[Federal Register Volume 81, Number 13 (Thursday, January 21, 2016)]
[Notices]
[Pages 3412-3420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01043]
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FEDERAL RESERVE SYSTEM
Proposed Agency Information Collection Activities; Comment
Request
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB)
delegated to the Board of Governors of the Federal Reserve System
(Board) its approval authority under the Paperwork Reduction Act (PRA),
to approve of and assign OMB numbers to collection of information
requests and requirements conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official
OMB inventory of currently approved collections of information. Copies
of the PRA Submission, supporting statements and approved collection of
information instruments 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 number.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance
Officer--Nuha Elmaghrabi--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 information collection:
Report title: Capital Assessments and Stress Testing information
collection.
Agency form number: FR Y-14A/Q/M.
OMB control number: 7100-0341.
Effective Dates: December 31, 2015, June 30, 2016 and September 30,
2016.
Frequency: Annually, semi-annually, quarterly, and monthly.
Respondents: Any top-tier bank holding company (BHC) (other than a
foreign banking organization), that has $50 billion or more in total
consolidated assets, as determined based on: (i) The average of the
BHC's total consolidated assets in the four most recent quarters as
reported quarterly on the BHC's Consolidated Financial Statements for
Bank Holding Companies (FR Y-9C) (OMB No. 7100-0128); or (ii) the
average of the BHC's total consolidated assets in the most recent
consecutive quarters as reported quarterly on the BHC's FR Y-9Cs, if
the BHC has not filed an FR Y-9C for each of the most recent four
quarters. Reporting is required as of the first day of the quarter
immediately following the quarter in which it meets this asset
threshold, unless otherwise directed by the Federal Reserve.
Estimated annual reporting hours: FR Y-14A: Summary, 65,142 hours;
Macro scenario, 2,046 hours; Operational Risk, 396 hours; Regulatory
capital transitions, 759 hours; Regulatory capital instruments, 660
hours; Retail repurchase, 1,320 hours; and Business plan changes, 330
hours. FR Y-14Q: Securities, 1,716 hours; Retail, 2,112 hours; Pre-
provision net revenue (PPNR), 93,852 hours; Wholesale, 20,064 hours;
Trading, 69,336 hours; Regulatory capital transitions, 3,036 hours;
Regulatory capital instruments, 6,864 hours; Operational risk, 6,600
hours; Mortgage Servicing Rights (MSR) Valuation, 1,152 hours;
Supplemental, 528 hours; and Retail Fair Value Option/Held for Sale
(Retail FVO/HFS), 1,408 hours; Counterparty, 18,288 hours; and
Balances, 2,112 hours; FR Y-14M: 1st lien mortgage, 173,040 hours; Home
equity, 166,860 hours; and Credit card, 110,160 hours. FR Y-14 On-going
automation revisions, 15,840 hours. FR Y-14 Attestation implementation,
43,200 hours; and On-going audit and review, 23,040 hours.
Estimated average hours per response: FR Y-14A: Summary, 987 hours;
Macro scenario, 31 hours; Operational Risk, 12 hours; Regulatory
capital transitions, 23 hours; Regulatory capital instruments, 20
hours; Retail Repurchase, 20 hours; and Business Plan Changes, 10
hours. FR Y-14Q: Securities, 13 hours; Retail, 16 hours; PPNR, 711
hours; Wholesale, 152 hours; Trading, 1,926 hours; Regulatory capital
transitions, 23 hours; Regulatory capital instruments, 52 hours;
Operational risk, 50 hours; MSR Valuation, 24 hours; Supplemental, 4
hours; and Retail FVO/HFS, 16 hours; Counterparty, 508 hours; and
Balances, 16 hours; FR Y-14M: 1st lien mortgage, 515 hours; Home
equity, 515 hours; and Credit card, 510 hours. FR Y-14 On-Going
automation revisions, 480 hours. FR Y-14 Attestation Implementation,
4,800 hours; and On-going audit and review, 2,560 hours.
Number of respondents: 33.
General description of report: The FR Y-14 series of reports are
authorized by section 165 of the Dodd-Frank Act, which requires the
Federal Reserve to ensure that certain BHCs and nonbank financial
companies supervised by the Federal Reserve are subject to enhanced
risk-based and leverage standards in order to mitigate risks to the
financial stability of the United States (12 U.S.C. 5365).
Additionally, section 5 of the Bank Holding Company Act authorizes the
Federal Reserve to issue regulations and conduct information
collections with regard to the supervision of BHCs (12 U.S.C. 1844).
As these data are collected as part of the supervisory process,
they are subject to confidential treatment under exemption 8 of the
Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(8)). In addition,
commercial and financial information contained in these information
collections may be exempt from disclosure under exemption 4 of FOIA (5
U.S.C. 552(b)(4)), if disclosure would likely have the effect of (1)
impairing the government's ability to obtain the necessary information
in the future, or (2) causing substantial harm to the competitive
position of the respondent. Such exemptions would be made on a case-by-
case basis.
Though the Federal Reserve intends to share the information
collected under the FR Y-14 with the Department of Treasury's Office of
Financial Research, such sharing shall not be deemed a waiver of any
privilege applicable to such information, including but not limited to
any confidential status (12 U.S.C. 1821(t); 12 U.S.C. 1828(x)).
Abstract: The data collected through the FR Y-14A/Q/M schedules
provide the Federal Reserve with the additional information and
perspective needed to help ensure that large BHCs have strong,
firm[hyphen]wide risk measurement and management processes supporting
their internal assessments of capital adequacy and that their capital
resources are
[[Page 3413]]
sufficient given their business focus, activities, and resulting risk
exposures. The annual Comprehensive Capital Analysis and Review (CCAR)
exercise is also complemented by other Federal Reserve supervisory
efforts aimed at enhancing the continued viability of large BHCs,
including continuous monitoring of BHCs' planning and management of
liquidity and funding resources and regular assessments of credit,
market and operational risks, and associated risk management practices.
