regulatory capital rules to 
strengthen the quantity and quality of regulatory capital held by 
banking organizations. These revisions included a new minimum common 
equity tier 1 capital requirement of 4.5 percent of risk-weighted 
assets, which was fully phased-in on January 1, 2015.\5\
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    \5\ Banking organizations subject to the advanced approaches 
became subject to a minimum common equity tier 1 requirement of 4.0 
percent on January 1, 2014.
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    The 2016 capital plan and stress test cycle is the first cycle in 
which banking organizations will be subject to the 4.5 percent common 
equity tier 1 capital ratio for each quarter of the planning horizon. 
The common equity tier 1 capital ratio generally is expected to be more 
binding than the tier 1 common ratio under the severely adverse 
scenario because of the regulatory capital rule's stringent capital 
deductions, most of which will be fully phased-in by the end of the 
next planning horizon. Removing the tier 1 common ratio requirement 
will further reduce the burden of maintaining legacy systems and 
processes necessary for calculating the tier 1 common ratio.

III. Proposed Revisions to the Capital Plan and Stress Test Rules for 
Large Bank Holding Companies

    The proposal would modify capital action assumptions in the stress 
test rules to allow large banking holding companies to reflect 
dividends associated with expensed employee compensation and issuances 
to fund acquisitions. The stress test rules require large bank holding 
companies to assume that they do not issue capital or redeem capital 
instruments in the second through ninth quarters of the planning 
horizon. The October 2014 revisions to the capital plan and stress test 
rules (October 2014 revisions) provided an exception to this assumption 
for issuances related to expensed employee compensation.\6\ The 
proposal would make a related technical change to require a firm to 
assume that it pays dividends equal to the quarterly average dollar 
amount of common stock dividends that the company paid in the previous 
year on any issuance of stock related to expensed employee 
compensation.
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    \6\ 79 FR 64026 (October 27, 2014).
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    In addition, the proposal would permit a large bank holding company 
to assume that it issues capital associated with funding a planned 
acquisition. This proposed revision would align the capital action 
assumptions with the assumptions relating to business plan changes, 
which require a large bank holding company to project the effects of 
any planned mergers or acquisitions. Under the proposal, to the extent 
that a large bank holding company is required to include an acquisition 
in its balance sheet projections, the bank holding company could 
include any stock issuance associated with funding the acquisition in 
its stress test.

IV. Proposed Revisions to the Capital Plan and Stress Test Rules for 
Banking Organizations Subject to the Advanced Approaches

A. Delay of Inclusion of the Supplementary Leverage Ratio

    The supplementary leverage ratio requirement applies only to 
banking organizations that use the advanced approaches to calculate 
their minimum regulatory capital requirements. For these banking 
organizations, the proposal would delay the incorporation of the 
supplementary leverage ratio in the capital plan and stress test rules 
for one year. Under the proposal, these banking organizations would not 
be required to include an estimate of the supplementary leverage ratio 
for the capital plan and stress test cycles

[[Page 43639]]

beginning on January 1, 2016. This proposed change is appropriate in 
light of the October 2014 revisions, which changed the commencement 
date of the capital plan and stress test cycles. Prior to the timing 
change in the October 2014 revisions, these banking organizations would 
have been required to incorporate the supplementary leverage ratio into 
the stress test cycle beginning on October 1, 2016 (i.e., in the sixth 
quarter of the 2017 stress testing and capital planning cycle). As a 
result of the timing change, however, these banking organizations would 
be required to incorporate the supplementary leverage ratio into the 
upcoming stress test cycle beginning January 1, 2016 (i.e., in the 
ninth quarter of the 2016 stress testing and capital planning cycle).
    To provide adequate time to develop the required systems necessary 
to project the supplementary leverage ratio, the proposal would not 
require these banking organizations to demonstrate compliance with the 
supplementary leverage ratio for purposes of the 2016 capital plan and 
stress test cycles.

B. Deferral of the Introduction of the Advanced Approaches

    Under the current capital plan and stress test rules, banking 
organizations that use the advanced approaches to calculate their 
minimum regulatory capital requirements must project their risk-
weighted assets using both the standardized and the advanced 
approaches. Several banking organizations have noted that the use of 
advanced approaches in the capital plan and stress test rules would 
require significant resources and would introduce complexity and 
opacity. In light of the concerns raised by these banking 
organizations, and pending a broader review of how the capital plan and 
stress test rules interact with the regulatory capital rules as 
described above, the proposal would delay until further notice the use 
of the advanced approaches for calculating risk-based capital 
requirements for purposes of the capital plan and stress test rules.

