[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Proposed Rules]
[Pages 67239-67260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23629]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 225 and 252
[Regulations Y and YY; Docket No. R-1548; RIN 7100 AE-59]
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 is inviting comment on a notice of proposed
rulemaking to revise the capital plan and stress test rules for bank
holding companies with $50 billion or more in total consolidated assets
and U.S. intermediate holding companies of foreign banks. Under the
proposal, large and noncomplex firms, defined below, would no longer be
subject to the provisions of the Board's capital plan rule whereby the
Board may object to a capital plan on the basis of qualitative
deficiencies in the firm's capital planning process. In connection with
this modification, large and noncomplex firms would no longer be
subject to the qualitative assessment in Comprehensive Capital Analysis
and Review (CCAR), but would remain subject to a quantitative
assessment in CCAR. The qualitative assessment of the capital plans of
large and noncomplex firms instead would be conducted outside of CCAR
through the supervisory review process. For purposes of the proposal, a
bank holding company or U.S. intermediate holding company with total
consolidated assets of $50 billion or greater but less than $250
billion, on-balance sheet foreign exposure of less than $10 billion,
and nonbank assets of less than $75 billion would be considered a large
and noncomplex firm. The proposal would also modify reporting
requirements for large and noncomplex firms to reduce burdens by
raising materiality thresholds, reducing the scope of the data
collection on these firms' stress test results, and reducing supporting
documentation requirements. For all bank holding companies subject to
the capital plan rule, the proposal would simplify the initial
applicability provisions for the capital plan and stress test rules,
reduce the amount of additional capital distributions that a bank
holding company may make during a capital plan cycle without seeking
the Board's prior approval, and extend the range of potential as-of
dates for the trading and counterparty scenario component used in the
stress test rules. The proposal would also amend the Parent Company
Only Financial Statements for Large Holding Companies (FR Y-9LP) to
include new line item 17 of PC-B Memoranda (Total nonbank assets of a
holding company that is subject to the Federal Reserve Board's capital
plan rule) for purposes of identifying the large and noncomplex firms.
All other bank holding companies subject to the capital plan rule that
are not large and noncomplex firms would remain subject to objection to
their capital plan based on qualitative deficiencies under the rule.
The proposal would not apply to bank holding companies with total
consolidated assets of less than $50 billion or to any state member
bank or savings and loan holding company.
DATES: Comments must be received by November 25, 2016.
ADDRESSES: You may submit comments, identified by Docket No. R-1548 and
RIN 7100 AE-59 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.aspx.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
[[Page 67240]]
Email: [email protected]. Include the
docket number and RIN number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Robert deV. Frierson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments will be made available on the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.aspx as
submitted, unless modified for technical reasons. Accordingly, your
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
Streets NW.), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on
weekdays. For security reasons, the Board requires that visitors make
an appointment to inspect comments. You may do so by calling (202) 452-
3684. Upon arrival, visitors will be required to present valid
government-issued photo identification and to submit to security
screening in order to inspect and photocopy comments.
FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Associate Director, (202)
263-4833, Richard Naylor, Associate Director, (202) 728-5854, Molly
Mahar, Deputy Associate Director, (202) 973-7360, Constance Horsley,
Assistant Director, (202) 452-5239, Mona Touma Elliot, Manager, (202)
912-4688, Celeste Molleur, Manager (202) 452-2783, Elizabeth MacDonald,
Manager, (202) 475-6316, Christine Graham, Senior Supervisory Financial
Analyst, (202) 452-3005, Seth Ruhter, Senior Supervisory Financial
Analyst, (202) 452-3997, Joseph Cox, Supervisory Financial Analyst,
(202) 452-3216, Kevin Tran, Supervisory Financial Analyst, (202) 452-
2309, or Hillel Kipnis, Financial Analyst, (202) 452-2924, Division of
Banking Supervision and Regulation; Laurie Schaffer, Associate General
Counsel, (202) 452-2272, Benjamin McDonough, Special Counsel, (202)
452-2036, Julie Anthony, Counsel, (202) 475-6682, Brian Chernoff,
Senior Attorney, (202) 452-2952, or Amber Hay, Attorney, (202) 973-
6997, 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
A. Description of Capital Plan and Stress Test Requirements
Capital planning and stress testing are two key components of the
Board's supervisory framework for large financial companies.\1\ Under
Section 165 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), the Board of Governors of the Federal
Reserve System (Board) is directed to establish enhanced prudential
standards for bank holding companies with total consolidated assets of
$50 billion or more.\2\ As part of this requirement, the Board must
conduct annual supervisory stress tests with respect to these bank
holding companies and issue regulations requiring these bank holding
companies to conduct semi-annual company-run stress tests.\3\ The Board
adopted final rules to implement these requirements on October 12,
2012.\4\
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\1\ In addition to bank holding companies with total
consolidated assets of $50 billion or more, the changes in this
proposed rulemaking would also apply to any nonbank financial
company supervised by the Board that becomes subject to the capital
planning and stress test requirements pursuant to a rule or order of
the Board and to U.S. intermediate holding companies of foreign
banking organizations in accordance with the transition provisions
under the capital plan rule and subpart O of the Board's Regulation
YY (12 CFR part 252). Currently, no nonbank financial companies
supervised by the Board are subject to the capital planning or
stress test requirements. A U.S. intermediate holding company that
was required to be established by July 1, 2016, and that was not
previously subject to the Board's capital plan rule is required to
submit its first capital plan in 2017 and will become subject to the
Board's stress test rules beginning in 2018. References to ``bank
holding companies'' or ``firms'' in this preamble should be read to
include all of these companies, unless otherwise specified.
\2\ 12 U.S.C. 5365.
\3\ 12 U.S.C. 5365(i).
\4\ 77 FR 62380 (October 12, 2012). See 12 CFR part 252,
subparts E and F. On October 12, 2012, as required by section 165(i)
of the Dodd-Frank Act, the Federal Reserve also adopted a final rule
to impose company-run stress testing requirements for state member
banks and savings and loan holding companies with assets of more
than $10 billion and bank holding companies with assets of more than
$10 billion but less than $50 billion, which is codified at subpart
B of 12 CFR part 252. The Federal Reserve is not proposing to adjust
the requirements in subpart B of 12 CFR part 252 at this time.
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The Dodd-Frank Act also requires the enhanced prudential standards
established by the Board to increase in stringency based on several
factors, including the size and risk characteristics of the bank
holding companies subject to the requirements.\5\ In prescribing more
stringent prudential standards, including stress test requirements, the
Board may differentiate among bank holding companies on an individual
basis or by category, taking into consideration their capital
structure, riskiness, complexity, financial activities (including the
financial activities of their subsidiaries), size, and any other risk-
related factors that the Board deems appropriate.\6\
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\5\ See 12 U.S.C. 5365(b).
\6\ 12 U.S.C. 5363(a)(2)(A).
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B. Implementation of Capital Plan and Stress Test Requirements
Consistent with the Dodd-Frank Act mandate, the Board conducts an
annual assessment of the capital planning and post-stress capital
adequacy of bank holding companies with total consolidated assets of
$50 billion or more. All U.S. intermediate holding company subsidiaries
of foreign banking organizations will be subject to the Board's capital
plan rule beginning in 2017. The Board's capital planning and stress
testing framework for these firms consists of two related programs:
CCAR, which is conducted pursuant to the Board's capital plan rule,\7\
and the Dodd-Frank Act stress tests, which is conducted pursuant to the
Board's stress test rules.\8\
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\7\ 12 CFR 225.8.
\8\ Subparts E and F of the Board's Regulation YY (12 CFR 252,
subparts E and F).
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In CCAR, the Board assesses the internal capital planning processes
of bank holding companies and these companies' ability to maintain
sufficient capital to continue their operations under expected and
stressful conditions. Pursuant to the capital plan rule, each bank
holding company must submit an annual capital plan to the Board that
describes its capital planning processes and capital adequacy
assessment. The capital plan must include (i) an assessment of the
expected uses and sources of capital over the planning horizon; (ii) a
detailed description of the bank holding company's processes for
assessing capital adequacy; (iii) the bank holding company's capital
policy; and (iv) a discussion of any expected changes to the bank
holding company's business plan that could materially affect its
capital adequacy.\9\ A bank holding company may be required to include
other information and analysis relevant to its capital planning
processes and internal capital adequacy assessment. The Federal Reserve
reviews each capital plan submission and may object to a bank holding
company's capital plan based on criteria identified in the rule.\10\ If
the Federal Reserve objects to a bank holding company's capital plan,
the bank holding company may not make any
[[Page 67241]]
capital distributions unless the Federal Reserve indicates in writing
that it does not object to such distributions.\11\
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\9\ See 12 CFR 225.8(e)(2).
\10\ See 12 CFR 225.8(f).
\11\ See 12 CFR 225.8(f)(2)(iv).
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Pursuant to the Board's stress test rules, the Board conducts
supervisory stress tests of bank holding companies with total
consolidated assets of $50 billion or more, and these bank holding
companies are required to conduct annual and mid-cycle company-run
stress tests. In conducting the supervisory stress tests, the Board
projects balance sheets, risk-weighted assets, net income, and
resulting post-stress capital levels and regulatory capital ratios over
a planning horizon under baseline, adverse, and severely adverse
scenarios, incorporating capital action assumptions prescribed in the
Board's stress test rules.\12\ Similarly, for the annual company-run
stress tests, a bank holding company uses the same planning horizon,
capital action assumptions, and baseline, adverse, and severely adverse
scenarios used in the supervisory stress test.\13\
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\12\ See 12 CFR 252.44.
\13\ See 12 CFR 252.54. For the mid-cycle company-run stress
tests, each bank holding company must develop and employ baseline,
adverse, and severely adverse scenarios that are appropriate for its
risk profile and operations. See 12 CFR 252.55(b).
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C. Review of Capital Plan and Stress Test Requirements
The 2015 capital planning cycle marked the fifth anniversary of
CCAR. In 2015, the Board initiated a series of meetings, including with
a bank officials, debt and equity-side market analysts, public interest
groups, and academics, to solicit their views on their overall
evaluation of, and recommendations for, the CCAR program. The Board
received a wide range of comments on the program. While meeting
participants generally expressed the view that CCAR has been successful
in strengthening the capital positions and improving the risk-
management capabilities of the bank holding companies subject to CCAR,
some participants provided suggestions for improving or strengthening
various aspects of the program.\14\ Notably, representatives from bank
holding companies with less than $250 billion in total consolidated
assets recommended that the Board modify CCAR to reduce burdens for
these bank holding companies by establishing a separate capital
planning program that would reduce the associated regulatory reporting
requirements and extend reporting timelines.
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\14\ In addition to the changes in this proposal, the Federal
Reserve may propose further adjustments to CCAR in the future in
response to these comments.
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In December 2015, the Board released capital planning guidance in
Supervision and Regulation (SR) Letters 15-18 and 15-19 to consolidate
its existing expectations and clarify that the Board's expectations for
capital planning differ depending on the size and complexity of the
firm.\15\ The guidance provided that firms with $250 billion or more in
total consolidated assets, firms with $10 billion or more in foreign
exposures, and firms otherwise subject to the Large Institution
Supervision Coordinating Committee (LISCC) supervisory framework
(typically the largest, most internationally active bank holding
companies) would be subject to heightened expectations in all aspects
of capital planning, as compared to other large, but less complex
firms. The guidance reflects an important objective of the Federal
Reserve, which is to tailor supervisory expectations for firms with a
lower systemic risk profile, while simultaneously protecting financial
stability and improving the resiliency of and the availability of
credit from the largest and most complex firms.\16\
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\15\ Board of Governors of the Federal Reserve System, Division
of Banking Supervision and Regulation, ``Federal Reserve Supervisory
Assessment of Capital Planning and Positions for LISCC Firms and
Large and Complex Firms,'' SR Letter 15-18 (December 18, 2015),
available at www.federalreserve.gov/bankinforeg/srletters/sr1518.htm
(``SR Letter 15-18''); Board of Governors of the Federal Reserve
System, Division of Banking Supervision and Regulation, ``Federal
Reserve Supervisory Assessment of Capital Planning and Positions for
Large and Noncomplex Firms,'' SR Letter 15-19 (December 18, 2015),
available at www.federalreserve.gov/bankinforeg/srletters/sr1519.htm
(``SR Letter 15-19'').
\16\ Daniel K. Tarullo (2015). ``Application of Enhanced
Prudential Standards to Bank Holding Companies'' testimony delivered
before the Committee on Banking, Housing and Urban Affairs, U.S.
Senate, Washington, DC, March 19, available at:
www.federalreserve.gov/newsevents/testimony/tarullo20150319a.htm.
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While SR Letter 15-19 outlined tailored capital planning
expectations for large and noncomplex firms, the high public profile of
the CCAR qualitative review could create a risk that large and
noncomplex firms will over-invest in stress testing and capital
planning processes that are unnecessary to adequately capture the risks
of these firms. In this proposal, the Board is proposing to further
tailor its stress testing and capital planning requirements, as
discussed below.
II. Proposed Revisions to the Capital Plan and Stress Test Rules
A. Overview
This proposal would revise the standards that the Board uses to
review capital plans for bank holding companies that have total
consolidated assets of at least $50 billion but less than $250 billion,
on-balance sheet foreign exposure of less than $10 billion, and nonbank
assets of less than $75 billion (each, a large and noncomplex firm).
Specifically, these large and noncomplex firms under the proposal would
no longer be subject to the provisions of the Board's capital plan rule
whereby the Board may object to a firm's capital plan based on
unresolved supervisory issues or concerns with the assumptions,
analysis, and methodologies in the firm's capital plan (qualitative
objection criteria, as described further in section II.D of this
preamble below). In connection with this change, large and noncomplex
firms would remain subject to a quantitative assessment in CCAR and
would no longer be subject to the qualitative assessment in CCAR. The
proposal would also amend the Parent Company Only Financial Statements
for Large Holding Companies (FR Y-9LP) to include a new line item for
purposes of identifying the large and noncomplex firms. All other bank
holding companies subject to the capital plan rule (a LISCC firm, if
the bank holding company is subject to the LISCC supervisory framework,
\17\ or large and complex firm, if the bank holding company otherwise
has total consolidated assets of $250 billion or more, on-balance sheet
foreign exposure of $10 billion or more, or nonbank assets of $75
billion or more) would remain subject to objection to their capital
plan based on qualitative deficiencies under the rule.
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\17\ Based on the current population of bank holding companies,
all LISCC firms have total consolidated assets of $250 billion or
more, on-balance sheet foreign exposure of $10 billion or more, or
nonbank assets of $75 billion or more.