Information gathered in this data collection is also used in the
supervision and regulation of these financial institutions. In order to
fully evaluate the data submissions, the Federal Reserve may conduct
follow up discussions with or request responses to follow up questions
from respondents, as needed.
The Capital Assessments and Stress Testing information collection
consists of the FR Y-14A, Q, and M reports. The semi-annual FR Y-14A
collects information on the stress tests conducted by BHCs, including
quantitative projections of balance sheet, income, losses, and capital
across a range of macroeconomic scenarios, and qualitative information
on methodologies used to develop internal projections of capital across
scenarios.\1\ The quarterly FR Y-14Q and the monthly FR Y-14M are used
to support supervisory stress test models and for continuous monitoring
efforts. The quarterly FR Y-14Q collects granular data on BHCs' various
asset classes, including loans, securities and trading assets, and PPNR
for the reporting period. The monthly FR Y-14M comprises three retail
loan- and portfolio-level collections, and one detailed address
matching collection to supplement two of the portfolio and loan-level
collections.
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\1\ BHCs that must re-submit their capital plan generally also
must provide a revised FR Y-14A in connection with their
resubmission.
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Current Actions: On September 16, 2015, the Federal Reserve
published a notice in the Federal Register (80 FR 55621) requesting
public comment for 60 days on the extension, with revision, of the FR
Y-14A/Q/M. The Federal Reserve proposed to revise several schedules of
the FR Y 14A/Q/M reports effective December 31, 2015, March 31, 2015
and June 30, 2016, and to implement an attestation requirement for
LISSC firms as-of June 30, 2016. The comment period for this notice
expired on November 16, 2015.
The Board received two comment letters addressing the proposed
changes: One from the Financial Services Roundtable, and one from The
Clearing House, the Institute of International Bankers, the American
Bankers Association, and the Securities Industry and Financial Markets
Association. Comments focused on the scope and timing of the proposed
attestation requirement, and the timing of proposed modifications to
existing items or schedules, in particular the FR Y-14Q Wholesale
schedules (Schedule H.1 and H.2). Commenters requested clarification of
the instructions for proposed or existing items, or were technical in
nature. Responses to these comments are addressed in the attached draft
FR Y-14A/Q/M reporting forms and instructions.
The Federal Reserve also received several comments not directly
related to the proposed revisions to the FR Y-14 information collection
regarding (1) challenges with the frequency and timing of changes, (2)
the Frequently Asked Questions (FAQ) process, (3) technical
instructions and data submission processes, (4) edit checks and (5)
estimate of reporting burden. Although not specifically addressed
herein, these comment letters, well as feedback provided in meetings
with both individual respondents and industry groups, have assisted the
Federal Reserve's effort to continually improve its internal processes
and practices. The following section includes a detailed discussion of
aspects of the proposed FR Y-14 collection for which the Federal
Reserve received substantive comments and an evaluation of, and
responses to the comments received.
Detailed Discussion of Public Comments
A. General Comments
In general, commenters expressed concern with the timing of the
proposed changes. Specifically commenters stated there was not
sufficient time to undertake the changes necessary to implement the
proposed revisions and develop appropriate processes and procedures
surrounding the attestation requirement. One commenter recommended that
the Federal Reserve provide a minimum of sixth months between the
finalization of reporting and technical requirements and the effective
date of proposed changes to the FR Y-14A/Q/M reports in order for
respondents to adhere to standard software development life cycles.
In response to these comments, the final FR Y-14 regulatory report
(final FR Y-14) delays the effective date for nearly all proposed
changes to reports with a June 30, 2016, as-of date, as detailed in the
schedule-specific sections below. This extension provides respondents
with approximately six months to make needed system changes. In
addition, the final FR Y-14 delays by two quarters, until September 30,
2016, the effective date of certain changes to the wholesale schedules
(Schedules H.1 and H.2), as indicated in the schedule-specific section
below.
Certain changes in the final FR Y-14 would take effect beginning
with the regulatory reports that have a December 31, 2015, as-of date.
These changes include the shift in the FR Y-14A as-of date, from
September 30 to December 31, in accordance with modifications to the
capital plan and stress test rules; formalization of the FR Y-14Q
Business Plan Changes schedule as a regulatory report (rather than as a
case-by-case supervisory collection of information); elimination of the
FR Y-14Q Securities B.2 sub-schedule, and removal of certain items
related to tier 1 common capital.\2\ These changes align the FR Y-14
reports with changes in the final capital rule that the Board recently
approved, better align regulatory reporting requirements with other
existing requirements, reduce burden, or formalize information
collections that are already reported as part of the supervisory
process. In light of the limited comment on, and limited impact of,
these proposed changes, they will be implemented, as proposed, with a
December 31, 2015, as-of date.
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\2\ See 79 Federal Register 64026 (October 27, 2014); 80 Federal
Register 75419 (December 2, 2015).
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In response to the Federal Reserve's solicitation for feedback
regarding burden associated with the FR Y-14A/Q/M, one commenter
suggested that the estimates of reporting burden are substantially
lower than a good-faith estimate provided by a sample of reporting
firms. The commenter outlined the type of effort and resources, and
associated burden required to file the FR Y-14A/Q/M reports and offered
to engage in further discussion with the Federal Reserve regarding
burden estimates. Burden estimates are based on a schedule by schedule
calculation while the estimates provided by the commenter are
aggregated. This difference makes it difficult to modify the proposed
burden estimates without more detailed information from the commenter.
For these reasons, the burden estimates remain the same as proposed.
Commenters also suggested several improvements to the current FAQ
process, including providing status on a real time basis, establishing
a searchable
[[Page 3414]]
repository, distributing more frequently, and setting a standard
schedule for responding to questions. The Federal Reserve is
continually working to improve the FAQ process. As part of these
ongoing efforts the Federal Reserve recently implemented a new FAQ
system to enhance the Federal Reserve's ability to track and respond to
questions. The new system will allow for more insight into the status
of FAQs and help ensure more consistent timing on responses. In
addition, similar to the effort undertaken in 2013,\3\ the Federal
Reserve incorporated all relevant historical FAQs into the final
instructions associated with this proposal. The Federal Reserve will
continue to incorporate relevant comments and questions related to the
FR Y-14 into the instructions on a regular basis.