V. Proposed Revisions to Stress Test Rules for Certain Bank Holding 
Companies and Savings and Loan Holding Companies With Total 
Consolidated Assets of $10 Billion or More

    For bank holding companies with total consolidated assets of more 
than $10 billion but less than $50 billion and savings and loan holding 
companies with total consolidated assets of more than $10 billion, the 
proposal would eliminate the fixed dividend assumptions for company-run 
stress tests and would delay the application of the company-run stress 
testing requirements to these savings and loan holding companies for 
one stress test cycle.

A. Elimination of Fixed Dividend Assumptions

    The proposal would eliminate the requirement that bank holding 
companies with total consolidated assets of more than $10 billion but 
less than $50 billion and savings and loan holding companies with total 
consolidated assets of more than $10 billion incorporate fixed 
assumptions regarding dividends in their stress tests. These bank 
holding companies and savings and loan holding companies would instead 
be required to incorporate their own dividend payment assumptions 
consistent with internal capital needs and projections.
    Currently, the stress test rules require these bank holding 
companies and savings and loan holding companies to make the same 
capital action assumptions in their stress tests that apply to large 
bank holding companies. These capital action assumptions require these 
bank holding companies and savings and loan holding companies to assume 
they maintain their common stock dividend at a steady rate over the 
planning horizon, continue payments on other regulatory capital 
instruments at their stated dividend rate, and assume no repurchases or 
issuance of shares for each of the second through ninth quarters of the 
planning horizon. The proposal would maintain the assumptions of no 
repurchases, redemptions, or issuance of regulatory capital instruments 
in the stress tests.
    This proposed change is responsive to concerns raised by banking 
organizations that dividends made at the holding company level are 
often funded directly through a subsidiary bank's distributions to its 
holding company, but that subsidiary banks may be subject to dividend 
restrictions that would not permit the bank to upstream capital to its 
holding company. The proposed change would also better align the stress 
test rules with the rules applicable to state member banks and the 
rules of the other banking agencies.

B. Company Run Stress Test Transition Provisions for Certain Savings 
and Loan Holding Companies

    The proposal would delay for one stress test cycle the application 
of the company-run stress test rules to saving and loan holding 
companies with total consolidated assets of more than $10 billion, such 
that these savings and loan holding companies would become subject to 
the stress test rules for the first time beginning on January 1, 2017.
    Savings and loan holding companies with total consolidated assets 
of more than $10 billion must conduct annual company-run stress 
tests.\7\ The original stress test rules provided a two-year transition 
period for these savings and loan holding companies to comply with the 
stress test requirements once they became subject to regulatory capital 
requirements on January 1, 2015. However, the October 2014 revisions to 
the stress test rules resulted in a shortening of this initial 
transition period to one year. The proposal would reinstate the 
previous transition period, such that these savings and loan holding 
companies would become subject to the company-run stress tests on 
January 1, 2017. Accordingly, savings and loan holding companies with 
total consolidated assets of more than $50 billion would report results 
by April 5, 2017, and those with total consolidated assets of less than 
$50 billion would report results by July 31, 2017.
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    \7\ Currently, savings and loan holding companies are not 
subject to the Board's capital plan rule or supervisory stress 
tests, regardless of size.
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VI. Proposed Technical Amendments to the Capital Plan and Stress Test 
Rules

    The proposal would also make certain technical amendments to the 
capital plan and stress test rules to incorporate changes related to 
other rulemakings. On January 1, 2015, the risk-based capital rules 
under 12 CFR part 217 became effective, and the proposal would remove 
references to the risk-based capital rules in 12 CFR part 225 that are 
no longer operative as of that date.
    In addition, the Board is proposing to amend the definition of 
minimum regulatory capital ratio in 12 CFR 225.8(d)(8), and the 
definition of regulatory capital ratio in 12 CFR 252.12(n), 12 CFR 
252.42(m), and 12 CFR 252.52(n) to incorporate the deductions required 
under 12 CFR 248.12(d) (the Volcker Rule). The Volcker Rule requires a 
banking organization to deduct from tier 1 capital its aggregate 
investments in covered funds (as defined in 12 CFR. 248.10(b)). These 
required deductions are not, however, reflected in the regulatory text 
of 12 CFR part 217. Accordingly, the proposal would revise the 
regulatory text of the above-referenced definitions to include the 
required deductions under the Volcker Rule in the definition of 
regulatory capital ratio and minimum regulatory

[[Page 43640]]

capital ratio. The amended language will ensure that the definitions 
referenced above will incorporate not only the deductions required 
under 12 CFR part 217 but also the deductions required under the 
Volcker Rule.