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The proposal would also modify associated regulatory reporting
requirements for large and noncomplex firms to collect less detailed
information on these firms' stress test results and raise the
materiality threshold for reporting on specific portfolios. Under the
proposal, large and noncomplex firms would no longer be subject to the
qualitative assessment in CCAR beginning with the 2017 CCAR cycle, and
a large and noncomplex firm would be able to implement the modified
reporting requirements either immediately or after a six-month delay.
In addition, the proposal would simplify the timing of the initial
applicability of the capital plan and stress test rules for all bank
holding companies that cross the $50 billion asset threshold to become
subject to these rules. These revisions are
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intended to reduce compliance burdens associated with the capital plan
and stress test rules.
The proposal would also revise the de minimis exception threshold
for capital distributions under the capital plan rule. As noted, as
part of CCAR, the Federal Reserve evaluates the planned capital
distributions, such as dividends or repurchases of common stock, that
were included in a capital plan. Under the capital plan rule, a bank
holding company may make the capital distributions that were included
in the capital plan, provided that the Federal Reserve does not object
to the plan.\18\ Generally, a bank holding company must obtain the
Federal Reserve's prior approval before making additional capital
distributions above the dollar amount described in its capital
plan.\19\ However, a bank holding company that is well capitalized, as
defined in 12 CFR 225.2(r), may make additional capital distributions
above such dollar amount without seeking the Board's prior approval if
certain other requirements are met. These include the requirement that
the total distribution amount not exceed 1.00 percent of the bank
holding company's tier 1 capital for the year-period following the
Federal Reserve's action on the bank holding company's capital plan
(the de minimis exception).\20\
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\18\ See 12 CFR 225.8.
\19\ See 12 CFR 225.8(g)(1).
\20\ See 12 CFR 225.8(g)(2).
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The proposal would amend the de minimis exception in two ways for
all bank holding companies subject to the capital plan rule. First, the
proposal would establish a one-quarter ``blackout period'' while the
Federal Reserve is conducting CCAR (the second quarter of a calendar
year), during which bank holding companies would not be able to submit
a notice to use the de minimis exception. Second, the proposal would
lower the de minimis limitation from 1.00 percent to 0.25 percent of a
bank holding company's tier 1 capital, beginning April 1, 2017.
The proposal includes an additional blackout period for additional
capital distribution requests that require prior approval from the
Federal Reserve. This additional blackout period would also apply
during the calendar quarter in which the Federal Reserve conducts the
CCAR exercise. The proposed blackout periods for both the de minimis
exception and prior approval requests are expected to be effective
during the second quarter of 2017, in which the Federal Reserve will be
conducting CCAR 2017.
The last proposed change to the capital plan rule relates to the
trading and counterparty component of the stress test. Under the
Board's stress test rules, the Board may require a bank holding company
with significant trading activity to include a trading and counterparty
component (global market shock) in its adverse and severely adverse
scenarios for its company-run stress tests.\21\ Currently, the Board
must select a date between January 1 and March 1 of the calendar year
of the current stress test cycle for the ``as-of'' date for the data
used as part of the global market shock components of the bank holding
company's adverse and severely adverse scenarios.\22\ For the reasons
described in section III.B of this preamble, the proposal would extend
the range of dates from which the Board may select the as-of date for
the global market shock to October 1 of the calendar year preceding the
year of the stress test cycle to March 1 of the calendar year of the
stress test cycle.
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\21\ See 12 CFR 252.14(b)(2).
\22\ Id.
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As described in section III.C of this preamble, the proposal would
also remove transition provisions in the capital plan and stress test
rules that are no longer operative.
B. Identifying Large and Noncomplex Firms
Under the proposal, a bank holding company would be considered
large and noncomplex if, as of December 31 of the calendar year prior
to the capital plan cycle, it has average total consolidated assets of
$50 billion or greater but less than $250 billion,\23\ total on-balance
sheet foreign exposure of less than $10 billion,\24\ and average total
nonbank assets of less than $75 billion.
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\23\ The proposal would not amend the existing methodology for
determining average total consolidated assets under the capital plan
rule. Under the rule, average total consolidated assets equals the
amount of total assets reported on the bank holding company's
Consolidated Financial Statements for Holding Companies (FR Y-9C),
measured as an average over the preceding four quarters. If a bank
holding company has not filed the FR Y-9C for each of the four most
recent consecutive quarters, its total consolidated assets are
measured as the average of its total consolidated assets, as
reported on the FR Y-9C, for the most recent quarter or consecutive
quarters, as applicable. See 12 CFR 225.8(b)(2).
\24\ Consolidated total on-balance sheet foreign exposure would
be based on a calculation of a bank holding company's total foreign
countries cross-border claims on an ultimate-risk basis, plus total
foreign countries claims on local residents on an ultimate-risk
basis, plus total foreign countries fair value of foreign exchange
and derivative products, calculated at the most recent year-end in
accordance with the Federal Financial Institutions Examination
Council (FFIEC) 009 Country Exposure Report.
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The proposed thresholds of $250 billion in average total
consolidated assets and $10 billion in foreign exposure identify the
largest and most internationally active bank holding companies, whose
failure or distress could pose significant risks to U.S. financial
stability. The proposed thresholds of $250 billion in total
consolidated assets and $10 billion in foreign exposure identify the
largest and most internationally active bank holding companies, the
failure or distress of which could pose significant risks to U.S.
financial stability. These thresholds would be consistent with
thresholds used in the Board's capital and liquidity requirements to
identify companies that may present elevated risk because of their size
and the amount of their cross-border exposure.\25\
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\25\ See, e.g., 12 CFR 217.100(b), 12 CFR 249.1(b).
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In addition to thresholds based on a bank holding company's average
total consolidated assets and total on-balance sheet foreign exposure,
the Board is proposing an additional threshold to identify a bank
holding company as large and noncomplex based on the amount of its
total nonbank assets. The proposed nonbank asset threshold of $75
billion would separate out bank holding companies that are
significantly engaged in activities outside the business of banking,
which have the potential to generate additional systemic risk and
therefore warrant heightened capital planning standards. The proposed
threshold would also facilitate heightened supervisory oversight with
respect to the capital planning practices for a bank holding company
that engages in activities through legal entities that are not subject
to direct regulation and supervision applicable to a regulated banking
entity, which may involve a broader range of risks and more complex
structure requiring more sophisticated risk management.
As discussed in more detail below, under the proposal, a LISCC or
large and complex firm would remain subject to the qualitative
objection criteria, the CCAR qualitative review process, and the
current more detailed reporting requirements. The qualitative objection
criteria, CCAR qualitative review process, and more detailed reporting
requirements would continue to provide for greater supervisory
oversight to ensure that these LISCC firms and large and complex firms
are effectively identifying and managing risks that may arise in
connection with their greater size, international activity, or
nonbanking operations. For bank holding companies with significant
nonbanking activities in particular, the
[[Page 67243]]
CCAR qualitative assessment supplements the existing regulatory capital
framework by incorporating a comprehensive review of a bank holding
company's processes to identify, aggregate, and measure risks from all
of its activities, including nonbanking activities. The added scrutiny
of the qualitative CCAR review helps to ensure that such LISCC firms
and large and complex firms are effectively identifying and managing
their combined risks on a consolidated basis.
In developing the proposal, the Federal Reserve considered a range
of nonbank asset thresholds between $50 billion and $125 billion. The
proposed $75 billion threshold was chosen based on historical failures
and bankruptcies of large financial firms and the risk profile of the
current population of bank holding companies.
At the low end of the range, a $50 billion nonbank asset threshold
would be analogous to the total asset threshold used in section 165 of
the Dodd-Frank Act for applying enhanced prudential standards to a bank
holding company.\26\ However, based on the current population of bank
holding companies, a $50 billion nonbank asset threshold appeared to be
too low, as many bank holding companies at this level conduct primarily
traditional bank-like activities (such as mortgage lending) through
nonbank subsidiaries. At the high end of the range, the Board
considered a nonbank asset threshold of $125 billion, which would scope
in bank holding companies with at least a majority of their assets as
nonbank assets, indicating a potentially greater complexity of
structure or activities and therefore greater risk.\27\ Based on the
current population of firms, a nonbank asset threshold of $125 billion
would include the most complex U.S. bank holding companies with the
largest derivatives trading and capital markets activities, but may
exclude some bank holding companies with risk profiles that are
significantly concentrated in riskier activities, particularly U.S.
intermediate holding companies of foreign banking organizations that
engage in significant capital markets activities. In particular, a
threshold of $125 billion in nonbank assets would exclude companies
that engage in equities trading, prime brokerage, and investment
banking activities, and therefore have risk profiles that are more
similar to those of the most complex U.S. financial firms than to the
risk profiles of the smaller, less complex bank holding companies.
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\26\ 12 U.S.C. 5365.
\27\ A firm with total consolidated assets of $250 billion or
more would have been included by the total consolidated assets
threshold, so $125 billion or more in nonbank assets would
constitute at least 50 percent of the assets of a bank holding
company with total consolidated assets less than $250 billion.
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The potential complexity and interconnectedness of a bank holding
company with significant nonbank assets heightens the need for such a
bank holding company to be subject to an intensive annual review of its
capital planning processes and risk management based on its
idiosyncratic risk profile, through the CCAR qualitative assessment and
qualitative objection criteria (as defined below).The proposed nonbank
asset threshold of $75 billion would be slightly below the midpoint of
the $50-to-$125 billion range of potential nonbank asset thresholds
considered. Based on the current population of bank holding companies,
this proposed threshold would include large firms with complex capital
markets activities, but would not include firms with less complex
structures or activities. This result would be consistent with the
proposal's objective of focusing supervisory resources and more
detailed reporting requirements on firms with elevated risk profiles.
The Board invites comment on whether the proposed thresholds
identify firms for which the proposed relief would be most appropriate
in light of the goals and purposes of the CCAR exercises.
Question 1: What other standards, such as revenue related to
nonbanking activities, should the Board consider to identify large and
noncomplex firms?
C. Measurement and Reporting of Average Total Nonbank Assets
1. Measurement for CCAR 2017
In order to determine whether a bank holding company meets the $75
billion average total nonbank asset threshold for CCAR 2017, average
total nonbank assets under the proposal would equal (i) total combined
nonbank assets of nonbank subsidiaries, as reported on line 15a of
Schedule PC-B of the Parent Company Only Financial Statements for Large
Holding Companies (FR Y-9LP) as of December 31, 2016; plus (ii) the
total amount of equity investments in nonbank subsidiaries and
associated companies as reported on line 2a of Schedule PC-A of the FR
Y-9LP as of December 31, 2016, (except that any investments reflected
in (i) may be eliminated); plus (iii) assets of each Edge and Agreement
Corporation, as reported on the Consolidated Report of Condition and
Income for Edge and Agreement Corporations (FR 2886b) as of December
31, 2016, to the extent such corporation is designated as
``Nonbanking'' in the box on the front page of the FR 2886b; minus (v)
assets of each federal savings association, federal savings bank, or
thrift subsidiary, as reported on the Call Report as of December 31,
2016.
Question 2: What, if any, additional burdens would the proposed
measurement of nonbank assets create for firms for the December 31,
2016, measurement date? What steps should the Board take to address any
such burdens (for example, should the Board permit firms to net
intercompany exposures among all nonbank subsidiaries for purposes of
the December 31, 2016, report)?
2. Measurement for Capital Plan Cycles After 2017
For purposes of capital plan cycles after 2017, the $75 billion
average total nonbank asset threshold would be the average of the total
nonbank assets of a holding company, calculated in accordance with the
instructions to the FR Y-9LP, for the four most recent consecutive
quarters or, if the bank holding company has not filed the FR Y-9LP for
each of the four most recent consecutive quarters, for the most recent
quarter or consecutive quarters, as applicable.
The proposal would amend the FR Y-9LP to include new line item 17
of PC-B Memoranda (Total nonbank assets of a holding company that is
subject to the capital plan rule) for purposes of identifying large and
noncomplex firms. Under the proposal, a bank holding company with total
consolidated assets of $50 billion or more would be required to report
on the FR Y-9LP the average dollar amount of its total nonbank assets
of consolidated nonbank subsidiaries, whether held directly or
indirectly or held through lower-tier holding companies, and its direct
investments in unconsolidated nonbank subsidiaries, associated nonbank
companies, and those nonbank corporate joint ventures over which the
bank holding company exercises significant influence (collectively,
``nonbank companies'').\28\
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\28\ For purposes of the FR Y-9LP, (i) a subsidiary is a company
in which the reporting bank holding company directly or indirectly
owns more than 50 percent of the outstanding voting stock; (ii) an
associated company is a corporation in which the reporting bank
holding company, directly or indirectly, owns 20 to 50 percent of
the outstanding voting stock and over which the reporting bank
holding company exercises significant influence; and (iii) a
corporate joint venture is a corporation owned and operated by a
group of companies, no one of which has a majority interest, as a
separate and specific business or project for the mutual benefit of
that group of companies.
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[[Page 67244]]
Nonbank companies, for purposes of this measure, would exclude (i)
all national banks, state member banks, state nonmember insured banks
(including insured industrial banks), federal savings associations,
federal savings banks, and thrift institutions (collectively,
``depository institutions'') and (ii) except for an Edge or Agreement
Corporation designated as ``Nonbanking'' in the box on the front page
of the Consolidated Report of Condition and Income for Edge and
Agreement Corporations (FR 2886b), any subsidiary of a depository
institution (``depository institution subsidiary'').
For purposes of this measure, a reporting bank holding company
should eliminate all intercompany assets and operating revenue among
the nonbank companies, but should include assets and operating revenue
with the reporting bank holding company; any depository institution;
any depository institution subsidiary. For a reporting bank holding
company that is a subsidiary of a foreign banking organization, the
reporting bank holding company should include assets and operating
revenue with any branch or agency of the foreign banking organization
or any non-U.S. subsidiary, non-U.S. associated company, or non-U.S.
corporate joint venture of the foreign banking organization that is not
held through the reporting bank holding company, should be included.
For example, a reporting bank holding company should eliminate the
loans made by one nonbank company to a second nonbank company, but
should not eliminate loans made by one nonbank company to the reporting
bank holding company; depository institution; depository institution
subsidiary; or for a reporting bank holding company that is a
subsidiary of a foreign banking organization, any branch or agency of
the foreign banking organization or any non-U.S. subsidiary, non-U.S.
associated company, or non-U.S. corporate joint venture of the foreign
banking organization that is not held through the reporting bank
holding company.
The proposed line item would require a firm to report nonbank
assets based on an average over the quarter, as calculated on either a
daily, weekly, or monthly basis. Using an average would further the
integrity of the nonbank assets measure by ensuring that it is not
unduly influenced by end-of-quarter fluctuations in nonbank assets;
however, requiring a daily or weekly average may impose undue burden on
firms to perform this calculation. The Board is therefore seeking
comment as to whether a daily, weekly, or monthly average would be most
appropriate for this calculation. This new line item is expected to be
effective for the reporting period as of March 31, 2017.