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\3\ See 78 Federal Register 59934.
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In the proposal, the Federal Reserve notified respondents of the
intent to share FR Y-14 data sets with the Office of Financial Research
(OFR). One commenter recommended that the OFR publish aggregate
summaries of the data so reporting companies, and the public, can gain
insights into industry trends and developments.
B. Attestation
Commenters generally expressed concerns about specific elements of
the proposed attestation requirement for the FR Y-14 submission and, in
particular, the timing necessary to meet the proposed requirements.
Both commenters argued that the proposed effective date of June 30,
2016, would not provide sufficient time to implement several of the
proposed attestation requirements. However, one commenter agreed that
it would be practical and appropriate for respondents to provide an
attestation as to conformance with the FR Y-14 instructions by June 30,
2016, subject to the specific recommendations in the commenter's
letter. Both commenters indicated that additional time was needed to
adapt to The Committee of Sponsoring Organizations (COSO)-based
framework, including materially supplementing and/or modifying existing
systems and processes, and establishing policies, documentation, and
certification frameworks. One commenter pointed out that, although some
respondents may be able to leverage parts of their existing control
infrastructure required under the Sarbanes-Oxley Act of 2002 (Sarbanes-
Oxley), the scope and level of data granularity on the FR Y-14 forms is
substantially larger than what is required under Sarbanes-Oxley and
therefore beyond the capability of most firms. Finally, one commenter
noted that the implementation of the various attestation requirements
would require a significant investment in firm personnel, management,
and compliance and information technology resources, and additional
time for implementation would allow for more deliberate expansion and
upgrade of existing processes and systems to support the attestation.
In light of the above, both commenters suggested alternative
implementation timelines. One commenter noted that a major consulting
firm estimated it would take a company 15 months to implement the
controls necessary to assess risk information. The other commenter
suggested a phased-in implementation approach, which would provide
respondents additional time to make the more substantial alterations to
existing systems and processes necessary to support certain components
of the proposed attestation. The phased in approach would involve: (i)
An attestation solely regarding compliance with the FR Y-14
instructions effective as of June 30, 2016, which is the same timeframe
as in the proposal; (ii) an incremental requirement for respondents to
demonstrate as part of the supervisory process, by April 2017, that a
framework has been put in place to identify, test, and independently
validate key control activities to support these attestations; and
(iii) an attestation regarding the effectiveness of internal controls
and to the material correctness of data as of April 2018.
In addition, one commenter indicated that the proposal appeared to
require attestation to internal controls with each annual, quarterly
and monthly FR Y-14 report submission, but that doing so would not be
feasible at that frequency. The commenter suggested that the
effectiveness of internal controls be limited to annual submissions on
the FR Y-14A.
The Federal Reserve recognized in the initial Federal Register
notice the time needed for LISCC firms to ``enhance certain systems and
processes'' and ``modify internal control frameworks and data
governance committees.'' In response to comments and in order to allow
additional time for respondents to put internal controls processes and
frameworks in place and complete testing of these processes and
frameworks, the initial attestation requirement in the final Y-14 will
be delayed until reports with a December 31, 2016, as-of date. In
addition, in connection with the initial attestation and to allow time
for respondents to develop and test their internal control systems, the
initial attestation will relate solely to the effectiveness of internal
controls over submissions as of December 31, 2016, rather than with
respect to submissions throughout the year. Effective for the monthly,
quarterly, and semi-annual FR Y-14 reports submitted as of January 31,
2017, and thereafter, respondents will attest to conformance with the
FR Y-14 instructions and to the material correctness of data to the
best of the respondent's knowledge, and agree to report material
weaknesses and any material errors in the data as they are identified
starting January 1, 2017. Effective December 31, 2017, and for all
future reporting periods, a respondent's attestation as to the
effectiveness of internal controls will be with regard to FR Y-14
submissions filed throughout the year.
To clarify the timing of these staggered attestation requirements,
the final Y-14 includes three separate attestation cover pages. First,
as indicated, with respect to the monthly, quarterly, and annual FR Y-
14 reports with a December 31, 2016, as-of date, respondents will
attest to internal controls around the reports submitted as of that
date. Second, effective for the monthly, quarterly, and semi-annual FR
Y-14 reports submitted beginning January 31, 2017, and thereafter,
respondents will attest on a separate cover page to the respondent's
conformance with the FR Y-14 instructions and to the material
correctness of data to the best of the respondent's knowledge, and
agree to report material weaknesses and any material errors in the data
as they are identified starting January 1, 2017. Third and finally,
effective for reports with a December 31, 2017, as-of date and for all
future FR Y-14 submissions as of December 31 of a calendar year, the
initial December 31, 2016, cover page will be replaced by a new cover
page that will be submitted annually and will include an attestation to
the effectiveness of internal controls around the annual FR Y-14A
submission and around the FR Y-14Q/M reports that are submitted
throughout the year.
Commenters suggested various modifications to the attestation
requirement and associated attestation language. One commenter noted
that the proposal indicates that the Federal Reserve would not expect
to penalize a firm for incorrect reporting where there has been a good
faith effort to reasonably interpret the instructions or seek input on
a question or interpretation from the Federal Reserve
[[Page 3415]]
and requested that similar qualifying language be added to the
attestation form. The final FR Y-14 includes these revisions to the
attestation form.
Under the proposal, the firm's CFO would have been required to
attest to the internal controls over the reporting of actual data as-of
the reporting period. A commenter noted that internal controls over
financial reporting and risk management data are the joint
responsibility of senior management and that the CFO is not
individually responsible for internal controls over the reporting of FR
Y-14 data. The commenter suggested that the attestation form be
modified to indicate that the CFO attests that senior management is
responsible for the internal controls over the reporting of the FR Y-14
data. In response, the final FR Y-14 incorporates this modification to
the attestation form.