Administrative Law Matters

a. Paperwork Reduction Act
    In accordance with the requirements of the Paperwork Reduction Act 
(PRA) of 1995 (44 U.S.C. 3501-3521), the Board may not conduct or 
sponsor, and a respondent is not required to respond to, an information 
collection unless it displays a currently valid Office of Management 
and Budget (OMB) control number. The Board reviewed this proposed rule 
under the authority delegated to the Board by the OMB and determined 
that it contains no collections of information. As the Board considers 
the public comments received and finalizes the rulemaking, the Board 
will reevaluate this PRA determination.
b. Regulatory Flexibility Act Analysis
    The Board is providing an initial regulatory flexibility analysis 
with respect to this proposed rule. The Regulatory Flexibility Act, 5 
U.S.C. 601 et seq. (RFA), generally requires that an agency prepare and 
make available an initial regulatory flexibility analysis in connection 
with a notice of proposed rulemaking.
    Under regulations issued by the Small Business Administration 
(``SBA''), a small entity includes a depository institution, bank 
holding company, or savings and loan holding company with total assets 
of $550 million or less (a small banking organization).\8\ As of March 
31, 2015, there were approximately 631 small state member banks. As of 
December 31, 2014, there were approximately 3,833 small bank holding 
companies and 271 small savings and loan holding companies. The 
proposed rule would apply to bank holding companies, savings and loan 
holding companies, and state member banks with total consolidated asset 
of $10 billion or more and nonbank financial companies supervised by 
the Board. Companies that would be subject to the proposed rule 
therefore substantially exceed the $550 million total asset threshold 
at which a company is considered a small company under SBA regulations. 
Therefore, there are no significant alternatives to the proposed rule 
that would have less economic impact on small banking organizations. As 
discussed above, the projected reporting, recordkeeping, and other 
compliance requirements of the rule are expected to be small. The Board 
does not believe that the rule duplicates, overlaps, or conflicts with 
any other Federal rules. In light of the foregoing, the Board does not 
believe that the final rule would have a significant economic impact on 
a substantial number of small entities.
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    \8\ See 13 CFR 121.201. Effective July 14, 2014, the Small 
Business Administration revised the size standards for banking 
organizations to $550 million in assets from $500 million in assets. 
79 FR 33647 (June 12, 2014).
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    The Board welcomes comment on all aspects of its analysis. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.
c. Solicitation of Comments on Use of Plain Language
    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The Board has sought to present the proposed rule in a 
simple and straightforward manner, and invites comment on the use of 
plain language.
    For example:
     Have we organized the material to suit your needs? If not, 
how could the rule be more clearly stated?
     Are the requirements in the rule clearly stated? If not, 
how could the rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would make the regulation easier to 
understand?
     Would more, but shorter, sections be better? If so, which 
sections should be changed?
     What else could we do to make the regulation easier to 
understand?

List of Subjects

12 CFR Part 225

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Holding companies, Reporting and recordkeeping requirements, 
Securities, Stress testing.

12 CFR Part 252

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Federal Reserve System, Holding companies, Reporting and 
recordkeeping requirements, Securities, Stress testing.

Authority and Issuance

    For the reasons stated in the Supplementary Information, the Board 
of Governors of the Federal Reserve System proposes to amend 12 CFR 
chapter II as follows:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
1. The authority citation for part 225 continues to read as follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906, 
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.

Subpart A--General Provisions

0
2. Section 225.8 is amended by:
0
a. Revising paragraphs (c)(3), (d)(8), and (d)(11);
0
b. Removing paragraphs (d)(12) and (d)(13);
0
c. Redesignating paragraph (d)(14) as paragraph (d)(12);
0
d. Removing and reserving paragraph (e)(2)(i)(B); and
0
e. Revising paragraphs (e)(2)(ii)(A), (f)(1)(i)(C), (f)(2)(ii)(C), and 
(g)(1)(i).
    The revisions to read as follows:


Sec.  225.8  Capital planning.