Question 3: What are the costs and benefits of using a daily,
weekly, or monthly average for purposes of calculating nonbank assets?
Question 4: What other measures for identifying large and
noncomplex firms should the Board consider? For instance, should the
Board consider evaluating the percent of revenues from nonbank
activities to total revenue, in addition to the asset measure?
D. Elimination of CCAR Qualitative Assessment and Objection for Large
and Noncomplex Firms
Capital planning is a core aspect of financial and risk management
for all bank holding companies that helps ensure the financial strength
and resilience of a firm. Strong forward-looking capital planning
processes ensure that a bank holding company with total consolidated
assets of $50 billion or more has sufficient capital to absorb losses
and continue to lend to creditworthy businesses and consumers,
including during times of stress. The Board expects all bank holding
companies with total consolidated assets of $50 billion or more to
maintain sound capital planning processes on an ongoing basis.
The Board has different expectations for sound capital planning and
capital adequacy depending on the size, scope of operations, activity,
and systemic risk profile of a firm. Consistent with those different
expectations, under the proposal, large and noncomplex firms would no
longer be subject to the provisions of the Board's capital plan rule
whereby the Board may object to a capital plan on the basis of
deficiencies in the firm's capital planning process or unresolved
supervisory issues, that is, large and noncomplex firms would no longer
be subject to the CCAR qualitative assessment.
In the current CCAR process, the Federal Reserve conducts a
qualitative assessment of the strength of each bank holding company's
internal capital planning process and a quantitative assessment of each
bank holding company's capital adequacy in the calendar quarter in
which the bank holding company submits a capital plan. In the
qualitative assessment, the Federal Reserve evaluates the extent to
which the analysis underlying each bank holding company's capital plan
comprehensively captures and addresses potential risks stemming from
company-wide activities. In addition, the Federal Reserve evaluates the
reasonableness of a bank holding company's capital plan, the
assumptions and analysis underlying the plan, and the robustness of the
bank holding company's capital planning process. Under the capital plan
rule, the Board may object to a bank holding company's capital plan if
the Board determines that (1) the bank holding company has material
unresolved supervisory issues, including but not limited to issues
associated with its capital adequacy process; (2) the assumptions and
analysis underlying the bank holding company's capital plan, or the
bank holding company's methodologies for reviewing its capital adequacy
process, are not reasonable or appropriate; \29\ or (3) the bank
holding company's capital planning process or proposed capital
distributions otherwise constitute an unsafe or unsound practice, or
would violate any law, regulation, Board order, directive, or condition
imposed by, or written agreement with, the Board or the appropriate
Federal Reserve Bank (together, qualitative objection criteria).\30\
The Board may also object to a bank holding company's capital plan if
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 (that is, based on a quantitative assessment).\31\ In the past
CCAR exercises, the Board has publicly announced its decision to object
to a bank holding company's capital plan, along with the basis for the
decision.\32\
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\29\ As discussed in section II.E of this preamble below, the
proposal would revise this criterion to permit objection where the
Board determines that the assumptions and analysis underlying the
bank holding company's capital plan, or the bank holding company's
methodologies and practices that support its capital planning
process, are not reasonable or appropriate.
\30\ See 12 CFR 225.8(f)(2)(ii)(A), (B), and (D).
\31\ See 12 CFR 225.8(f)(2)(ii)(C).
\32\ See 12 CFR 225.8(f)(v).
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In the feedback meetings that the Board held on CCAR, participants
from large and noncomplex firms expressed the view that the CCAR
qualitative assessment was unduly burdensome because, in their view, it
required the development of large amounts of documentation and
sophisticated stress test models to the same degree as the largest
firms in order to avoid a public objection to their capital plan.
Consistent with this feedback, further tailoring of regulatory
requirements for large and noncomplex firms would avoid creating a
risk, based on the high
[[Page 67245]]
public profile of the CCAR qualitative review, that large and
noncomplex firms will over-invest in stress testing and capital
planning processes that are unnecessary to adequately capture the risks
of these firms.
In general, large and noncomplex firms present less systemic risk
than LISCC firms and large and complex firms. Furthermore, large and
noncomplex firms are generally engaged in traditional banking
activities and have a more limited geographical scope than LISCC firms
and large and complex firms; accordingly, there is less variation in
key risks across these firms relative to key risks of LISCC firms and
large and complex firms. The strength of each large and noncomplex
firm's capital planning process may be assessed through normal
supervisory reviews supplemented with targeted, horizontal reviews of
aspects of capital planning. Consequently, the Federal Reserve proposes
to conduct its supervisory assessment of a large and noncomplex firm's
risk-management and capital planning practices through the regular
supervisory process and targeted, horizontal assessments of particular
aspects of capital planning, rather than the intensive CCAR qualitative
horizontal assessment. Further, the Board would not object to the
capital plans of large and noncomplex firms due to qualitative
deficiencies in their capital planning process, but rather would
incorporate an assessment of these practices into regular, ongoing
supervision.
As compared to CCAR, the proposed review process for large and
noncomplex firms is expected to be more limited in scope, include
targeted horizontal evaluations of specific areas of the capital
planning process, and focus on the standards set forth in the capital
plan rule and SR Letter 15-19. Before the start of the supervisory
review process, the Federal Reserve would send a supervisory
communication to each large and noncomplex firm describing the scope of
the year's review. The review would likely occur in the quarter
following the CCAR qualitative assessment for LISCC firms and large and
complex firms.
Under the proposal, the Board would continue to perform the annual
quantitative assessment of capital plans of the large and noncomplex
firms and publicly announce a decision to object or not object to a
firm's capital plan on this basis. The quantitative assessment ensures
that firms maintain sufficient capital to continue operations
throughout times of economic and financial market stress. While an
individual large and noncomplex firm is likely to have a lower systemic
risk profile than a LISCC firm or large and complex firm, its
activities or distress still could pose some degree of risk to
financial stability. Moreover, large and noncomplex firms collectively
represent over $2 trillion in total assets and nearly $1.3 trillion in
loans and leases as of June 30, 2016. A common weakness or insufficient
capitalization across a group of large and noncomplex firms could still
represent a significant threat to the U.S. economy and to specific
regions where the firms' operations or activities are concentrated.
Accordingly, the proposal would maintain the current quantitative
analysis framework for these firms and the possible basis for objection
to a firm's capital plan based on the results of the quantitative
assessment, in order to appropriately ensure the capital adequacy of
all bank holding companies subject to the capital plan rule.
As under the current capital plan rule, nothing in the proposal
would limit the authority of the Federal Reserve to issue a capital
directive, such as a directive to reduce capital distributions, or take
any other supervisory enforcement action, including an action to
address unsafe or unsound practices or conditions or violations of law,
such as an unsafe and unsound capital planning process.\33\
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\33\ See 12 CFR 225.8(b)(4).
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E. Continued Application of CCAR for LISCC Firms and Large and Complex
Firms
For LISCC firms and large and complex firms, the proposal would
maintain the current comprehensive assessment of capital planning
processes in the CCAR qualitative assessment. The comprehensive
assessment of capital planning processes in the CCAR qualitative
assessment produces significant safety and soundness benefits for LISCC
firms and large and complex firms and financial stability benefits for
the financial system as a whole. As the Board noted when it adopted the
capital plan rule in 2011, the analytical techniques and other
requirements set forth in the capital plan rule enable a firm to
identify, measure, and monitor its risks and promote the stability of
the U.S. financial system.\34\
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\34\ 76 FR 74631, 74632 (December 1, 2011).
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Expectations for LISCC firms and large and complex firms are
elevated relative to large and noncomplex firms because material
distress or failure of a LISCC firm or large and complex firm is more
likely to pose a threat to U.S. financial stability as compared to a
large and noncomplex firm, heightening the need to ensure the
resiliency of these firms. Furthermore, LISCC firms and large and
complex firms engage in more diverse activities and have a larger
overall size and geographical scope than large and noncomplex firms.
This larger size and greater diversity leads to greater variation in
the material risks at these firms, which may not be fully captured by a
standardized supervisory stress scenario.
The intensive, comprehensive assessment provided by the CCAR
qualitative process enables the Federal Reserve to assess whether a
LISCC firm or large and complex firm has sufficient capital and strong
capital planning processes in light of the scope and diversity of its
activities, including risks that are idiosyncratic to each firm. The
systemic footprint of these firms and the damage that their failure
could pose to the financial system makes it critical that a
comprehensive assessment occur on an annual basis, to ensure that the
capital planning processes of LISCC firms and large and complex firms
are sufficiently dynamic to reflect changes in economic or financial
conditions, as well as changes to the risk profile of the firm.
The public nature of the CCAR process and disclosure of the results
of the Federal Reserve's qualitative assessment helps to ensure that
LISCC firms and large and complex firms maintain focus on ensuring that
their practices are consistent with the Federal Reserve's capital
planning expectations articulated in SR Letter 15-18.\35\ Additionally,
the public profile of the CCAR qualitative assessment improves
incentives for firms to ensure the strength of their capital planning
processes. The additional scrutiny and market discipline provided by
the CCAR process is all the more important in light of the systemic
risk presented by LISCC firms and large and complex firms.
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\35\ See SR Letter 15-18.
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The proposal includes a modification to the capital plan rule's
qualitative objection criteria for LISCC firms and large and complex
firms to better align with the Federal Reserve's focus during the CCAR
supervisory assessment. Specifically, the proposal provides that the
Board may object to a the capital plan of a LISCC firm or large and
complex firm if, among other factors, the methodologies and practices
that support the bank holding company's capital planning process are
not reasonable or appropriate (emphasis added). The current rule
instead provides a basis for objection if the bank holding company's
methodologies for
[[Page 67246]]
reviewing its capital adequacy process, are not reasonable or
appropriate (emphasis added). This modification is intended to clarify
the current scope of the CCAR qualitative review and the areas of the
focus in the review of the capital plan of a LISCC firm or a large and
complex firm.
F. Implementation of Modified Reporting Requirements
The Capital Assessments and Stress Testing Report (FR Y-14 series
of reports; OMB No. 7100-0341) collects data used to support
supervisory stress testing models and continuous monitoring efforts for
bank holding companies with total consolidated assets of $50 billion or
more. The FR Y-14 consists of three reports: The semi-annual FR Y-14A,
the quarterly FR Y-14Q, and monthly FR Y-14M. Each report contains
multiple schedules, several of which are reported only by bank holding
companies that meet specified materiality thresholds.
In discussions on CCAR, several large and noncomplex firms
recommended that the Board revise the FR Y-14 series of reports to
reduce reporting burdens for these firms. For instance, these large and
noncomplex firms suggested that the Board raise the materiality
threshold for the FR Y-14 reports and reduce the detail required in the
supporting documentation requirements. Additionally, these firms
indicated that in some cases where a portfolio met the criteria to be
considered immaterial, the firm voluntarily reported data on the
portfolio due to the Federal Reserve's practice of applying a 75th
percentile loss rate to immaterial portfolios in the supervisory stress
test. The proposal would reduce burdens associated with reporting the
FR Y-14 schedules for large and noncomplex firms in three ways: By
raising the materiality threshold, reducing the supporting
documentation requirements, removing several sub-schedules from the FR
Y-14A Summary Schedule, and using the median loss rate for immaterial
portfolios.
The proposal would increase the materiality thresholds for filing
schedules on the FR Y-14Q report and the FR Y-14M report for large and
noncomplex firms. The FR Y-14 instructions currently define material
portfolios as those with asset balances greater than $5 billion or
asset balances greater than five percent of tier 1 capital on average
for the four quarters preceding the reporting quarter.\36\ The proposal
would revise the FR Y-14's definition of a ``material portfolio'' for
large and noncomplex firms to mean a portfolio with asset balances
greater than either (1) $5 billion or (2) 10 percent of tier 1 capital,
both measured as an average for the four quarters preceding the
reporting quarter.\37\ As a result of this change, respondents would be
able to exclude certain portfolios from reporting and in some cases may
not be required to report certain schedules at all. In modeling losses
on these portfolios for large and noncomplex firms, the Federal Reserve
intends to apply the median, rather than 75th percentile, loss rate
from supervisory projections based on the firms that reported data, so
as not to discourage firms from using the increased threshold for
materiality.
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\36\ Respondents have the option to complete the data schedules
for immaterial portfolios.
\37\ The four quarter average percent of tier 1 capital is
calculated as the sum of the firm's preceding four quarters of
balances subject to the particular materiality threshold divided by
the sum of the firm's proceeding four quarters of tier 1 capital.
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The proposal also would reduce the supporting documentation a large
and noncomplex firm would be required to be submit with its capital
plan. Appendix A of the FR Y-14A report outlines qualitative
information that a bank holding company should submit in support of its
projections, including descriptions of the methodologies used to
develop the internal projections of capital across scenarios and other
analyses that support the bank holding company's comprehensive capital
plans. The proposal would revise the instructions to Appendix A of the
FR Y-14A to remove the requirement that a large and noncomplex firm
include in its capital plan submission certain documentation regarding
its models, including any model inventory mapping document, methodology
documentation, model technical documents, and model validation
documentation. Large and noncomplex firms would still be required to be
able to produce these materials upon request by the Federal Reserve,
and all or a subset of these firms may be required to provide this
documentation depending on the focus of the supervisory review of large
and noncomplex firm capital plans. Removing the requirement that a
large and noncomplex firm submit this information in connection with
its capital plan should reduce the resources needed to prepare the plan
for submission and alleviate concerns of an adverse supervisory finding
that a capital plan is incomplete based on the failure to provide
documentation.
Under the proposal, large and noncomplex firms would no longer be
required to complete several elements of the FR Y-14A Schedule A
(Summary), including the Securities OTTI methodology sub-schedule,
Securities Market Value source sub-schedule, Securities OTTI by
security sub-schedule, the Retail repurchase sub-schedule, the Trading
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\38\ The revised instructions for the FR Y-14A Summary
schedule reporting form are available on the Board's public Web site.
Removing these elements should reduce burdens associated with
collecting and validating this data, responding to follow-up inquiries,
and implementing and maintaining technical systems. Under the proposal,
a large and noncomplex firm may adopt these changes for the FR Y-14A
report as of December 31, 2016, or as of June 30, 2017. The Federal
Reserve continues to review the details required to be reported in the
FR Y-14 series of reports, and may propose additional changes in the
future to further reduce burdens associated with these reporting
requirements.
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\38\ A large and noncomplex firm would be required to report
line item 138 of the income statement, as that line item is
currently derived from the retail repurchase sub-schedule.