Both commenters addressed the definition of materiality in the
attestation language. One commenter expressed concern with the absence
of a definition of ``materiality'' which inherently requires each
respondent to make an individual determination on materiality. The
other commenter requested that the Federal Reserve confirm that
respondents would be expected to develop materiality policies based on
their own capital plan submission. The Federal Reserve does not
generally define materiality within the FR Y-14 reports.
Furthermore, outlining materiality for specific respondents would
not be feasible. As stated in the Federal Register for the proposal, a
BHC would be required to have a policy for determining materiality in
the context of quantitative and qualitative considerations for their
firm. Accordingly, the final FR Y-14 includes the proposed definition
of materiality without change.
One commenter requested that the Federal Reserve make attestation
requirements applicable to the intermediate holding company (IHC)
subsidiaries of LISCC foreign banking organizations (FBOs) no earlier
than April 2018. On February 18, 2014, the Board adopted a final rule
implementing enhanced prudential standards for FBOs,\4\ which, among
other things, requires an FBO with U.S. non-branch assets of greater
than $50 billion to establish a U.S. IHC by July 1, 2016, to which it
must transfer its entire ownership interest in all U.S. BHCs, U.S.
insured depository institutions, and U.S. subsidiaries.\5\ The
commenter expressed concern that the timing of the implementation of
the attestation requirement would be particularly challenging for FBOs
currently restructuring to complete the formation of their IHC.
Currently, the Board has not proposed reporting requirements for IHCs,
which, as noted in the preamble to the final rule implementing enhanced
prudential standards for FBOs, would be addressed at a later date.
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\4\ 79 Federal Register 17239 (March 27, 2014).
\5\ See 12 CFR 252.153.
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At such time as the Board proposes reporting requirements for IHCs,
the Federal Reserve expects to invite comment through a notice and
comment process, and would evaluate the particular circumstances and
challenges surrounding IHC formation vis-[agrave]-vis the full spectrum
of Board regulatory reporting requirements. The Federal Reserve does,
however, reiterate that the attestation requirement applies to LISCC
firms.
C. Schedule Specific Comments
FR Y-14A
Schedules A.1.c.1 (General RWA) and A.1.d. (Capital)
Related to the proposed modifications to the collection in
accordance with revisions to the capital plan and stress test rules,
specifically elimination of the use of the tier 1 common ratio, one
commenter noted that as of the end of the comment period, the changes
to the capital plan and stress test rules had not yet been finalized
and asked that the Federal Reserve reflect any changes in the final
release of the FR Y-14 forms. On November 25, 2015, the Board approved
the final rule to modify the capital plan and stress test rules.
Accordingly, and in response to the comment, the final FR Y-14 removes
items relating to the reporting of ``tier 1 common capital'' as
proposed from the following schedules in order to align with the final
rule: FR Y-14A General RWA (Schedule A.1.c.1), Standardized RWA
(Schedule A.1.c.2), Capital (Schedule A.1.d), Regulatory Capital
Transitions (Schedule D.4), Regulatory Capital Instruments (RCI,
Schedule C), and the FR Y-14Q Regulatory Capital Transitions (Schedule
D.4) and Regulatory Capital Instruments (Schedule C).\6\
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\6\ Effective January 1, 2016, tier 1 common capital has been
removed from the Board's capital plan rule (12 CFR 225.8). See 80
Federal Register 75419 (December 2, 2015).
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Both commenters supported the removal of items related to tier 1
capital consistent with the rule, however recommended removing the
items from the technical instructions in order to limit the number of
edit checks respondents are required to respond to, rather than keeping
these items in the technical instructions as proposed. The Federal
Reserve recognizes the burden of responding to edits, as well as the
technical effort by both the Federal Reserve and respondents to
incorporate report changes. The Federal Reserve will keep the tier 1
common capital-related items in the FR Y-14A Summary schedule (Schedule
A) technical instructions in order to mitigate the operational risk of
making changes as proposed; however, to address the commenters concerns
and reduce the burden on respondents, edit checks on these items will
be eliminated and responses will not be requested.
Schedules A.1.c.2 (Standardized RWA) and D.4 (RCT)
Under the proposal, the Standardized RWA (FR Y-14A, Schedule
A.1.c.2) and Regulatory Capital Transitions (FR Y-14A, Schedule D.4 and
FR Y-14Q, Schedule D.4) schedules would have been revised by replacing
the existing market-risk weight asset portion with the relevant items
from the FFIEC 102 and aligning the remaining items with the FR Y-9C
Schedule HC-R Part II. Both commenters noted that the aforementioned
changes were effective for the Standardized RWA schedule (FR Y-14A,
Schedule A.1.c.d) as-of December 31, 2015 and for the Regulatory
Capital Instruments schedules (FR Y-14A Schedule D.4, FR Y-14Q Schedule
D.4) as-of June 30, 2016. They recommended that the effective dates be
consistent and delayed until June 30, 2016. In response, the changes
for all three schedules (FR Y-14A, A.1.c.2 (Standardized RWA), D.4
(RCT) and 14Q D.4 (RCT) will be implemented as modified below,
effective June 30, 2016.
One commenter expressed concern that these modifications would
require an unnecessary level of forecasting granularity around Market
Risk RWA and recommended that this level of detail not be included in
the final version. The other commenter stated they had no objection to
the changes as proposed. In response to the comment received, the
Federal Reserve further reviewed the items proposed to be added to
these schedule in alignment with the FFIEC 102. In light of these
comments, the final FR Y-14 removes the requirement to report
projections for certain more granular proposed items from the FR Y14A
Standardized RWA (Schedule A.1.c.2) and Regulatory Capital Transitions
(Schedule D.4) schedules, while retaining general alignment with the
structure of the FFIEC 102 report and reporting of the actual
information. These changes will
[[Page 3416]]
be implemented as modified effective June 30, 2016.