* * * * *
    (c) * * *
    (3) Transition periods for bank holding companies subject to the 
supplementary leverage ratio. Notwithstanding paragraph (d)(8) of this 
section, only for purposes of the capital plan cycle beginning on 
January 1, 2016, a bank holding company shall not include an estimate 
of its supplementary leverage ratio.
    (d) * * *
    (8) Minimum regulatory capital ratio means any minimum regulatory 
capital ratio that the Federal Reserve may require of a bank holding 
company, by regulation or order, including, the bank holding company's 
tier 1 and supplementary leverage ratios as calculated under 12 CFR 
217, including the deductions required under 12 CFR 248.12, as 
applicable, and the bank holding company's common equity tier 1, tier 
1, and total risk-based capital ratios as calculated under 12 CFR part 
217, including the deductions required under 12 CFR 248.12 and the 
transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any 
successor regulation; except that, the bank holding company shall not 
use the advanced approaches to calculate its regulatory capital ratios.
* * * * *

[[Page 43641]]

    (11) Tier 1 capital has the same meaning as under 12 CFR part 217 
or any successor regulation.
* * * * *
    (e) * * *
    (2)(i) * * *
    (B) [Reserved]
* * * * *
    (ii) * * *
    (A) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital 
ratios, and serve as a source of strength to its subsidiary depository 
institutions;
* * * * *
    (f) * * *
    (1)(i) * * *
    (C) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio on a pro forma basis under 
expected and stressful conditions throughout the planning horizon, 
including but not limited to any scenarios required under paragraphs 
(e)(2)(i)(A) and (e)(2)(ii) of this section.
* * * * *
    (2)(ii) * * *
    (C) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio on a pro 
forma basis under expected and stressful conditions throughout the 
planning horizon; or
* * * * *
    (g) * * *
    (1) * * *
    (i) After giving effect to the capital distribution, the bank 
holding company would not meet a minimum regulatory capital ratio;
* * * * *

PART 252--ENHANCED PRUDENTIAL STANDARDS (Regulation YY).

0
3. The authority citation for part 252 continues to read as follows:

    Authority:  12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1, 
1844(b), 1844(c), 5361, 5365, 5366.
0
4. Section 252.12 is amended by revising paragraph (n) to read as 
follows:


Sec.  252.12  Definitions.

* * * * *
    (n) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including a company's tier 1 and supplementary leverage ratio as 
calculated under 12 CFR 217, including the deductions required under 12 
CFR 248.12, as applicable, and the company's common equity tier 1, tier 
1, and total risk-based capital ratios as calculated under 12 CFR part 
217, including the deductions required under 12 CFR 248.12 and the 
transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or any 
successor regulation; except that, the company shall not use the 
advanced approaches to calculate its regulatory capital ratios.
* * * * *
0
5. Section 252.13 is amended by revising paragraphs (b)(2) and (b)(3) 
to read as follows:


Sec.  252.13  Applicability.

* * * * *
    (b) * * *
    (2) Transition period for savings and loan holding companies. (i) A 
savings and loan holding company that is subject to minimum regulatory 
capital requirements and exceeds the asset threshold for the first time 
on or before March 31 of a given year, must comply with the 
requirements of this subpart beginning on January 1 of the following 
year, unless that time is extended by the Board in writing;
    (ii) A savings and loan holding company that is subject to minimum 
regulatory capital requirements and exceeds the asset threshold for the 
first time after March 31 of a given year must comply with the 
requirements of this subpart beginning on January 1 of the second year 
following that given year, unless that time is extended by the Board in 
writing; and
    (iii) Notwithstanding paragraph (b)(2)(i) of this section, a 
savings and loan holding company that is subject to minimum regulatory 
capital requirements and exceeded the asset threshold for the first 
time on or before March 31, 2015, must comply with the requirements of 
this subpart beginning on January 1, 2017, unless that time is extended 
by the Board in writing.
    (3) Transition periods for companies subject to the supplementary 
leverage ratio.
    Notwithstanding Sec.  252.12(n) of this subpart, for purposes of 
the stress test cycle beginning on January 1, 2016, a company shall not 
include an estimate of its supplementary leverage ratio.
* * * * *
0
6. Section 252.15 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  252.15  Methodologies and practices.

* * * * *
    (b) * * *
    (2) For each of the second through ninth quarters of the planning 
horizon, the bank holding company or savings and loan holding company 
must:
    (i) Assume no redemption or repurchase of any capital instrument 
that is eligible for inclusion in the numerator of a regulatory capital 
ratio;
    (ii) Assume no issuances of common stock or preferred stock, except 
for issuances related to expensed employee compensation or in 
connection with a planned merger or acquisition to the extent that the 
merger or acquisition is reflected in the company's pro forma balance 
sheet estimates; and
    (iii) Make reasonable assumptions regarding payments of dividends 
consistent with internal capital needs and projections.
* * * * *
0
7. Section 252.42 is amended by:
0
a. Revising paragraph (m); and
0
b. Removing paragraph (r).
    The revision to read as follows:


Sec.  252.42  Definitions.