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G. Simplify Initial Application of Capital Plan and Stress Test Rules
and Regulatory Reporting Requirements
The proposal would simplify the applicability provisions for the
capital plan and stress test rules that apply to bank holding companies
with $50 billion or more in total consolidated assets (subparts E and F
of the Board's Regulation YY, hereafter subparts E and F) and provide
additional time before the application of these requirements for bank
holding companies that cross the $50 billion asset threshold close to
the April 5 capital plan submission and stress test date. Under the
current rules, a bank holding company that crosses the $50 billion
asset threshold on or before December 31 of a calendar year must submit
a capital plan by April 5 of the following year. Under the proposal,
the cutoff date for the capital plan rule would be moved to September
30, so that a firm that crosses the $50 billion asset threshold in the
fourth quarter of a calendar year would not have to submit a capital
plan until April 5 of the second year after it crosses the threshold.
The proposal would also align the cutoff date for initial
application of the stress test rules in subparts E and F with the
proposed September 30 cutoff date for the initial application of the
capital plan rule. A bank holding company
[[Page 67247]]
would become subject to these stress test rules in subparts E and F in
the year following the first year in which the bank holding company
submitted a capital plan. Under the current stress test rules, a bank
holding company that crosses the $50 billion asset threshold before
March 31 of a given year becomes subject to the stress test rules under
subparts E and F beginning in the following year, and accordingly, may
have only nine months before its first stress test under these
subparts. Under the proposal, a firm would have at least a year before
it would be subject to its initial stress tests under subparts E and F.
This revision would simplify the application of the capital plan and
stress test rules and allow for a more orderly onboarding process for
new FR Y-14 filers, which will improve the quality of data used in the
supervisory stress tests.\39\
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\39\ Providing this extension would also have the effect of
allowing firms that cross the $50 billion in the fourth quarter of a
given year as much as a year and a half before they are required to
submit their first capital plan, and two and a half years before
they are subject to the stress tests under subparts E and F. This
extended period would allow for the significant investments firms
must make to meet these requirements and account for the fact that
these firms would continue to be subject to prudential supervision
during the transition period.
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The proposal would also provide an extended onboarding period for
regulatory reporting requirements to a bank holding company after it
first crosses the $50 billion asset threshold. Currently, a bank
holding company that crosses the $50 billion asset threshold must
prepare FR Y-14M reports as of the end of the month in which it crosses
the threshold, and must submit its first FR Y-14M within 90 days after
the end of the month (at which time, data for the three intervening
months is due). The proposal would require a bank holding company to
begin preparing its initial FR Y-14M as of the end of the third month
after the bank holding company first meets the $50 billion asset
threshold (rather than as of the month in which the bank holding
company crosses the threshold) and must submit its first FR Y-14M
within 90 days after the end of that month (at which time, data for the
three intervening months would be due). For example, a bank holding
company that crosses the $50 billion asset threshold as of September
30, 2016, would be required to prepare its initial FR Y-14M report as
of December 2016, and file its FR Y-14M reports for December 2016,
January 2017, and February 2017 in March 2017. A bank holding company
would continue to prepare its FR Y-14Q report as of the end of the
first quarter after it initially crosses the threshold. The additional
onboarding time should facilitate communications between the Federal
Reserve and a bank holding company and better prepare the bank holding
company to comply with FR Y-14 reporting requirements. Generally, a
bank holding company does not begin the onboarding process, including
dialogue with the data aggregators who collect the FR Y-14M data, until
after the Federal Reserve confirms that the bank holding company has
exceeded the asset threshold. Accordingly, providing for an extended
onboarding period should help bank holding companies become better
prepared to comply with the FR Y-14 reporting requirements when they
take effect, which will improve data quality for initial reporting
periods and reduce burdens and costs for reporting bank holding
companies.
III. Other Amendments to the Capital Plan and Stress Test Rules
A. Lowering the de minimis Exception Threshold for All Bank Holding
Companies
As noted, a bank holding company subject to the capital plan rule
must request prior approval for a capital distribution that has not
explicitly been approved by the Board. However, in the event that a
bank holding company received a notice of non-objection to its capital
plan, the bank holding company may make a capital distribution that
exceeds the amount described in the capital plan if: (1) The bank
holding company remains well capitalized after the distribution,\40\
(2) the bank holding company's performance and capital levels following
the distribution are consistent with its projections under the expected
conditions in the bank holding company's capital plan, (3) the bank
holding company provides 15 days' notice prior to execution and the
Board does not object within that time period; and (4) the aggregate
dollar amount of all capital distributions during the capital planning
cycle (the period beginning on July 1 of a calendar year and ending on
June 30 of the following year) would not exceed the total amount
described in the bank holding company's capital plan by more than 1.00
percent of the bank holding company's tier 1 capital as reported in the
bank holding company's first quarter FR Y-9C.\41\
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\40\ As defined by 12 CFR 225.2(r).
\41\ See 12 CFR 225.8(g)(2).
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The purpose of this de minimis exception is to provide flexibility
for well-capitalized bank holding companies to distribute small,
additional amounts of capital without the need for a complete re-
assessment of the bank holding company's capital plan. Prior to the
2015 capital planning cycle, requests to make distributions under the
de minimis exception were generally small and typically related to
unanticipated events that improved a bank holding company's capital
levels (such as tax rebates or litigation settlements). Over time, the
Board has observed a pattern of certain bank holding companies using
the de minimis exception to increase their common stock repurchases by
the maximum amount allowed under the exception. This pattern risks
treating the de minimis exception as an automatic add-on to approved
common stock distributions under a bank holding company's capital plan
rather than for its intended use for unanticipated events. Based on
planned net common stock distributions (i.e., planned common stock
dividends and repurchases less planned common stock issuances) for the
CCAR 2016 approval period, the current level of the de minimis
threshold would imply that bank holding companies could increase their
net common stock capital distributions by 32 percent on average (median
of 13 percent).\42\
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\42\ Net common stock distributions is calculated as planned
common stock dividends and repurchases less planned common stock
issuances. This analysis excludes firms that had no or negative net
planned common stock distributions in their 2016 capital plans.
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The proposal would reduce the de minimis exception from 1.00
percent to 0.25 percent of a bank holding company's tier 1 capital in
order to ensure that a de minimis distribution would represent a
smaller percentage of the bank holding company's approved capital
distributions and tier 1 capital. Based on data from CCAR 2016, a 0.25
percent de minimis threshold would enable bank holding companies to
increase their planned net common stock distributions by 8 percent on
average (median of 3 percent).
The expected aggregate capital impact of this proposed change to
the de minimis exception threshold can be evaluated on both a
prospective and historical basis. On a prospective basis, a comparison
can be made between the total de minimis capital distributions that
could be made across all bank holding companies subject to CCAR
(assuming all applicable conditions were met) under the proposal and
under the current rule, by taking the difference between 1.00 percent
and 0.25 percent of tier 1 capital across all firms. Based on data as
of the first quarter of 2016, this difference equals $9.8 billion,
equivalent to 0.10 percent of the total
[[Page 67248]]
risk-weighted assets of bank holding companies subject to CCAR in
2016.\43\ On a historical basis, if a 0.25 percent de minimis
limitation had applied during the CCAR 2015 cycle rather than a 1.00
percent limitation, $2.3 billion of distributions actually made during
the CCAR 2015 period would not have been permitted without prior
approval, equivalent to 0.02 percent of total risk-weighted assets of
bank holding companies subject to CCAR in 2015.
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\43\ Total risk-weighted assets across bank holding companies
subject to CCAR in 2016 equaled $9.6 trillion.
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A smaller de minimis limitation would not prohibit these additional
distributions. Instead, it would require the bank holding company to
include the distributions in its next annual capital plan.
In addition, with the proposed revision to the de minimis rule,
bank holding companies would still be able to seek approval to make
capital distributions not included in their capital plans, consistent
with section 225.8(g) of the capital plan rule. Any bank holding
company making such a request must provide adequate information
regarding any changes to its risk profile, financial condition, and
corporate structure since the previous CCAR exercise. In many cases,
the Federal Reserve expects to request additional information from bank
holding companies that request approval for additional capital
distributions, which will likely include revised stress test results
using updated data and scenarios. One exception is where a bank holding
company replaces the foregone capital with capital of equal or higher
quality prior to or concurrently with the incremental distribution.
One important factor in the Board's decision on a capital
distribution request is the size and complexity of the bank holding
company making the request. All else equal, a capital distribution
request from a LISCC or large and complex firm would likely require
stronger justification than a request from a large and noncomplex firm.
For instance, a request from a LISCC or large and complex firm directly
related to an unforeseeable event at the time of the last capital plan
submission that has a positive expected impact on current or future
capital ratios would likely require more supporting evidence (for
instance, updated stress test results) than a similar request from a
large and noncomplex firm. This difference reflects the Federal
Reserve's elevated expectations for capital planning at LISCC and large
and complex firms, where any revision to a firm's capital plan to
increase capital distributions following the CCAR qualitative
assessment requires strong evidence and support.
B. Blackout Period for the de minimis Exception and Requests for
Approval To Make Additional Distributions Not Included in a Bank
Holding Company's Capital Plan
In addition to proposing a change in the allowable size of the de
minimis exception, the proposal would establish a one-quarter
``blackout period'' while the Board is conducting CCAR (the second
quarter of a calendar year) during which bank holding companies would
not be able to submit a notice to use the de minimis exception or
submit a request for prior approval for additional capital
distributions that do not qualify for the de minimis exception. In the
absence of this modification, the Federal Reserve's analysis in CCAR
may not in all cases represent a comprehensive evaluation of the bank
holding company's capital adequacy and the appropriateness of the bank
holding company's planned capital actions in CCAR. Under the proposal,
a bank holding company seeking to make capital distributions in the
second quarter in excess of the amount described in the capital plan
for which a non-objection was issued pursuant to the de minimis
exception or prior approval process, when the CCAR exercise is
underway, would be required submit a notice to use the de minimis
exception by March 15 or submit a request for prior approval for
incremental capital distributions that do not qualify for the de
minimis exception by March 1 and reflect the additional distributions
in its capital plan. The proposed blackout periods are expected to be
effective for CCAR 2017.
C. Revisions to the Time Period From Which the Market Shock ``as-of''
Date May Be Selected
Under the Board's stress test rules, the Board may require a bank
holding company with significant trading activity to include a trading
and counterparty component (``global market shock'') in its adverse and
severely adverse scenarios for its company-run stress tests. Currently,
the Board must select a date between January 1 and March 1 of the
calendar year of the stress test cycle. However, in order to provide
bank holding companies with as much time as possible to conduct their
company-run stress tests and prepare their capital plans, the Board has
typically specified the as-of date for the global market shock as early
as possible in January. As such, the Board has a narrow window to
select the as-of date for the market shock, effectively sometime very
early in January. The narrow window creates the possibility for bank
holding companies to artificially reduce the risk of their portfolios
around the time of the market shock date. In addition, limiting the as-
of date for the market shock to the first weeks of the calendar year
does not account for seasonality in trading activity--for example,
trading activity typically slows towards the end of the calendar year
and gradually picks up in the new calendar year.
The proposal would allow the Board to select any date between
October 1 of the prior year and March 1 of the year of the stress test
cycle for the as-of date of the global market shock. Bank holding
companies subject to the trading and counterparty component would be
notified within two weeks of the selected as-of date for the global
market shock, to enable the bank holding company to preserve trading
and counterparty exposure data from the as-of date. This change would
help ensure that the stress tests capture representative trading
exposure for bank holding companies with significant trading activity,
for example, by avoiding effects caused by unusual trading conditions
around year-end. Moreover, the change would provide additional time for
both bank holding companies and supervisors to implement the global
market shock scenario in a well-controlled manner. Under the proposal,
this change would take effect for the 2018 stress test cycle.
D. Removal of Obsolete Provisions
In 2014, the Federal Reserve adjusted the capital planning and
stress test cycles from an October 1 as-of date to a January 1 as-of
date. The capital plan and stress test rules currently include several
provisions reflecting the previous October 1 as-of date, as well as
obsolete transition provisions for foreign banking organizations that
previously relied on SR Letter 01-01,\44\ and for the application of
the supplementary leverage ratio. The proposal would remove these
provisions, as they are no longer operative.
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\44\ SR Letter 01-01 (January 5, 2001), available at
www.federalreserve.gov/boarddocs/srletters/2001/sr0101.htm.
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IV. Administrative Law Matters
A. Paperwork Reduction Act
In accordance with section 3512 of the Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3521) (PRA), the Board
[[Page 67249]]
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 OMB control
numbers are 7100-0128, 7100-0341, and 7100-0342 for this information
collection. The Board reviewed the proposed rule under the authority
delegated to the Board by OMB.
The proposed rule contains requirements subject to the PRA. The
reporting requirements are found in sections 12 CFR 225.8.
Comments are invited on:
a. Whether the collections of information are necessary for the
proper performance of the Federal Reserve's functions, including
whether the information has practical utility;
b. The accuracy or the estimate of the burden of the information
collections, including the validity of the methodology and assumptions
used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
All comment will become a matter of public record. Comments on
aspects of this notice that may affect reporting, recordkeeping, or
disclosure requirements and burden estimates should be sent to:
Secretary, Board of Governors of the Federal Reserve System, 20th and C
Streets NW., Washington, DC 20551. A copy of the comments may also be
submitted to the OMB desk officer by mail to U.S. Office of Management
and Budget, 725 17th Street NW., #10235, Washington, DC 20503 or by
facsimile to 202-3955806, Attention, Agency Desk Officer.
Proposed Revisions, With Extension for Three Years, of the
Following Information Collections:
(1) Title of Information Collection: Parent Company Only Financial
Statements for Large Holding Companies.
Agency Form Number: FR Y-9C; FR Y-9LP; FR Y-9SP; FR Y-9ES; FR Y-
9CS.
OMB Control Number: 7100-0128.
Frequency of Response: Quarterly, semi-annually, and annually.
Affected Public: Businesses or other for-profit.
Respondents: Bank holding companies (BHCs), savings and loan
holding companies (SLHCs), securities holding companies (SHCs), and
U.S. intermediate holding companies (IHCs), (collectively, ``holding
companies'').
Abstract: The FR Y-9LP serves as standardized financial statements
for large parent holding companies. The FR Y-9 family of reporting
forms continues to be the primary source of financial data on holding
companies that examiners rely on in the intervals between on-site
inspections. Financial data from these reporting forms are used to
detect emerging financial problems, to review performance and conduct
pre-inspection analysis, to monitor and evaluate capital adequacy, to
evaluate holding company mergers and acquisitions, and to analyze a
holding company's overall financial condition to ensure the safety and
soundness of its operations.