Schedule A.2.b (Retail Repurchase)
Commenters expressed concern with the proposal to break out the
Retail Repurchase schedule from the Summary (Schedule A) and moving the
submission date in line with the quarterly schedules given the schedule
contains projected data as well as actual data. The commenters were
also concerned that the proposed effective date of June 30, 2016 would
not allow respondents enough time to implement the necessary controls
and processes required to submit the new semi-annual schedule and
recommended delaying implementation an additional six months to be
effective December 31, 2016. The Federal Reserve agrees that the
projected data should remain part of the Summary (Schedule A) and
confirms that the new FR Y-14A semi-annual schedule breaks out only the
actual data from the existing Retail Repurchase schedule (Schedule
A.2.b). Given the information to be collected on both schedules is
already reported on the FR Y-14A, the restructuring changes only the
submission date for actual not projected data, and that the submission
date is more than six months out, the final FR Y-14 proceeds with this
change as indicated above, effective June 30, 2016 as proposed.
Schedule A.2.c (ASC 310-30)
The Federal Reserve proposed eliminating this schedule effective
as-of June 30, 2016. One commenter recommended that the Federal Reserve
eliminate this schedule as-of December 31, 2015. The other commenter
noted that although they have previously requested a six month window
between the finalization of changes and effective date, it is less
burdensome to remove a minor reporting item and therefore supported the
change as proposed. In an effort to allow as much time as possible
between finalization and the effective date for both the removal and
addition of items and in support of limiting the changes effective for
the December 31, 2015 as-of date, the final FR Y-14 implements this
change as proposed.
Schedule A.7.c (PPNR)
In an effort to reduce burden, the Federal Reserve proposed
aligning this schedule with the ``normal environment'' requirement.
There were no questions or concerns on the proposed change, however one
commenter requested that the Federal Reserve periodically review
whether the items to be submitted are still necessary and propose
removing those that are not. The Federal Reserve continues to review
the FR Y-14 and propose to remove items as they are no longer
necessary, as evidenced in this proposal with the removal of two
schedules and other items. Upon further review, the final FR Y-14
eliminates three additional variables from the PPNR Metrics schedule
(Schedule A.7.c): Merchant Banking/Private Equity--Assets Under
Management (Line 27), Sales and Trading--Total Proprietary Trading
Revenue (Line 29), and Investment Services--Corporate Trust Deals
Administered (Line 43). In addition, a materiality threshold will be
added to the investment banking metrics of the PPNR Metrics schedule to
further limit the amount of detail required for many firms. The
instructions will be updated to indicate that only firms who report
greater than $100 million in item 15, Investment Banking, of Schedule
A.7.a (PPNR Projections) should report the investment banking metrics
(Lines 11 to 26) in Section A of Schedule A.7.c (PPNR Metrics). The
Federal Reserve will continue to review the FR Y-14 reports for
unnecessary items for potential elimination in future proposals. In
addition, in response to the general request for additional time to
implement changes, the effective date of all modifications to this
schedule will be delayed until June 30, 2016.
Schedule F (Business Plan Changes)
One commenter supported the formalization of the Business Plan
Changes (BPC) schedule (Schedule F), but was concerned that the BPC
schedule instructions as proposed did not appear consistent with the FR
Y-14A summary and did not incorporate previous FAQ guidance. The
commenter also requested that clarification on the definition of
``material''. The final FR Y-14 BPC instructions have been updated to
identify a limited number of items on the BPC schedule which, for
technical reasons, require different instructions. In addition, the
final FR Y-14 instructions have been updated to include certain
clarifications from the FAQ process. Finally, the requirement to report
the BPC schedule is based on whether the BHC includes material business
plan changes in their capital plan, as defined in the CCAR
instructions. In response, the final FR Y-14 includes updates to the
BPC instructions to refer BHCs to the CCAR instructions for a given
year for requirements of materiality.
FR Y-14Q
The majority of comments received regarding the FR Y-14Q requested
clarification of item definitions and will be addressed in the final
instructions. Several substantive comments, particularly on the
Wholesale Corporate Loan (Schedule H.1) and Commercial Real Estate
(Schedule H.2) schedules, are summarized below.
Schedule A.1-A.10 (Retail)
Commenters requested additional information on the proposed change
to the loan population on the Retail schedule. They noted that the
initial notice in the Federal Register stated that the change would
limit the population of the schedule to ``accrual loans'', while the
draft instructions indicate a BHC should ``include loans and leases
held for investment at amortized cost.'' The language in the Federal
Register Notice should have stated that the change was to ``restrict
the loan population of this schedule to loans held at amortized cost in
order to accurately reflect the intention of the schedule and be
responsive to industry comments.'' This is in alignment with the
language in the draft instructions. In response to the general request
to provide additional time to implement changes, the effective date of
this change will be delayed until the report as-of June 30, 2016.
Schedule A.8-A.9 (Retail)
One commenter expressed concern with the effective date of the
proposal to exclude non-purpose loans for purchasing and carrying
securities from this schedule as it requires changes to complex,
product-specific loan tagging rules, including for loans already tagged
for months in the quarter. The commenter requested that the Federal
Reserve make this change effective as-of June 30, 2016. The effective
date of this change, as well as the complementary changes to the FR Y-
14Q Wholesale (Schedule H.1) and Balances (Schedule M) schedules until
the report as-of June 30, 2016.
Schedule C.3 (Regulatory Capital Instruments (RCI)--Issuances During
the Quarter)
Both commenters requested clarification on the intended effective
date of this change and the nature of the one-time submissions. The
additions and modifications will be implemented as proposed, however in
response to the general request to provide additional time to implement
changes, the effective date of the changes proposed for December 31,
2015 will be delayed until the report as-of June 30, 2016. As a result,
all proposed changes to the RCI schedule will be effective June 30,
2016, at which time there will be one separate
[[Page 3417]]
one-time submission of all subordinated debt instruments for the
effective date. Additionally, any new respondents are required to
report the one-time submission.
Schedule D.4 (RCT)
As with the corresponding changes to the FR Y-14A Standardized RWA
(Schedule A.1.c.2) and RCT (D.4) schedules, commenters noted the
inconsistent effective dates and recommended that the proposed changes
to the FR Y-14Q RCT (Schedule D.4) also be effective June 30, 2016. The
Federal Reserve agrees with this suggestion and the proposed changes
will be made effective as-of June 30, 2016.