* * * * *
    (m) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including the company's tier 1 and supplementary leverage ratios 
as calculated under 12 CFR part 217, including the deductions required 
under 12 CFR 248.12, as applicable, and the company's common equity 
tier 1, tier 1, and total risk-based capital ratios as calculated under 
12 CFR part 217, including the deductions required under 12 CFR 248.12 
and the transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, 
or any successor regulation; except that, the company shall not use the 
advanced approaches to calculate its regulatory capital ratios.
* * * * *
0
8. Section 252.43 is amended by revising paragraph (c) to read as 
follows:


Sec.  252.43  Applicability.

* * * * *
    (c) Transition periods for covered companies subject to the 
supplementary leverage ratio. Notwithstanding Sec.  252.42(m) of this 
subpart, only for purposes of the stress test cycle beginning on 
January 1, 2016, the Board will not include an estimate a covered 
company's supplementary leverage ratio.
* * * * *
0
9. Section 252.44 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  252.44  Annual analysis conducted by the Board.

    (a) * * *

[[Page 43642]]

    (2) The analysis will include an assessment of the projected 
losses, net income, and pro forma capital levels and regulatory capital 
ratios and other capital ratios for the covered company and use such 
analytical techniques that the Board determines are appropriate to 
identify, measure, and monitor risks of the covered company that may 
affect the financial stability of the United States.
* * * * *
0
10. Section 252.45 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  252.45  Data and information required to be submitted in support 
of the Board's analyses.

* * * * *
    (b) * * *
    (2) Project a company's pre-provision net revenue, losses, 
provision for loan and lease losses, and net income; and, pro forma 
capital levels, regulatory capital ratios, and any other capital ratio 
specified by the Board under the scenarios described in Sec.  
252.44(b).
* * * * *
0
11. Section 252.52 is amended by:
0
a. Revising paragraph (n); and
0
b. removing paragraph (t).
    The revision to read as follows:


Sec.  252.52  Definitions.

* * * * *
    (n) Regulatory capital ratio means a capital ratio for which the 
Board established minimum requirements for the company by regulation or 
order, including the company's tier 1 and supplementary leverage ratios 
as calculated under 12 CFR part 217, including the deductions required 
under 12 CFR 248.12, as applicable, and the company's common equity 
tier 1, tier 1, and total risk-based capital ratios as calculated under 
12 CFR part 217, including the deductions required under 12 CFR 248.12 
and the transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, 
or any successor regulation; except that, the company shall not use the 
advanced approaches to calculate its regulatory capital ratios.
* * * * *
0
12. Section 252.53 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  252.53  Applicability.

* * * * *
    (b) * * *
    (3) Transition periods for covered companies subject to the 
supplementary leverage ratio. Notwithstanding Sec.  252.52(n) of this 
subpart, only for purposes of the stress test cycle beginning on 
January 1, 2016, a bank holding company shall not include an estimate 
of its supplementary leverage ratio.
* * * * *
0
13. Section 252.56 is amended by revising paragraphs (a)(2), (b)(2)(i), 
and (b)(2)(iv) to read as follows:


Sec.  252.56  Methodologies and practices.

    (a) * * *
    (2) The potential impact on pro forma regulatory capital levels and 
pro forma capital ratios (including regulatory capital ratios and any 
other capital ratios specified by the Board), incorporating the effects 
of any capital actions over the planning horizon and maintenance of an 
allowance for loan losses appropriate for credit exposures throughout 
the planning horizon.
    (b) * * *
    (2) * * *
    (i) Common stock dividends equal to the quarterly average dollar 
amount of common stock dividends that the company paid in the previous 
year (that is, the first quarter of the planning horizon and the 
preceding three calendar quarters) plus common stock dividends 
attributable to issuances related to expensed employee compensation;
* * * * *
    (iv) An assumption of no issuances of common stock or preferred 
stock, except for issuances related to expensed employee compensation 
or in connection with a planned merger or acquisition to the extent 
that the merger or acquisition is reflected in the covered company's 
pro forma balance sheet estimates.
* * * * *
0
14. Section 252.58 is amended by revising paragraphs (b)(3)(v), (b)(4), 
and (c)(2) to read as follows:


Sec.  252.58  Disclosure of stress test results.

* * * * *
    (b) * * *
    (3) * * *
    (v) Pro forma regulatory capital ratios and any other capital 
ratios specified by the Board;
    (4) An explanation of the most significant causes for the changes 
in regulatory capital ratios; and
* * * * *
    (c) * * *
    (2) The disclosure of pro forma regulatory capital ratios and any 
other capital ratios specified by the Board that is required under 
paragraph (b) of this section must include the beginning value, ending 
value, and minimum value of each ratio over the planning horizon.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, July 17, 2015.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2015-18038 Filed 7-22-15; 8:45 am]
 BILLING CODE P