Current Actions: The proposal would amend the FR Y-9LP to include
new line item 17 of PC-B Memoranda (Total nonbank assets of a holding
company subject to the Federal Reserve Board's capital plan rule) for
purposes of identifying large and noncomplex firms subject to the
capital plan rule. Under the proposal, a top-tier holding company that
is subject to the Board's capital plan rule would be required to report
on the FR Y-9LP the average dollar amount for the calendar quarter (as
calculated on either a daily, weekly, or monthly basis during the
calendar quarter) of its total nonbank assets of consolidated nonbank
subsidiaries, whether held directly or indirectly or held through
lower-tier holding companies, and its direct investments in
unconsolidated nonbank subsidiaries, associated nonbank companies, and
those nonbank corporate joint ventures over which the bank holding
company exercises significant influence (collectively, ``nonbank
companies'').\45\ As noted in section II.C.2 of this preamble, the
Board seeks comment as to whether a daily, weekly, or monthly average
would be most appropriate for this calculation. This proposed amendment
would be effective as of March 31, 2017.
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\45\ For purposes of the FR Y-9LP, (i) a subsidiary is a company
in which the reporting bank holding company directly or indirectly
owns more than 50 percent of the outstanding voting stock; (ii) an
associated company is a corporation in which the reporting bank
holding company, directly or indirectly, owns 20 to 50 percent of
the outstanding voting stock and over which the reporting bank
holding company exercises significant influence; and (iii) a
corporate joint venture is a corporation owned and operated by a
group of companies, no one of which has a majority interest, as a
separate and specific business or project for the mutual benefit of
that group of companies.
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Nonbank companies, for purposes of this measure, would exclude (i)
all national banks, state member banks, state nonmember insured banks
(including insured industrial banks), federal savings associations,
federal savings banks, thrift institutions (collectively for purposes
of this proposed item 17, ``depository institutions'') and (ii) except
for an Edge or Agreement Corporation designated as ``Nonbanking'' in
the box on the front page of the Consolidated Report of Condition and
Income for Edge and Agreement Corporations (FR 2886b), any subsidiary
of a depository institution (for purposes of this proposed item 17,
``depository institution subsidiary'').
All intercompany assets and operating revenue among the nonbank
companies should be eliminated, but assets and operating revenue with
the reporting holding company; any depository institution; any
depository institution subsidiary; and for a reporting holding company
that is a subsidiary of a foreign banking organization, any branch or
agency of the foreign banking organization or any non-U.S. subsidiary,
non-U.S. associated company, or non-U.S. corporate joint venture of the
foreign banking organization that is not held through the reporting
holding company, should be included. For example, eliminate the loans
made by one nonbank company to a second nonbank company, but do not
eliminate loans made by one nonbank company to the parent holding
company; depository institution; depository institution subsidiary; or
for a reporting holding company that is a subsidiary of a foreign
banking organization, any branch or agency of the foreign banking
organization or any non-U.S. subsidiary, non-U.S. associated company,
or non-U.S. corporate joint venture of the foreign banking organization
that is not held through the reporting holding company.
While the FR Y-9LP collects another measure of nonbank assets (line
item 15 of PC-B Memoranda (Total combined nonbank assets of nonbank
subsidiaries)), the proposed nonbank assets measure differs in several
important ways. Specifically, proposed line item 17 excludes assets of
an insured industrial bank, federal savings association, federal
savings bank, or thrift institution and includes assets of an Edge or
Agreement Corporation designated as ``Nonbanking'' in the box on the
front page of the Consolidated Report of Condition and Income for Edge
and Agreement Corporations (FR 2886b). It also includes the value of an
investment in an unconsolidated
[[Page 67250]]
nonbank company that is held directly by the holding company. While
these elements may be sourced from other reporting forms, the new line
item is necessary to reflect the elimination of intercompany
transactions among these nonbank companies, as described above.
Number of Respondents: Proposed revision would apply to top-tier
holding companies subject to the Board's capital plan rule (BHCs and
IHCs with total consolidated assets of $50 billion or more), for a
total of 38 of the existing 792 FR Y-9LP respondents. FR Y-9C (non-
Advanced Approaches holding companies or other respondents): 654; FR Y-
9C (Advanced Approaches holding companies or other respondents): 13; FR
Y-9SP: 4,122; FR Y-9ES: 88; FR Y-9CS: 236.
Estimated Average Hours per Response: FR Y-9C (non-Advanced
Approaches holding companies or other respondents): 50.17 hours; FR Y-
9C (Advanced Approaches holding companies or other respondents): 52.42
hours; FR Y-9LP: 5.25 hours; FR Y-9SP: 5.4 hours; FR Y-9ES: 0.5 hours;
FR Y-9CS: 0.5 hours.
Current Estimated Annual Burden Hours: FR Y-9C (non-Advanced
Approaches holding companies or other respondents): 131,245 hours; FR
Y-9C (Advanced Approaches holding companies or other respondents):
2,674 hours; FR Y-9LP: 16,632 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR
Y-9CS: 472.
Proposed Revisions only change in Estimated Annual Burden Hours: FR
Y-9LP: 76 hours (0.5 hours per quarter for the 38 impacted FR Y-9LP
respondents).
Proposed Total Estimated Annual Burden Hours: FR Y-9C (non-Advanced
Approaches holding companies or other respondents): 131,245 hours; FR
Y-9C (Advanced Approaches holding companies or other respondents):
2,674 hours; FR Y-9LP: 16,651 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR
Y-9CS: 472.
(2) Title of Information Collection: Capital Assessments and Stress
Testing information collection.
Agency Form Number: FR Y-14A/Q/M.
OMB Control Number: 7100-0341.
Frequency of Response: Annually, semi-annually, quarterly, and
monthly.
Affected Public: Businesses or other for-profit.
Respondents: The respondent panel consists of any top-tier bank
holding company (BHC) or intermediate holding company (IHC) that has
$50 billion or more in total consolidated assets, as determined based
on: (i) The average of the firm's total consolidated assets in the four
most recent quarters as reported quarterly on the firm's Consolidated
Financial Statements for Bank Holding Companies (FR Y-9C) (OMB No.
7100-0128); or (ii) the average of the firm's total consolidated assets
in the most recent consecutive quarters as reported quarterly on the
firm's FR Y-9Cs, if the firm 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 Board.
Abstract: The data collected through the FR Y-14A/Q/M schedules
provide the Board with the additional information and perspective
needed to help ensure that large BHCs and IHCs have strong,
firm[hyphen]wide risk measurement and management processes supporting
their internal assessments of capital adequacy and that their capital
resources are sufficient given their business focus, activities, and
resulting risk exposures. The annual CCAR exercise is also complemented
by other Board supervisory efforts aimed at enhancing the continued
viability of large firms, including continuous monitoring of firms'
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
Board 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 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.\46\ The quarterly FR Y-14Q collects granular
data on various asset classes, including loans, securities, and trading
assets, and pre-provision net revenue (PPNR) for the reporting period.
The monthly FR Y-14M comprises three retail portfolio- and loan-level
collections, and one detailed address matching collection to supplement
two of the portfolio and loan-level collections.
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\46\ A BHC that must re-submit its capital plan generally also
must provide a revised FR Y-14A in connection with its resubmission.
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Current Actions: The Capital Assessments and Stress Testing Report
(FR Y-14 series of reports; OMB No. 7100-0341) collects data used to
support supervisory stress testing models and continuous monitoring
efforts for bank holding companies with total consolidated assets of
$50 billion or more. The FR Y-14 consists of three reports, the semi-
annual FR Y-14A, the quarterly FR Y-14Q, and monthly FR Y-14M. Each
report contains multiple schedules, several of which are reported only
by bank holding companies that meet specified materiality thresholds.
In discussions on CCAR, several large and noncomplex firms recommended
that the Board revise the FR Y-14 series of reports to reduce the
reporting burden on these firms. For instance, these large and
noncomplex firms suggested that the Board raise the materiality
threshold for the FR Y-14 reports and reduce the detail required in the
supporting documentation requirements. The proposal would reduce
burdens associated with reporting the FR Y-14 schedules for large and
noncomplex firms by raising the materiality threshold, reducing
supporting documentation requirements, removing several sub-schedules
from the FR Y-14A Summary Schedule, and using the median loss rate for
immaterial portfolios.
The proposal would increase the materiality thresholds for filing
schedules on the FR Y-14Q report and the FR Y-14M report for large and
noncomplex firms. The FR Y-14 instructions currently define material
portfolios as those with asset balances greater than $5 billion or
asset balances greater than five percent of tier 1 capital, both
measured as an average for the four quarters preceding the reporting
quarter.\47\ The proposal would revise the FR Y-14's definition of a
``material portfolio'' for large and noncomplex firms to mean a
portfolio with asset balances greater than either (1) $5 billion or (2)
10 percent of tier 1 capital on average for the four quarters preceding
the reporting quarter.\48\ As a result of this change, respondents
would be able to exclude certain portfolios from reporting and in some
cases may
[[Page 67251]]
not be required to report certain schedules at all.
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\47\ Respondents have the option to complete the data schedules
for immaterial portfolios.
\48\ The four quarter average percent of tier 1 capital is
calculated as the sum of the firm's preceding four quarters of
balances subject to the particular materiality threshold divided by
the sum of the firm's proceeding four quarters of tier 1 capital.
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In addition, the proposal would reduce the supporting documentation
a large and noncomplex firm would be required to be submit with its
capital plan. Appendix A of the FR Y-14A report outlines qualitative
information that a bank holding company should submit in support of its
projections, including descriptions of the methodologies used to
develop the internal projections of capital across scenarios and other
analyses that support the bank holding company's comprehensive capital
plans. The proposal would revise the instructions to Appendix A of the
FR Y-14A to remove the requirement that a large and noncomplex firm
include in its capital plan submission certain documentation regarding
its models, including any model inventory mapping document, methodology
documentation, model technical documents, and model validation
documentation. Large and noncomplex firms would still be required to be
able to produce these materials upon request by the Federal Reserve,
and all or a subset of these firms may be required to provide this
documentation depending on the focus of the supervisory review of large
and noncomplex firm capital plans. Removing the requirement that a
large and noncomplex firm submit this information in connection with
its capital plan should reduce the resources needed to prepare the plan
for submission and alleviate concerns of an adverse supervisory finding
that a capital plan is incomplete based on the failure to provide
documentation.
Under the proposal, large and noncomplex firms would no longer be
required to complete several elements of the FR Y-14A Schedule A
(Summary), including the Securities OTTI methodology sub-schedule,
Securities Market Value source sub-schedule, Securities OTTI by
security sub-schedule, the Retail repurchase sub-schedule, the Trading
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\49\ The revised instructions for the FR Y-14A Summary
schedule reporting form are available on the Board's public Web site.
Removing these elements should reduce burdens associated with
collecting and validating this data, responding to follow-up inquiries,
and implementing and maintaining technical systems. Under the proposal,
a large and noncomplex firm may adopt these changes for the FR Y-14A
report as of December 31, 2016, or as of June 30, 2017. The Federal
Reserve continues to review the details required to be reported in the
FR Y-14 series of reports, and may propose additional changes in the
future to further reduce burdens associated with these reporting
requirements.
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\49\ A large and noncomplex firm would be required to report
line item 138 of the income statement, as that line item is
currently derived from the retail repurchase sub-schedule.
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These changes are expected to decrease burden for the information
collection by 56,454 hours. This includes a decrease in the average
hours per response for the FR Y-14A due to the elimination of the
requirement for large and noncomplex firms to file four Summary sub-
schedules and a reduction in the supporting documentation requirements,
resulting in a decrease of 6,346 hours. The modification to the
materiality threshold for the FR Y-14Q and FR Y-14M reports would be
anticipated to reduce the number of firms filing certain schedules on
the FR Y-14Q and FR Y-14M reports. Specifically, this would result in a
decrease of 1,088 hours on the FR Y-14Q report and 49,020 hours for the
FR Y-14M report.
Number of Respondents: 38.
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 risk, 13 hours; Retail risk, 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; Retail FVO/HFS, 16 hours; CCR, 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; and implementation, 7,200 hours. FR Y-
14 Attestation: Implementation, 4,800 hours; and on-going revisions,
2,560 hours.
Current Estimated Annual Burden Hours: FR Y-14A: Summary, 75,012
hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours;
Regulatory capital transitions, 874 hours; Regulatory capital
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business
plan changes, 380 hours. FR Y-14Q: Securities risk, 2,432 hours; Retail
risk, 1,976 hours, Pre-provision net revenue (PPNR), 108,072 hours;
Wholesale, 23,104 hours; Trading, 46,224 hours; Regulatory capital
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours;
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR)
Valuation, 1,632 hours; Supplemental, 608 hours; and Retail Fair Value
Option/Held for Sale (Retail FVO/HFS), 1,728 hours; Counterparty,
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage,
228,660 hours; Home equity, 197,760 hours; and Credit card, 153,000
hours. FR Y-14 On-going automation revisions, 18,720 hours; and
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours;
and on-going revisions, 23,040 hours.
Proposed Revisions Only Change in Estimated Annual Burden Hours: FR
Y-14A: -6,346 Hours, FR Y-14Q: -1,088 FR Y-14M: -49,020 Hours.
Proposed Total Estimated Annual Burden Hours: FR Y-14A: Summary,
68,780 hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours;
Regulatory capital transitions, 760 hours; Regulatory capital
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business
plan changes, 380. FR Y-14Q: Securities risk, 2,280 hours; Retail risk,
1,824 hours, Pre-provision net revenue (PPNR), 108,072 hours;
Wholesale, 22,952 hours; Trading, 46,224 hours; Regulatory capital
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours;
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR)
Valuation, 1,288 hours; Supplemental, 608 hours; and Retail Fair Value
Option/Held for Sale (Retail FVO/HFS), 1,440 hours; Counterparty,
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage,
228,660 hours; Home equity, 191,580 hours; and Credit card, 110,160
hours. FR Y-14 On-going automation revisions, 18,720 hours; and
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours;
and on-going revisions, 23,040 hours.
(3) Title of Information Collection: Recordkeeping and Reporting
Requirements Associated with Regulation Y (Capital Plans).
Agency Form Number: Reg Y-13.
OMB Control Number: 7100-0342.
Frequency of Response: Annually.
Affected Public: Businesses or other for-profit.
Respondents: BHCs and IHCs.
Abstract: Regulation Y (12 CFR part 225) requires large bank
holding companies (BHCs) to submit capital plans to the Federal Reserve
on an annual basis and to require such BHCs to request prior approval
from the Federal Reserve under certain circumstances before making a
capital distribution.
Current Actions: The proposed rule contains requirements subject to
the
[[Page 67252]]
PRA. The collection of information revised by this final rule is found
in section 225.8 of Regulation Y (12 CFR part 225). Under section
225.8(f)(2) of the proposal, large and noncomplex firms would no longer
be subject to the provisions of the Board's capital plan rule whereby
the Board can object to a capital plan on the basis of qualitative
deficiencies in the firm's capital planning process. In feedback
meetings that the Board held on CCAR, participants from large and
noncomplex firms expressed the view that the provision of the rule
permitting the Board to object to a capital plan on the basis of
qualitative deficiencies, in their view, required a large and
noncomplex firm to develop a large amount of documentation and stress
test models to the same degree as the largest firms in order to avoid
risk of a public objection to its capital plan. Accordingly, this
revision to section 225.8(f)(2) is expected to reduce the recordkeeping
requirements for large and noncomplex firms by approximately 25
percent, or 3,000 hours for large and noncomplex firms.