As noted in regards to the FR Y-14A, one commenter expressed
concern that the proposed modifications would require an unnecessary
level of forecasting granularity around Market Risk RWA. Since the FR
Y-14Q RCT Schedule (Schedule D.4) does not require any projected data,
the changes to the FR Y-14Q RCT schedule will be implemented as
proposed effective June 30, 2016.
Schedule G (PPNR)
One commenter noted that the Federal Reserve should not eliminate
the deposit funding threshold for submission of the Net Interest Income
(NII) worksheet and require all respondents to submit such schedules.
Specifically, the commenter stated that requiring firms to submit the
NII templates would impose undue burden and offered an alternative of
only completing the banking book assets and liabilities rather than
both trading book and banking book. The Federal Reserve notes that the
schedule separates out specific instructions related to trading and
banking book expectations and the trading line items are already
required to be completed for other regulatory reporting purposes (FR Y-
9C). Furthermore, the underlying NII reporting systems are already
required as part of separate supervisory expectations related to
interest rate risk identification. Finally, collecting this information
will enhance the comparability of assets and liabilities across BHCs
and promote greater consistency in supervisory evaluations. Therefore,
the changes do not appear to impose unnecessary burden and the final FR
Y-14 implements the revisions as proposed.
One commenter stated that the Federal Register Notice did not
indicate an effective date for the change in the NII worksheet deposit
funding threshold. The other commenter added that this change will
require sufficient time for newly covered firms to build reporting
systems. The effective date was erroneously omitted from the proposal,
and changes were intended to be proposed to be effective March 31,
2016. In response to these and the general comments on timing, the
effective date of this change will be delayed until June 30, 2016.
Schedule H.1 (Corporate Loan) and H.2 (Commercial Real Estate)
Both commenters expressed concerns with the effective date of the
changes to the Corporate Loan and CRE schedules, especially regarding
the disposed loan and syndicated pipeline reporting. In particular
commenters explained that respondents may need to update systems to
capture and report the information required as proposed. They also
noted that the non-purpose loans were proposed to be included on the
Corporate Loan schedule (H.1) as-of December 31, 2015, but that the new
purpose codes associated with those loans were proposed to be effective
March 31, 2016 and asked that the changes be implemented concurrently.
In response to the aforementioned comments and in consideration of the
additional time needed to implement changes, the changes related to
disposed loans and the syndicated pipeline will be effective September
30, 2016, and all other changes to the Corporate Loan and Commercial
Real Estate schedules effective as-of June 30, 2016.
Commenters requested clarification on the definition and purpose of
disposed loans as it relates the expansion of the loan population and
the proposed Disposition Flag field. Specifically, they questioned
whether facility information should be reported as-of the disposition
date and if that means capturing balances and data prior to the actual
payoff or charge-off of the facility. The Federal Reserve confirms that
the data should be reported as-of the date of disposition, not prior to
the payoff or charge-off of the facility.
In addition, one commenter recommended adding Disposition Flag
values for when loans fall under the $1M reporting threshold, or shift
from one loan schedule to another. In response, the final FR Y-14 adds
two options to the Disposition Flag field. In addition, to accommodate
the new item for facilities shifting from one schedule to another, the
final FR Y-14 adds an additional field to capture to which schedule the
facility shifted.
The Federal Reserve proposed expanding the options of the
Participation Flag item to include the Shared National Credit (SNC)
program. One commenter stated that some respondents are classified as
expanded reporters and, therefore, subject to a broader data collection
referred to as ``Large Corporate Syndicated Credit'' (LCSC) and
therefore recommended that all references to SNCs in the proposal be
clarified to include all LCSC eligible credits as well for respondents
that are classified as expanded reporters. The Federal Reserve confirms
that intent of the new proposed options in the Participation Loan Flag
are, in conjunction with the SNC Internal Credit Facility ID, to
distinguish whether or not the credit facility is included in the SNC
report. Accordingly, the final FR Y-14 implements the change as
proposed, effective June 30, 2016.
Both commenters indicated that two items for the Credit Rating
Agency Equivalent Rating field (Field 96, 97 of Schedule H.1 and Field
59, 60 of Schedule H.2) were included in the draft instructions but not
proposed as changes and therefore had no specified effective date.
Commenters had several questions regarding the reporting of these
items. The Federal Reserve confirms that these items were erroneously
included in the draft instructions, were not proposed to be added, and
therefore will not be implemented. These items have been removed from
the final FR Y-14 instructions.
Schedule H.1 (Corporate Loan)
Both commenters asked for guidance regarding the intended
difference between two of the five categories to be added to the Credit
Facility Purpose item, namely (1) non-purpose margin lending
collateralized by securities and (2) other non-purpose lending
collateralized by securities. One commenter stated that per the
definition, a ``non-purpose loan'' cannot be a margin loan. After
considering the definition and types of loans to be reported in both
proposed categories mentioned in the comment, the final FR Y-14 adds
only one consolidated category for ``Non-purpose loans collateralized
by securities'' rather than the two categories proposed.
The Federal Reserve proposed expanding the loan population to
include non-purpose loans that are not graded in conjunction with
complementary changes to FR Y-14Q Schedules A.8, A.9, and M to reflect
the intention of the schedule and be response to industry comments. One
commenter recommend that the definition of non-purpose loans be revised
to ``loans collateralized by securities and that the proceeds of such
[[Page 3418]]
loans are not contractually restricted to be used only to purchase or
carry securities.'' The same commenter expressed that it was unclear
whether non-graded loans for purchasing and carrying securities are to
be reported at the facility level, and if so that this information is
generally not readily available for reporting.
The corporate loan population was amended to include non-purpose
loans collateralized by securities made for any purpose other than
purchasing or carrying securities which are reportable in the relevant
FR Y-9C categories outlined in the instructions. Loans reported in FR
Y-9C, Schedule HC-C, line item 9.b.(1) (Loans for purchasing or
carrying securities) should not be reported at the facility level in
the Corporate schedule. Accordingly, the final FR Y-14 includes the
definition as proposed.
One commenter stated that scored non-purpose loans are currently
reported on FR Y-14M report and requested confirmation that scored non-
purpose loans are not included within ``non-purpose loans that are not
graded.'' The corporate loan population will be expanded as proposed to
include both scored and graded non-purpose loans which are reportable
in the relevant FR Y-9C line items indicated in the Corporate Loan
Schedule (Schedule H.1) instructions. This change is intended to help
ensure that non-purpose commercial loans and loans for purchasing or
carrying securities are treated consistently across institutions and
the Federal Reserve confirms that any non-purpose loans reportable in
other FR Y-9C line items not specified in the Corporate Loan schedule
instructions should continue to be reported on other FR Y-14 schedules
per the instructions of those schedules. As previously indicated, the
final FR Y-14 delays the effective date of this proposed change until
June 30, 2016.
One commenter asked for further details surrounding the reporting
of the new Credit Facility Purpose (Field 22) code ``bridge
financing'', including whether this code value only includes real
estate financing loans and how it relates to the ``mini-perm'' loan
purpose code recently added to the CRE schedule (Schedule H.2). The
Federal Reserve clarifies that bridge financing is not limited to only
real estate financing loans. Bridge financing is interim financing,
typically taken out for a period of 2 weeks to 3 years pending the
arrangement of larger or longer-term financing. The ``Bridge
Financing'' purpose code on the Corporate schedule (Schedule H.1) is
not meant to be related to the mini-perm loan purpose code on the CRE
schedule (Schedule H.2).
Both commenters requested clarification as to what was to be
reported in the two new credit facility types proposed for Field 20
(Credit Facility Type), ``Fronting Loan'' and ``Swingline''. In
response to comments, the final FR Y-14 modifies Field 20 (Credit
Facility Type) to include one additional option called ``Fronting
Exposure'', as opposed to the two additional options proposed. The
Fronting Exposure option should be selected for credit facilities
reported in the schedule that represent a BHC's exposure to fund
certain obligations (e.g., swinglines or letters of credit) on behalf
of other participant lenders. In addition, the instructions are revised
to indicate that for credit facilities which include a fronting
exposure, BHCs should report their pro-rata share of the stated
commitment amount as one facility to the borrower and the fronting
obligations as separate credit facilities to each of the lending group
participants.
In regards to the proposed changes to the Credit Facility Type
field, one commenter also requested guidance on reporting facilities
that have both a Swingline and LC Issuance limit. In response to
comments, the final FR Y-14 instructions have been revised to indicate
that for credit facilities which include a fronting exposure, BHCs
should report their pro-rata share of the stated commitment amount as
one facility to the borrower and the fronting obligations as separate
credit facilities to each of the lending group participants. Fronting
exposures are those that represent a BHC's exposure to fund certain
obligations (e.g., swinglines or letters of credit) on behalf of other
participant lenders. For such exposures, the BHC should report the new
Fronting Exposure option in the Credit Facility Type field. To address
this, the general instructions will have been updated to include the
following example: For example, consider a facility with $400 million
committed balance where the BHC is the agent bank and the BHC's pro-
rata share of the commitment is 10% or $40 million. Assume further that
the credit facility contains a $50 million sublimit that the BHC, as
agent, has an obligation to advance on behalf of lending group
participants which may include swinglines, letters of credit and other
fronting obligations. In this example, the agent BHC would report one
credit facility to the borrower with a commitment of $40 million and
would report separate facilities to each of the lending group
participants with pro-rata commitments totaling $45 million (or 90%).
Both commenters asked for clarification regarding the removal of
the requirement to only report legally binding commitments.
Specifically, one commenter asked for clarification regarding the
definition of ``legally binding'' and asked whether all uncommitted
and/or unadvised lines on the FR Y-14Q report should be included or if
the change was to allow for the inclusion of exposures in the
syndicated loan pipeline. The other commenter asked if by removing the
legally binding restriction to the loan population, the Board intended
to report all facilities in the syndicated loan pipeline or just those
facilities considered commitments to commit based on a reporting
company's legal definition. The Federal Reserve confirms that the loan
population has been amended to capture commitments as defined in the FR
Y-9C, Schedule HC-L. In addition, the FR Y-14Q Corporate Loan schedule
(Schedule H.1) has been amended to capture facilities in the syndicated
loan pipeline including single-signed exposures, regardless of whether
the BHC considers those facilities to be commitments. As per the FR Y-
14Q, Corporate Loan schedule instructions, BHCs should not report
informal ``advised lines.''
Also in regards to the removal of the requirement to report only
legally binding commitments, one commenter noted that the language in
the proposed instructions for the Corporate Loan Schedule (H.1) was not
consistent with that of the Commercial Real Estate (CRE) Schedule (H.2)
and asked if the intention was to eliminate the legally binding
restriction from both schedules. The Federal Reserve agrees that there
should be consistency between the wholesale schedules, and the CRE
schedule (H.2) of the final FR Y-14 has been revised to also remove the
legally binding language in alignment with the Corporate schedule
(H.1).
Both commenters stated that it was unclear what type of lending is
intended to be captured in the syndicated loan population and what is
meant by ``closed and settled''. In response, the Federal Reserve
confirms that the loan population should include syndicated loan
commitments in the various stages of the syndication process, including
single-signed exposures where the BHC has signed a commitment letter
and has extended the terms to the borrower, even if the borrower has
not countersigned. In response to the comment, the final FR Y-14
clarifies the Syndicated Loan Flag field by including the following:
``Closed and settled refers
[[Page 3419]]
to the final phase where loan documents are fully executed and fully
binding with post-closing selldown to all participants complete. Loans
which have closed but are still pending execution of final
documentation by all syndicate participants should remain in phase 3
`Closed but not settled'.''
One commenter asked for clarification as to whether only those
syndicated loans for which the respondents serves as lead bank should
be reported. The Federal Reserve confirms that any BHC which has signed
a commitment letter and extended terms to the borrower should report
the syndicated loans.