The proposed rule defines a large and noncomplex bank holding
company as a bank holding company with average total consolidated
assets of $50 billion or more but less than $250 billion, consolidated
total on-balance sheet foreign exposure of less than $10 billion, and
average total nonbank assets of less than $75 billion. While the total
consolidated assets and on-balance sheet foreign exposure measures are
calculated for purposes of other regulatory requirements, the proposed
average total nonbank assets threshold is not otherwise calculated for
purposes of a regulatory requirement.
For the first calculation date (December 31, 2016), firms will be
required to calculate nonbank assets by aggregating items reported on
other reporting forms. Specifically, nonbank assets would be calculated
as (A) total combined nonbank assets of nonbank subsidiaries, as
reported on line 15a of Schedule PC-B of the Parent Company Only
Financial Statements for Large Holding Companies (FR Y-9LP) as of
December 31, 2016; plus (B) the total amount of equity investments in
nonbank subsidiaries and associated companies as reported on line 2a of
Schedule PC-A of the FR Y-9LP as of December 31, 2016; plus (C) assets
of each Edge and Agreement Corporation, as reported on the Consolidated
Report of Condition and Income for Edge and Agreement Corporations (FR
2886b) as of December 31, 2016, to the extent such corporation is
designated as ``Nonbanking'' in the box on the front page of the FR
2886b; minus (D) assets of a federal savings association, federal
savings bank, or thrift subsidiary, as reported on the Report of
Condition and Income (Call Report) as of December 31, 2016. Performing
this calculation is expected to require 1 hour per firm.
As noted above, for calculation dates following the initial
calculation date, the Federal Reserve is adding a new line item to the
FR Y-9LP (Parent Company Only Financial Statements for Large Holding
Companies) to collect average total nonbank assets; however, for the
December 31, 2016 calculation date, a firm will be required to
calculate the line item based on existing line items. The burden
associated with this line item will be reflected in that collection.
Number of Respondents: 38.
Estimated Average Hours per Response: Annual capital planning
recordkeeping (225.8(e)(1)(i)), 11,920 hours; annual capital planning
reporting (225.8(e)(1)(ii)), 80 hours; annual capital planning
recordkeeping (225.8(e)(1)(iii)), 100 hours; data collections reporting
((225.8(e)(3)(i)-(vi)), 1,005 hours; data collections reporting
(225.8(e)(4)), 100 hours; review of capital plans by the Federal
Reserve reporting (225.8(f)(3)(i)), 16 hours; prior approval request
requirements reporting (225.8(g)(1), (3), & (4)), 100 hours; prior
approval request requirements exceptions (225.8(g)(3)(iii)(A)), 16
hours; prior approval request requirements reports (225.8(g)(6)), 16
hours.
Current Estimated Annual Burden Hours: Annual capital planning
recordkeeping (225.8(e)(1)(i)), 452,960 hours; annual capital planning
reporting (225.8(e)(1)(ii)), 2,240 hours; annual capital planning
recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data collections
reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data collections
reporting (225.8(e)(4)), 1,000 hours; review of capital plans by the
Federal Reserve reporting (225.8(f)(3)(i)), 32 hours; prior approval
request requirements reporting (225.8(g)(1), (3), & (4)), 2,600 hours;
prior approval request requirements exceptions (225.8(g)(3)(iii)(A)),
32 hours; prior approval request requirements reports (225.8(g)(6)), 32
hours.
Proposed Revisions Only Change in Estimated Average Hours per
Response: For large and noncomplex firms: Annual capital planning
recordkeeping (225.8(e)(1)(i)), 8,920 hours.
Proposed Revisions Only Change in Estimated Annual Burden Hours:
Annual capital planning reporting (225.8(e)(1)(ii)): -54,000 hours.
Proposed Total Estimated Annual Burden Hours: Annual capital
planning recordkeeping (225.8(e)(1)(i)) (LISCC and large and complex
firms), 238,400 hours; Annual capital planning recordkeeping
(225.8(e)(1)(i) (large and noncomplex firms), 160,560 hours; annual
capital planning reporting (225.8(e)(1)(ii)), 2,240 hours; annual
capital planning recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data
collections reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data
collections reporting (225.8(e)(4)), 1,000 hours; review of capital
plans by the Federal Reserve reporting (225.8(f)(3)(i)), 32 hours;
prior approval request requirements reporting (225.8(g)(1), (3), &
(4)), 2,600 hours; prior approval request requirements exceptions
(225.8(g)(3)(iii)(A)), 32 hours; prior approval request requirements
reports (225.8(g)(6)), 32 hours.
B. Regulatory Flexibility Act
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., 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).\50\ As of June
30, 2016, there were approximately 594 small state member banks, 3,203
small bank holding companies and 162 small savings and loan holding
companies. The proposed rule would apply only to bank holding companies
with total consolidated asset of $50 billion or more. 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
[[Page 67253]]
impact on a substantial number of small entities.
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\50\ 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 of 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 revised to read as follows:
Sec. 225.8 Capital planning.
(a) Purpose. This section establishes capital planning and prior
notice and approval requirements for capital distributions by certain
bank holding companies.
(b) Scope and reservation of authority--(1) Applicability. Except
as provided in paragraph (c) of this section, this section applies to:
(i) Any top-tier bank holding company domiciled in the United
States with average total consolidated assets of $50 billion or more
($50 billion asset threshold);
(ii) Any other bank holding company domiciled in the United States
that is made subject to this section, in whole or in part, by order of
the Board;
(iii) Any U.S. intermediate holding company subject to this section
pursuant to 12 CFR 252.153; and
(iv) Any nonbank financial company supervised by the Board that is
made subject to this section pursuant to a rule or order of the Board.
(2) Average total consolidated assets. For purposes of this
section, average total consolidated assets means the average of the
total consolidated assets as reported by a bank holding company on its
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)
for the four most recent consecutive quarters. If the bank holding
company has not filed the FR Y-9C for each of the four most recent
consecutive quarters, average total consolidated assets means the
average of the company's total consolidated assets, as reported on the
company's FR Y-9C, for the most recent quarter or consecutive quarters,
as applicable. Average total consolidated assets are measured on the
as-of date of the most recent FR Y-9C used in the calculation of the
average.
(3) Ongoing applicability. A bank holding company (including any
successor bank holding company) that is subject to any requirement in
this section shall remain subject to such requirements unless and until
its total consolidated assets fall below $50 billion for each of four
consecutive quarters, as reported on the FR Y-9C and effective on the
as-of date of the fourth consecutive FR Y-9C.
(4) Reservation of authority. Nothing in this section shall limit
the authority of the Federal Reserve to issue a capital directive or
take any other supervisory or enforcement action, including an action
to address unsafe or unsound practices or conditions or violations of
law.
(5) Rule of construction. Unless the context otherwise requires,
any reference to bank holding company in this section shall include a
U.S. intermediate holding company and shall include a nonbank financial
company supervised by the Board to the extent this section is made
applicable pursuant to a rule or order of the Board.
(c) Transitional arrangements. (1) Transition periods for certain
bank holding companies. (i) A bank holding company that meets the $50
billion asset threshold (as measured under paragraph (b) of this
section) on or before September 30 of a calendar year must comply with
the requirements of this section beginning on January 1 of the next
calendar year, unless that time is extended by the Board in writing.
(ii) A bank holding company that meets the $50 billion asset
threshold after September 30 of a calendar year must comply with the
requirements of this section beginning on January 1 of the second
calendar year after the bank holding company meets the $50 billion
asset threshold, unless that time is extended by the Board in writing.
(iii) The Board or the appropriate Reserve Bank with the
concurrence of the Board, may require a bank holding company described
in paragraph (c)(1)(i) or (ii) of this section to comply with any or
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of
this section if the Board or appropriate Reserve Bank with concurrence
of the Board, determines that the requirement is appropriate on a
different date based on the company's risk profile, scope of operation,
or financial condition and provides prior notice to the company of the
determination.
(2) Transition periods for subsidiaries of certain foreign banking
organizations. (i) U.S. intermediate holding companies. (A) A U.S.
intermediate holding company required to be established or designated
pursuant to 12 CFR 252.153 on or before September 30 of a calendar year
must comply with the requirements of this section beginning on January
1 of the next calendar year, unless that time is extended by the Board
in writing.
[[Page 67254]]
(B) A U.S. intermediate holding company required to be established
or designated pursuant to 12 CFR 252.153 after September 30 of a
calendar year must comply with the requirements of this section
beginning on January 1 of the second calendar year after the U.S.
intermediate holding company is required to be established, unless that
time is extended by the Board in writing.
(C) The Board or the appropriate Reserve Bank with the concurrence
of the Board, may require a U.S. intermediate holding company described
in paragraph (c)(2)(i)(A) or (B) of this section to comply with any or
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of
this section if the Board or appropriate Reserve Bank with concurrence
of the Board, determines that the requirement is appropriate on a
different date based on the company's risk profile, scope of operation,
or financial condition and provides prior notice to the company of the
determination.
(ii) Bank holding company subsidiaries of U.S. intermediate holding
companies required to be established by July 1, 2016. (A)
Notwithstanding any other requirement in this section, a bank holding
company that is a subsidiary of a U.S. intermediate holding company
(or, with the mutual consent of the company and Board, another bank
holding company domiciled in the United States) shall remain subject to
paragraph (e) of this section until December 31, 2017, and shall remain
subject to the requirements of paragraphs (f) and (g) of this section
until the Board issues an objection or non-objection to the capital
plan of the relevant U.S. intermediate holding company.
(B) After the time periods set forth in paragraph (c)(2)(ii)(A) of
this section, this section will cease to apply to a bank holding
company that is a subsidiary of a U.S. intermediate holding company,
unless otherwise determined by the Board in writing.
(d) Definitions. For purposes of this section, the following
definitions apply:
(1) Advanced approaches means the risk-weighted assets calculation
methodologies at 12 CFR part 217, subpart E, as applicable, and any
successor regulation.
(2) Average total nonbank assets means:
(i) For purposes of the capital plan cycle beginning January 1,
2017:
(A) Total combined nonbank assets of nonbank subsidiaries, as
reported on line 15a of Schedule PC-B of the Parent Company Only
Financial Statements for Large Holding Companies (FR Y-9LP) as of
December 31, 2016; plus
(B) The total amount of equity investments in nonbank subsidiaries
and associated companies as reported on line 2a of Schedule PC-A of the
FR Y-9LP as of December 31, 2016 (except that any investments reflected
in (A) may be eliminated); plus
(C) Assets of each Edge and Agreement Corporation, as reported on
the Consolidated Report of Condition and Income for Edge and Agreement
Corporations (FR 2886b) as of December 31, 2016, to the extent such
corporation is designated as ``Nonbanking'' in the box on the front
page of the FR 2886b; minus
(D) Assets of each federal savings association, federal savings
bank, or thrift subsidiary, as reported on the Report of Condition and
Income (Call Report) as of December 31, 2016.
(ii) For purposes of any capital plan cycles beginning on or after
January 1, 2018, the average of the total nonbank assets of a holding
company subject to the Federal Reserve Board's capital plan rule,
calculated in accordance with the instructions to the FR Y-9LP, for the
four most recent consecutive quarters or, if the bank holding company
has not filed the FR Y-9LP for each of the four most recent consecutive
quarters, for the most recent quarter or consecutive quarters, as
applicable.
(3) BHC stress scenario means a scenario designed by a bank holding
company that stresses the specific vulnerabilities of the bank holding
company's risk profile and operations, including those related to the
company's capital adequacy and financial condition.
(4) Capital action means any issuance or redemption of a debt or
equity capital instrument, any capital distribution, and any similar
action that the Federal Reserve determines could impact a bank holding
company's consolidated capital.
(5) Capital distribution means a redemption or repurchase of any
debt or equity capital instrument, a payment of common or preferred
stock dividends, a payment that may be temporarily or permanently
suspended by the issuer on any instrument that is eligible for
inclusion in the numerator of any minimum regulatory capital ratio, and
any similar transaction that the Federal Reserve determines to be in
substance a distribution of capital.
(6) Capital plan means a written presentation of a bank holding
company's capital planning strategies and capital adequacy process that
includes the mandatory elements set forth in paragraph (e)(2) of this
section.
(7) Capital plan cycle means the period beginning on January 1 of a
calendar year and ending on December 31 of that year.
(8) Capital policy means a bank holding company's written
assessment of the principles and guidelines used for capital planning,
capital issuance, capital usage and distributions, including internal
capital goals; the quantitative or qualitative guidelines for capital
distributions; the strategies for addressing potential capital
shortfalls; and the internal governance procedures around capital
policy principles and guidelines.
(9) Large and noncomplex bank holding company means any bank
holding company subject to this section that has, as of December 31 of
the calendar year prior to the capital plan cycle:
(i) Average total consolidated assets of less than $250 billion;
(ii) Consolidated total on-balance sheet foreign exposure at the
most recent year-end equal to less than $10 billion (where total on-
balance sheet foreign exposure equals total foreign countries cross-
border claims on an ultimate-risk basis, plus total foreign countries
claims on local residents on an ultimate-risk basis, plus total foreign
countries fair value of foreign exchange and derivative products,
calculated in accordance with the Federal Financial Institutions
Examination Council (FFIEC) 009 Country Exposure Report); and
(iii) Average total nonbank assets of less than $75 billion.
(10) 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
part 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 217.300; except that
the bank holding company shall not use the advanced approaches to
calculate its regulatory capital ratios.
(11) Nonbank financial company supervised by the Board means a
company that the Financial Stability Oversight Council has determined
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be
supervised by the Board and for which such determination is still in
effect.
[[Page 67255]]
(12) Planning horizon means the period of at least nine consecutive
quarters, beginning with the quarter preceding the quarter in which the
bank holding company submits its capital plan, over which the relevant
projections extend.
(13) Tier 1 capital has the same meaning as under 12 CFR part 217.
(14) U.S. intermediate holding company means the top-tier U.S.
company that is required to be established pursuant to 12 CFR 252.153.
(e) General requirements. (1) Annual capital planning. (i) A bank
holding company must develop and maintain a capital plan.
(ii) A bank holding company must submit its complete capital plan
to the Board and the appropriate Reserve Bank by April 5 of each
calendar year, or such later date as directed by the Board or by the
appropriate Reserve Bank with concurrence of the Board.
(iii) The bank holding company's board of directors or a designated
committee thereof must at least annually and prior to submission of the
capital plan under paragraph (e)(1)(ii) of this section:
(A) Review the robustness of the bank holding company's process for
assessing capital adequacy,
(B) Ensure that any deficiencies in the bank holding company's
process for assessing capital adequacy are appropriately remedied; and
(C) Approve the bank holding company's capital plan.
(2) Mandatory elements of capital plan. A capital plan must contain
at least the following elements:
(i) An assessment of the expected uses and sources of capital over
the planning horizon that reflects the bank holding company's size,
complexity, risk profile, and scope of operations, assuming both
expected and stressful conditions, including:
(A) Estimates of projected revenues, losses, reserves, and pro
forma capital levels, including any minimum regulatory capital ratios
(for example, leverage, tier 1 risk-based, and total risk-based capital
ratios) and any additional capital measures deemed relevant by the bank
holding company, over the planning horizon under expected conditions
and under a range of scenarios, including any scenarios provided by the
Federal Reserve and at least one BHC stress scenario;
(B) A discussion of the results of any stress test required by law
or regulation, and an explanation of how the capital plan takes these
results into account; and
(C) A description of all planned capital actions over the planning
horizon.
(ii) A detailed description of the bank holding company's process
for assessing capital adequacy, including:
(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;
(B) A discussion of how the bank holding company will, under
expected and stressful conditions, maintain sufficient capital to
continue its operations by maintaining ready access to funding, meeting
its obligations to creditors and other counterparties, and continuing
to serve as a credit intermediary;
(iii) The bank holding company's capital policy; and
(iv) A discussion of any expected changes to the bank holding
company's business plan that are likely to have a material impact on
the bank holding company's capital adequacy or liquidity.
(3) Data collection. Upon the request of the Board or appropriate
Reserve Bank, the bank holding company shall provide the Federal
Reserve with information regarding:
(i) The bank holding company's financial condition, including its
capital;
(ii) The bank holding company's structure;
(iii) Amount and risk characteristics of the bank holding company's
on- and off-balance sheet exposures, including exposures within the
bank holding company's trading account, other trading-related exposures
(such as counterparty-credit risk exposures) or other items sensitive
to changes in market factors, including, as appropriate, information
about the sensitivity of positions to changes in market rates and
prices;
(iv) The bank holding company's relevant policies and procedures,
including risk management policies and procedures;
(v) The bank holding company's liquidity profile and management;
(vi) The loss, revenue, and expense estimation models used by the
bank holding company for stress scenario analysis, including supporting
documentation regarding each model's development and validation; and
(vii) Any other relevant qualitative or quantitative information
requested by the Board or by the appropriate Reserve Bank to facilitate
review of the bank holding company's capital plan under this section.
(4) Re-submission of a capital plan. (i) A bank holding company
must update and re-submit its capital plan to the appropriate Reserve
Bank within 30 calendar days of the occurrence of one of the following
events:
(A) The bank holding company determines there has been or will be a
material change in the bank holding company's risk profile, financial
condition, or corporate structure since the bank holding company last
submitted the capital plan to the Board and the appropriate Reserve
Bank under this section; or
(B) The Board or the appropriate Reserve Bank with concurrence of
the Board, directs the bank holding company in writing to revise and
resubmit its capital plan for any of the following reasons:
(1) The capital plan is incomplete or the capital plan, or the bank
holding company's internal capital adequacy process, contains material
weaknesses;
(2) There has been, or will likely be, a material change in the
bank holding company's risk profile (including a material change in its
business strategy or any risk exposure), financial condition, or
corporate structure;
(3) The BHC stress scenario(s) are not appropriate for the bank
holding company's business model and portfolios, or changes in
financial markets or the macro-economic outlook that could have a
material impact on a bank holding company's risk profile and financial
condition require the use of updated scenarios; or
(4) The capital plan or the condition of the bank holding company
raise any of the issues described in paragraph (f)(2)(ii) of this
section.
(ii) A bank holding company may resubmit its capital plan to the
Federal Reserve if the Board or the appropriate Reserve Bank objects to
the capital plan.
(iii) The Board or the appropriate Reserve Bank with concurrence of
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this
section for up to an additional 60 calendar days, or such longer period
as the Board or the appropriate Reserve Bank, with concurrence of the
Board, determines, in its discretion, appropriate.
(iv) Any updated capital plan must satisfy all the requirements of
this section; however, a bank holding company may continue to rely on
information submitted as part of a previously submitted capital plan to
the extent that the information remains accurate and appropriate.
(5) Confidential treatment of information submitted. The
[[Page 67256]]
confidentiality of information submitted to the Board under this
section and related materials shall be determined in accordance with
applicable exemptions under the Freedom of Information Act (5 U.S.C.
552(b)) and the Board's Rules Regarding Availability of Information (12
CFR part 261).
(f) Review of capital plans by the Federal Reserve; publication of
summary results. (1) Considerations and inputs. (i) The Board or the
appropriate Reserve Bank with concurrence of the Board, will consider
the following factors in reviewing a bank holding company's capital
plan:
(A) The comprehensiveness of the capital plan, including the extent
to which the analysis underlying the capital plan captures and
addresses potential risks stemming from activities across the firm and
the company's capital policy;
(B) The reasonableness of the bank holding company's capital plan,
the assumptions and analysis underlying the capital plan, and the
robustness of its capital adequacy process; and
(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.
(ii) The Board or the appropriate Reserve Bank with concurrence of
the Board, will also consider the following information in reviewing a
bank holding company's capital plan:
(A) Relevant supervisory information about the bank holding company
and its subsidiaries;
(B) The bank holding company's regulatory and financial reports, as
well as supporting data that would allow for an analysis of the bank
holding company's loss, revenue, and reserve projections;
(C) As applicable, the Federal Reserve's own pro forma estimates of
the firm's potential losses, revenues, reserves, and resulting capital
adequacy under expected and stressful conditions, including but not
limited to any scenarios required under paragraphs (e)(2)(i)(A) and
(e)(2)(ii) of this section, as well as the results of any stress tests
conducted by the bank holding company or the Federal Reserve; and
(D) Other information requested or required by the Board or the
appropriate Reserve Bank, as well as any other information relevant, or
related, to the bank holding company's capital adequacy.
(2) Federal Reserve action on a capital plan. (i) Timing of action.
The Board or the appropriate Reserve Bank with concurrence of the
Board, will object, in whole or in part, to the capital plan or provide
the bank holding company with a notice of non-objection to the capital
plan:
(A) By June 30 of the calendar year in which a capital plan was
submitted pursuant to paragraph (e)(1)(ii) of this section; and
(B) For a capital plan resubmitted pursuant to paragraph (e)(4) of
this section, within 75 calendar days after the date on which a capital
plan is resubmitted, unless the Board provides notice to the company
that it is extending the time period.
(ii) Objection. (A) Large and noncomplex bank holding companies.
The Board, or the appropriate Reserve Bank with concurrence of the
Board, may object to a capital plan submitted by a large and noncomplex
bank holding company if it determines that 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.
(B) Bank holding companies that are not large and noncomplex bank
holding companies. The Board or the appropriate Reserve Bank with
concurrence of the Board, may object to a capital plan submitted by a
bank holding company that is not a large and noncomplex bank holding
company if it determines that:
(1) 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;
(2) The bank holding company has material unresolved supervisory
issues, including but not limited to issues associated with its capital
adequacy process;
(3) The assumptions and analysis underlying the bank holding
company's capital plan, or the bank holding company's methodologies and
practices that support its capital planning process, are not reasonable
or appropriate; or
(4) The bank holding company's capital planning process or proposed
capital distributions otherwise constitute an unsafe or unsound
practice, or would violate any law, regulation, Board order, directive,
or condition imposed by, or written agreement with, the Board or the
appropriate Reserve Bank. In determining whether a capital plan or any
proposed capital distribution would constitute an unsafe or unsound
practice, the Board or the appropriate Reserve Bank would consider
whether the bank holding company is and would remain in sound financial
condition after giving effect to the capital plan and all proposed
capital distributions.
(iii) Notification of decision. The Board or the appropriate
Reserve Bank will notify the bank holding company in writing of the
reasons for a decision to object to a capital plan.
(iv) General distribution limitation. If the Board or the
appropriate Reserve Bank objects to a capital plan and until such time
as the Board or the appropriate Reserve Bank with concurrence of the
Board, issues a non-objection to the bank holding company's capital
plan, the bank holding company may not make any capital distribution,
other than capital distributions arising from the issuance of a
regulatory capital instrument eligible for inclusion in the numerator
of a minimum regulatory capital ratio or capital distributions with
respect to which the Board or the appropriate Reserve Bank has
indicated in writing its non-objection.
(v) Publication of summary results. The Board may disclose publicly
its decision to object or not object to a bank holding company's
capital plan under this section, along with a summary of the Board's
analyses of that company. Any disclosure under this paragraph will
occur by June 30 of the calendar year in which a capital plan was
submitted pursuant to paragraph (e)(1)(ii) of this section, unless the
Board determines that a later disclosure date is appropriate.
(3) Request for reconsideration or hearing. (i) General. Within 15
calendar days of receipt of a notice of objection to a capital plan by
the Board or the appropriate Reserve Bank:
(A) A bank holding company may submit a written request to the
Board requesting reconsideration of the objection, including an
explanation of why reconsideration should be granted. Within 15
calendar days of receipt of the bank holding company's request, the
Board will notify the company of its decision to affirm or withdraw the
objection to the bank holding company's capital plan or a specific
capital distribution; or
(B) As an alternative to paragraph (f)(3)(i)(A) of this section, a
bank holding company may request an informal hearing on the objection.
(ii) Request for an informal hearing. (A) A request for an informal
hearing shall be in writing and shall be submitted within 15 calendar
days of a notice of an objection. The Board may,
[[Page 67257]]
in its sole discretion, order an informal hearing if the Board finds
that a hearing is appropriate or necessary to resolve disputes
regarding material issues of fact.
(B) An informal hearing shall be held within 30 calendar days of a
request, if granted, provided that the Board may extend this period
upon notice to the requesting party.
(C) Written notice of the final decision of the Board shall be
given to the bank holding company within 60 calendar days of the
conclusion of any informal hearing ordered by the Board, provided that
the Board may extend this period upon notice to the requesting party.
(D) While the Board's final decision is pending and until such time
as the Board or the appropriate Reserve Bank with concurrence of the
Board issues a non-objection to the bank holding company's capital
plan, the bank holding company may not make any capital distribution,
other than those capital distributions with respect to which the Board
or the appropriate Reserve Bank has indicated in writing its non-
objection.
(4) Application of this section to other bank holding companies.
The Board may apply this section, in whole or in part, to any other
bank holding company by order based on the institution's size, level of
complexity, risk profile, scope of operations, or financial condition.
(g) Approval requirements for certain capital actions. (1)
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (f)(2)(i) of this section, a bank holding
company may not make a capital distribution (excluding any capital
distribution arising from the issuance of a regulatory capital
instrument eligible for inclusion in the numerator of a minimum
regulatory capital ratio) under the following circumstances, unless it
receives prior approval from the Board or appropriate Reserve Bank
pursuant to paragraph (g)(5) of this section:
(i) After giving effect to the capital distribution, the bank
holding company would not meet a minimum regulatory capital ratio;
(ii) The Board or the appropriate Reserve Bank with concurrence of
the Board, notifies the company in writing that the Federal Reserve has
determined that the capital distribution would result in a material
adverse change to the organization's capital or liquidity structure or
that the company's earnings were materially underperforming
projections;
(iii) Except as provided in paragraph (g)(2) of this section, the
dollar amount of the capital distribution will exceed the amount
described in the capital plan for which a non-objection was issued
under this section, as measured on an aggregate basis beginning in the
third quarter of the planning horizon through the quarter at issue; or
(iv) The capital distribution would occur after the occurrence of
an event requiring resubmission under paragraphs (e)(4)(i)(A) or (B) of
this section and before the Federal Reserve has acted on the
resubmitted capital plan.
(2) Exception for well capitalized bank holding companies. (i) A
bank holding company may make a capital distribution for which the
dollar amount exceeds the amount described in the capital plan for
which a non-objection was issued under paragraph (f)(2)(i) of this
section if the following conditions are satisfied:
(A) The bank holding company is, and after the capital distribution
would remain, well capitalized as defined in Sec. 225.2(r) of
Regulation Y (12 CFR 225.2(r));
(B) The bank holding company's performance and capital levels are,
and after the capital distribution would remain, consistent with its
projections under expected conditions as set forth in its capital plan
under paragraph (f)(2)(i) of this section;
(C) Until March 31, 2017, the annual aggregate dollar amount of all
capital distributions in the period beginning on July 1 of a calendar
year and ending on June 30 of the following calendar year would not
exceed the total amounts described in the company's capital plan for
which the bank holding company received a notice of non-objection by
more than 1.00 percent multiplied by the bank holding company's tier 1
capital, as reported to the Federal Reserve on the bank holding
company's most recent first-quarter FR Y-9C;
(D) Beginning April 1, 2017, the annual aggregate dollar amount of
all capital distributions in the period beginning on July 1 of a
calendar year and ending on June 30 of the following calendar year
would not exceed the total amounts described in the company's capital
plan for which the bank holding company received a notice of non-
objection by more than 0.25 percent multiplied by the bank holding
company's tier 1 capital, as reported to the Federal Reserve on the
bank holding company's most recent first-quarter FR Y-9C;
(E) Between July 1 of a calendar year and March 15 of the following
calendar year, the bank holding company provides the appropriate
Reserve Bank with notice 15 calendar days prior to a capital
distribution that includes the elements described in paragraph (g)(4)
of this section; and
(F) The Board or the appropriate Reserve Bank with concurrence of
the Board, does not object to the transaction proposed in the notice.
In determining whether to object to the proposed transaction, the Board
or the appropriate Reserve Bank shall apply the criteria described in
paragraph (g)(5)(ii) of this section.
(ii) The exception in this paragraph (g)(2) shall not apply if the
Board or the appropriate Reserve Bank notifies the bank holding company
in writing that it is ineligible for this exception.
(3) Net distribution limitation. (i) General. Notwithstanding a
notice of non-objection under paragraph (f)(2)(i) of this section, a
bank holding company must reduce its capital distributions in
accordance with paragraph (g)(3)(ii) of this section if the bank
holding company raises a smaller dollar amount of capital of a given
category of regulatory capital instruments than it had included in its
capital plan, as measured on an aggregate basis beginning in the third
quarter of the planning horizon through the end of the current quarter.
(ii) Reduction of distributions. (A) Common equity tier 1 capital.
If the bank holding company raises a smaller dollar amount of common
equity tier 1 capital (as defined in 12 CFR 217.2), the bank holding
company must reduce its capital distributions relating to common equity
tier 1 capital such that the dollar amount of the bank holding
company's capital distributions, net of the dollar amount of its
capital raises, (``net distributions'') relating to common equity tier
1 capital is no greater than the dollar amount of net distributions
relating to common equity tier 1 capital included in its capital plan,
as measured on an aggregate basis beginning in the third quarter of the
planning horizon through the end of the current quarter.