Finally, one commenter stated that information about these
syndicated pipeline commitments is generally not captured in a
reporting company's loan accounting systems, but is maintained
``offline'' and appears in analytical documents and other artifacts.
Thus, reporting companies would face a significant, on-going manual
burden to somehow systematically collect the required detail on
syndicated pipeline commitments to support the requested reporting,
particularly at the level of detail required. Additionally, absent
proposed changes for how to populate correctly the Origination Date,
Maturity Date, and Committed Exposure Global for pipeline loans, the
Board has provided no guidance on which Corporate Loan (Schedule H.l)
fields would be required at time of submission. The other commenter
requested a delay in implementation of the disposed loans and
syndicated pipeline items of two quarters to at least September 30,
2016. In consideration of this feedback, the implementation of changes
related to disposed loans and syndicated pipeline in the final FR Y-14
will be delayed until September 30, 2016.
Schedule L (Counterparty)
One commenter asked if it is acceptable for BHCs to use Global
Industry Classification Standards (GICS) codes on this schedule as
allowed in Schedule H.1 (Corporate Loan), field 8, in place of the
North American Industry Classification System (NAICS) codes indicated
in the new column instructions. The Federal Reserve notes that the
instructions for Schedule H.1, field 8, also indicate that the NAICS
code should be provided and only offer alternatives in the case the
NAICS code is not available. In addition, prior submissions have shown
that it is rare for firms to provide GICS instead of NAICS codes. To
capture the greater level of granularity they make available,
particularly for financial institutions, the final FR Y-14 retains the
requirement that NAICS codes be used and the instructions remain as
proposed.
In addition, one commenter pointed out that the current
instructions do not reflect changes effective in the second quarter of
2015 that revised the level at which the BHC must report data on
schedules L.1 and L.4. The Federal Reserve confirms that there has been
no change to this requirement and that the final instructions for these
schedules will reflect the requirement as outlined in the current
instructions.
All proposed modifications to the Counterparty Schedule (Schedule
L) were proposed to be effective December 31, 2015. Given the general
request to provide additional time to implement changes, the effective
date of all Counterparty schedule changes to the final FR Y-14 will be
delayed until June 30, 2016
FR Y-14M
Schedule A (First Lien) and Schedule B (Home Equity)
Generally, commenters supported the addition of the ``Serviced by
Others'' flag on the First Lien (Schedule A) and Home Equity (Schedule
B) schedules. Both commenters noted, however, that the title of the
field, ``SBO Flag'', implied that the ``Y'' code should be defined as
serviced by others and the ``N'' code as serviced by the BHC rather
than the definitions specified in the instructions. The Federal Reserve
agrees that it would be more logical for the flag codes in the
instructions to be defined as suggested by the commenter rather than as
proposed, and the final FR Y-14 instructions have been adjusted to
reflect this change. Given the general request to provide additional
time to implement changes, final FR Y-14 delays the effective date of
this change until June 30, 2016.
Schedule B (Home Equity)
The Federal Reserve proposed adding a new modification type,
proposed code 13 ``HELOC Line Renewal'' in Field 77 (Modification Type)
on this schedule. Field 77 instructs that the modification type should
be reported for any loan that is currently operating under modified
terms and should identify the specific terms that were altered through
loss mitigation efforts. Both commenters questioned if all HELOC line
renewals should be reported on this line or only those completed
through loss mitigation efforts.
The Federal Reserve appreciates this feedback and agrees there is a
distinction between these two cases not captured in this item as
proposed. The Federal Reserve believes that renewal of a creditworthy
borrower is equivalent to prepayment of the existing line and
origination of a new line. For a borrower who does not meet current
credit standards, the line renewal is equivalent to a type of loan
modification: the contractual terms of the line will be changed because
the borrower has been identified as one who is likely to default if the
bank takes no action. Therefore, those borrowers should be treated as
though they did not prepay, but instead, entered the amortization
period of the HELOC with modified terms. To capture the distinction
between these two cases and in response to the comment, the final FR Y-
14 has been modified to add an additional code to the Modification Type
field, Code 13 to represent the ``HELOC Line Renewal (Regular)'', and
code 14 to represent ``HELOC Line Renewal (loss mitigation strategy)''.
The instructions for the final FR Y-14 also will be updated to reflect
the additional item codes and their definitions. Given the general
request to provide additional time to implement changes, this change
will be effective in the final FR Y-14 beginning June 30, 2016
In the initial Federal Register Notice, the Federal Reserve
specifically requested information on the collection of data related to
the performance of a first lien that is related to a junior lien
reported on the FR Y-14M Home Equity Schedule (Schedule B), including
what standards could make the item easier to report. In response to
this request, one commenter recommended that the Performance of the
First Lien on the First Lien Schedule (Schedule A) and Performance of
Junior Liens on the Home Equity Schedule (Schedule B) fields be removed
from the aforementioned FR Y-14M collections and that the Current
Credit Bureau Score, which is already being reported, be used as a
proxy to monitor any deterioration for evaluating performance and
probability of default. The Federal Reserve recognizes the cost and
burden expressed by the industry in supplying these items and
appreciates the feedback provided in response to the request. The
Federal Reserve agrees with the proposed suggestion to use current
scores as a reasonably proxy, and accordingly, the above-mentioned
fields in the final FR Y-14 have been removed from the applicable
schedules. To ensure the information necessary is available given this
change, the instructions for the final FR Y-14 also require that the
fields `Current Credit Bureau Score Date' and `Current Credit Bureau
Score' be updated at least one month within the quarter, and refreshed
[[Page 3420]]
at least one month within every subsequent quarter. These changes will
be effective beginning June 30, 2016.
Technical Clarifications
Commenters asked for a number of technical clarifications regarding
specific data items on the FR Y-14 forms. These questions will be
addressed in the finalized version of the amended FR Y-14A/Q/M
instructions.
Board of Governors of the Federal Reserve System, January 14,
2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-01043 Filed 1-20-16; 8:45 am]
BILLING CODE P