(B) Additional tier 1 capital. If the bank holding company raises a
smaller dollar amount of additional tier 1 capital (as defined in 12
CFR 217.2), the bank holding company must reduce its capital
distributions relating to additional tier 1 capital (other than
scheduled payments on additional tier 1 capital instruments) such that
the dollar amount of the bank holding company's net distributions
relating to additional tier 1 capital is no greater than the dollar
amount of net distributions relating to additional tier 1 capital
included in its capital plan, as measured on an aggregate basis
beginning in the third quarter of the planning horizon through the end
of the current quarter.
[[Page 67258]]
(C) Tier 2 capital. If the bank holding company raises a smaller
dollar amount of tier 2 capital (as defined in 12 CFR 217.2), the bank
holding company must reduce its capital distributions relating to tier
2 capital (other than scheduled payments on tier 2 capital instruments)
such that the dollar amount of the bank holding company's net
distributions relating to tier 2 capital is no greater than the dollar
amount of net distributions relating to tier 2 capital included in its
capital plan, as measured on an aggregate basis beginning in the third
quarter of the planning horizon through the end of the current quarter.
(iii) Exceptions. Paragraphs (g)(3)(i) and (g)(3)(ii) of this
section shall not apply:
(A) To the extent that the Board or appropriate Reserve Bank
indicates in writing its non-objection pursuant to paragraph (g)(5) of
this section, following a request for non-objection from the bank
holding company that includes all of the information required to be
submitted under paragraph (g)(4) of this section;
(B) To capital distributions arising from the issuance of a
regulatory capital instrument eligible for inclusion in the numerator
of a minimum regulatory capital ratio that the bank holding company had
not included in its capital plan;
(C) To the extent that the bank holding company raised a smaller
dollar amount of capital in the category of regulatory capital
instruments described in paragraph (g)(3)(i) of this section due to
employee-directed capital issuances related to an employee stock
ownership plan;
(D) To the extent that the bank holding company raised a smaller
dollar amount of capital in the category of regulatory capital
instruments described in paragraph (g)(3)(i) of this section due to a
planned merger or acquisition that is no longer expected to be
consummated or for which the consideration paid is lower than the
projected price in the capital plan;
(E) Until March 31, 2017, to the extent that the dollar amount by
which the bank holding company's net distributions exceed the dollar
amount of net distributions included in its capital plan in the
category of regulatory capital instruments described in paragraph
(g)(3)(i) of this section, as measured on an aggregate basis beginning
in the third quarter of the planning horizon through the end of the
current quarter, is less than 1.00 percent of the bank holding
company's tier 1 capital, as reported to the Federal Reserve on the
bank holding company's most recent first-quarter FR Y-9C; between July
1 of a calendar year and March 15 of the following calendar year, the
bank holding company provides the appropriate Reserve Bank with notice
15 calendar days prior to any capital distribution in that category of
regulatory capital instruments that includes the elements described in
paragraph (g)(4) of this section; and the Board or the appropriate
Reserve Bank with concurrence of the Board, does not object to the
transaction proposed in the notice. In determining whether to object to
the proposed transaction, the Board or the appropriate Reserve Bank
shall apply the criteria described in paragraph (g)(5)(ii) of this
section; or
(F) Beginning April 1, 2017, to the extent that the dollar amount
by which the bank holding company's net distributions exceed the dollar
amount of net distributions included in its capital plan in the
category of regulatory capital instruments described in paragraph
(g)(3)(i) of this section, as measured on an aggregate basis beginning
in the third quarter of the planning horizon through the end of the
current quarter, is less than 0.25 percent of the bank holding
company's tier 1 capital, as reported to the Federal Reserve on the
bank holding company's most recent first-quarter FR Y-9C; between July
1 of a calendar year and March 15 of the following calendar year, the
bank holding company provides the appropriate Reserve Bank with notice
15 calendar days prior to any capital distribution in that category of
regulatory capital instruments that includes the elements described in
paragraph (g)(4) of this section; and the Board or the appropriate
Reserve Bank with concurrence of the Board, does not object to the
transaction proposed in the notice. In determining whether to object to
the proposed transaction, the Board or the appropriate Reserve Bank
shall apply the criteria described in paragraph (g)(5)(ii) of this
section.
(iv) The exceptions in paragraph (g)(3)(iii) shall not apply if the
Board or the appropriate Reserve Bank notifies the bank holding company
in writing that it is ineligible for this exception.
(4) Contents of request. (i) A request for a capital distribution
under this section shall be filed between July 1 of a calendar year and
March 1 of the following calendar year with the appropriate Reserve
Bank and the Board and shall contain the following information:
(A) The bank holding company's current capital plan or an
attestation that there have been no changes to the capital plan since
it was last submitted to the Federal Reserve;
(B) The purpose of the transaction;
(C) A description of the capital distribution, including for
redemptions or repurchases of securities, the gross consideration to be
paid and the terms and sources of funding for the transaction, and for
dividends, the amount of the dividend(s); and
(D) Any additional information requested by the Board or the
appropriate Reserve Bank (which may include, among other things, an
assessment of the bank holding company's capital adequacy under a
revised stress scenario provided by the Federal Reserve, a revised
capital plan, and supporting data).
(ii) Any request submitted with respect to a capital distribution
described in paragraph (g)(1)(i) of this section shall also include a
plan for restoring the bank holding company's capital to an amount
above a minimum level within 30 calendar days and a rationale for why
the capital distribution would be appropriate.
(5) Approval of certain capital distributions. (i) The Board or the
appropriate Reserve Bank with concurrence of the Board, will act on a
request under this paragraph (g)(5) within 30 calendar days after the
receipt of all the information required under paragraph (g)(4) of this
section.
(ii) In acting on a request under this paragraph, the Board or
appropriate Reserve Bank will apply the considerations and principles
in paragraph (f) of this section. In addition, the Board or the
appropriate Reserve Bank may disapprove the transaction if the bank
holding company does not provide all of the information required to be
submitted under paragraph (g)(4) of this section.
(6) Disapproval and hearing. (i) The Board or the appropriate
Reserve Bank will notify the bank holding company in writing of the
reasons for a decision to disapprove any proposed capital distribution.
Within 15 calendar days after receipt of a disapproval by the Board,
the bank holding company may submit a written request for a hearing.
(A) The Board may, in its sole discretion, order an informal
hearing if the Board finds that a hearing is appropriate or necessary
to resolve disputes regarding material issues of fact.
(B) An informal hearing shall be held within 30 calendar days of a
request, if granted, provided that the Board may extend this period
upon notice to the requesting party.
(C) Written notice of the final decision of the Board shall be
given to the bank holding company within 60 calendar days of the
conclusion of any informal hearing ordered by the Board, provided
[[Page 67259]]
that the Board may extend this period upon notice to the requesting
party.
(D) While the Board's final decision is pending and until such time
as the Board or the appropriate Reserve Bank with concurrence of the
Board, approves the capital distribution at issue, the bank holding
company may not make such capital distribution.
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 252.42 is amended by revising paragraph (p) to read as
follows:
Sec. 252.42 Definitions.
* * * * *
(p) Stress test cycle means the period beginning on January 1 of a
calendar year and ending on December 31 of that year.
* * * * *
0
5. Section 252.43 is amended by
0
a. Revising paragraph (b); and
0
b. Removing paragraph (c).
The revision reads as follows:
Sec. 252.43 Applicability.
* * * * *
(b) Transitional arrangements. (1) A bank holding company that
becomes a covered company on or before September 30 of a calendar year
must comply with the requirements of this subpart beginning on January
1 of the second calendar year after the bank holding company becomes a
covered company, unless that time is extended by the Board in writing.
(2) A bank holding company that becomes a covered company after
September 30 of a calendar year must comply with the requirements of
this subpart beginning on January 1 of the third calendar year after
the bank holding company becomes a covered company, unless that time is
extended by the Board in writing.
0
6. Section 252.44 is amended by revising paragraph (b) to read as
follows:
Sec. 252.44 Annual analysis conducted by the Board.
* * * * *
(b) Economic and financial scenarios related to the Board's
analysis. The Board will conduct its analysis under this section using
a minimum of three different scenarios, including a baseline scenario,
adverse scenario, and severely adverse scenario. The Board will notify
covered companies of the scenarios that the Board will apply to conduct
the analysis for each stress test cycle by no later than February 15 of
each year, except with respect to trading or any other components of
the scenarios and any additional scenarios that the Board will apply to
conduct the analysis, which will be communicated by no later than March
1 of that year.
0
7. Section 252.46 is amended by revising paragraph (b)(1) to read as
follows:
Sec. 252.46 Review of the Board's analysis; publication of summary
results.
* * * * *
(b) Publication of results by the Board. (1) The Board will
publicly disclose a summary of the results of the Board's analyses of a
covered company by June 30 of the calendar year in which the stress
test was conducted pursuant to 12 CFR 252.44.
* * * * *
0
8. Section 252.52 is amended by revising paragraphs (k) and (r) to read
as follows:
Sec. 252.52 Definitions.
* * * * *
(k) Planning horizon means the period of at least nine consecutive
quarters, beginning on the first day of a stress test cycle over which
the relevant projections extend.
* * * * *
(r) Stress test cycle means the period beginning on January 1 of a
calendar year and ending on December 31 of that year.
* * * * *
0
9. Section 252.53 is amended by revising paragraph (b) to read as
follows:
Sec. 252.53 Applicability.
* * * * *
(b) Transitional arrangements. (1) A bank holding company that
becomes a covered company on or before September 30 of a calendar year
must comply with the requirements of this subpart beginning on January
1 of the second calendar year after the bank holding company becomes a
covered company, unless that time is extended by the Board in writing.
(2) A bank holding company that becomes a covered company after
September 30 of a calendar year must comply with the requirements of
this subpart beginning on January 1 of the third calendar year after
the bank holding company becomes a covered company, unless that time is
extended by the Board in writing.
0
10. Section 252.54 is amended by revising paragraphs (a), (b)(1),
(b)(2)(i), (b)(4)(i), and (b)(4)(iii) to read as follows:
Sec. 252.54 Annual stress test.
(a) In general. A covered company must conduct an annual stress
test. The stress test must be conducted by April 5 of each calendar
year based on data as of December 31 of the preceding calendar year,
unless the time or the as-of date is extended by the Board in writing.
(b) Scenarios provided by the Board. (1) In general. In conducting
a stress test under this section, a covered company must, at a minimum,
use the scenarios provided by the Board. Except as provided in
paragraphs (b)(2) and (3) of this section, the Board will provide a
description of the scenarios to each covered company no later than
February 15 of the calendar year in which the stress test is performed
pursuant to this section.
(2) Additional components. (i) The Board may require a covered
company with significant trading activity, as determined by the Board
and specified in the Capital Assessments and Stress Testing report (FR
Y-14), to include a trading and counterparty component in its adverse
and severely adverse scenarios in the stress test required by this
section:
(A) For the stress test cycle beginning on January 1, 2017, the
data used in this component must be as of a date selected by the Board
between January 1, 2017 and March 1, 2017, and the Board will
communicate the as-of date and a description of the component to the
company no later than March 1, 2017; and
(B) For the stress test cycle beginning on January 1, 2018, and for
each stress test cycle beginning thereafter, the data used in this
component must be as of a date selected by the Board between October 1
of the previous calendar year and March 1 of the calendar year in which
the stress test is performed pursuant to this section, and the Board
will communicate the as-of date and a description of the component to
the company no later than March 1 of the calendar year in which the
stress test is performed pursuant to this section.
* * * * *
(4) Notice and response--(i) Notification of additional component.
If the Board requires a covered company to include one or more
additional components in its adverse and severely adverse scenarios
under paragraph (b)(2) of this section or to use one or more additional
scenarios under paragraph (b)(3) of this section, the Board will notify
the company in writing. The Board will provide such notification no
later than December 31 of the preceding calendar year. The notification
will
[[Page 67260]]
include a general description of the additional component(s) or
additional scenario(s) and the basis for requiring the company to
include the additional component(s) or additional scenario(s).
* * * * *
(iii) Description of component. The Board will respond in writing
within 14 calendar days of receipt of the company's request. The Board
will provide the covered company with a description of any additional
component(s) or additional scenario(s) by March 1 of the calendar year
in which the stress test is performed pursuant to this section.
0
11. Section 252.55 is amended by revising paragraphs (a), (b)(4)(i),
and (b)(4)(iii) to read as follows:
Sec. 252.55 Mid-cycle stress test.
(a) Mid-cycle stress test requirement. In addition to the stress
test required under Sec. 252.54, a covered company must conduct a mid-
cycle stress test. The stress test must be conducted by September 30 of
each calendar year based on data as of June 30 of that calendar year,
unless the time or the as-of date is extended by the Board in writing.
(b) * * *
(4) Notice and response--(i) Notification of additional component.
If the Board requires a covered company to include one or more
additional components in its adverse and severely adverse scenarios
under paragraph (b)(2) of this section or one or more additional
scenarios under paragraph (b)(3) of this section, the Board will notify
the company in writing. The Board will provide such notification no
later than June 30. The notification will include a general description
of the additional component(s) or additional scenario(s) and the basis
for requiring the company to include the additional component(s) or
additional scenario(s).
* * * * *
(iii) Description of component. The Board will provide the covered
company with a description of any additional component(s) or additional
scenario(s) by September 1 of the calendar year prior to the year in
which the stress test is performed pursuant to this section.
0
12. Section 252.57 is amended by revising paragraph (a) to read as
follows:
Sec. 252.57 Reports of stress test results.
(a) Reports to the Board of stress test results. (1) A covered
company must report the results of the stress test required under Sec.
252.54 to the Board in the manner and form prescribed by the Board.
Such results must be submitted by April 5 of the calendar year in which
the stress test is performed pursuant to 12 CFR 252.54, unless that
time is extended by the Board in writing.
(2) A covered company must report the results of the stress test
required under Sec. 252.55 to the Board in the manner and form
prescribed by the Board. Such results must be submitted by October 5 of
the calendar year in which the stress test is performed pursuant to 12
CFR 252.55, unless that time is extended by the Board in writing.
* * * * *
0
13. Section 252.58 is amended by revising paragraph (a)(1)(ii) to read
as follows:
Sec. 252.58 Disclosure of stress test results.
(a) * * *
(1) * * *
(ii) A covered company must publicly disclose a summary of the
results of the stress test required under Sec. 252.55. This disclosure
must occur in the period beginning on October 5 and ending on November
4 of the calendar year in which the stress test is performed pursuant
to 12 CFR 252.55, unless that time is extended by the Board in writing.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, September 26, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-23629 Filed 9-29-16; 8:45 am]
BILLING CODE 6210-01-P