[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Notices]
[Pages 88239-88241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29329]


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FEDERAL RESERVE SYSTEM


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

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: The Board of Governors of the Federal Reserve System (Board or 
Federal Reserve) is adopting a proposal to extend for three years all 
of the Financial Reports of Foreign Banking Organizations: The 
Financial Statements of U.S. Nonbank Subsidiaries Held by Foreign 
Banking Organizations (FR Y-7N), the Abbreviated Financial Statements 
of U.S. Nonbank Subsidiaries Held by Foreign Banking Organizations (FR 
Y-7NS), and the mandatory Capital and Asset Report for Foreign Banking 
Organizations (FR Y-7Q); with revisions to the FR Y-7Q, effective 
December 31, 2016, except for three new FR Y-7Q items, which are 
effective March 31, 2018.
    On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board authority under the Paperwork Reduction Act 
(PRA) to approve of and assign OMB control numbers to collection of 
information requests and requirements conducted or sponsored by the 
Board. In exercising this delegated authority, the Board is directed to 
take every reasonable step to solicit comment. In determining whether 
to approve a collection of information, the Board will consider all 
comments received from the public and other agencies.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3829. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.

    Final approval under OMB delegated authority of the extension for 
three years, with revision, of the following information collection:
    Report titles: Financial Statements of U.S. Nonbank Subsidiaries 
Held by Foreign Banking Organizations, Abbreviated Financial Statements 
of U.S. Nonbank Subsidiaries Held by Foreign Banking Organizations, and 
Capital and Asset Report for Foreign Banking Organizations.
    Agency form numbers: FR Y-7N, FR Y-7NS, and FR Y-7Q.
    OMB control number: 7100-0125.
    Frequency: Quarterly and annually.
    Effective Dates: Reporting period ending on December 31, 2016, 
except for three new FR Y-7Q items, which are effective March 31, 2018.
    Respondent type: Foreign banking organizations (FBOs).
    Estimated annual reporting hours: FR Y-7N (quarterly): 1,170 hours; 
FR Y-7N (annual): 218 hours; FR Y-7NS: 40 hours; FR Y-7Q (quarterly): 
1,632 hours; FR Y-7Q (annual): 48 hours.
    Estimated average hours per response: FR Y-7N (quarterly): 6.8 
hours; FR Y-7N (annual): 6.8 hours; FR Y-7NS: 1 hour; FR Y-7Q 
(quarterly): 3 hours; FR Y-7Q (annual): 1.5 hours.
    Number of respondents: FR Y-7N (quarterly): 43; FR Y-7N (annual): 
32; FR Y-7NS: 40; FR Y-7Q (quarterly): 136; FR Y-7Q (annual): 32.
    Legal authorization and confidentiality: This information 
collection is mandatory pursuant to section 5(c) of the Bank Holding 
Company Act (12 U.S.C. 1844(c)) and sections 8(c) and 13 of the 
International Banking Act (12 U.S.C. 3106(c) and 3108)). Section 165 of 
the Dodd-Frank Act (12 U.S.C. 5365) directs the Federal Reserve to 
establish enhanced prudential standards for certain companies, 
including certain FBOs. Information disclosed in these reports is 
collected as part of the Board's supervisory process and may be 
accorded confidential treatment under Exemption 8 of the Freedom of 
Information Act (FOIA) (5 U.S.C. 552(b)(8)), but information that is 
required to be disclosed publicly is generally not considered 
confidential. However, individual respondents may request that certain 
data be protected pursuant to Exemptions 4 and 6 (5 U.S.C. 552(b)(4) & 
(6)) of FOIA, where such data relates to trade secrets and financial 
information, or to personal information, respectively. The 
applicability of these exemptions would have to be determined on a 
case-by-case basis.
    Abstract: The FR Y-7N and FR Y-7NS collect financial information 
for non-functionally regulated U.S. nonbank subsidiaries held by FBOs 
other than through a U.S. bank holding company (BHC), FHC, or U.S. 
bank. FBOs file the FR Y-7N quarterly or annually or the FR Y-7NS 
annually predominantly based on asset size thresholds. The FR Y-7Q 
collects consolidated regulatory capital information from all FBOs 
either quarterly or annually. The FR Y-7Q is filed quarterly by FBOs 
that have effectively elected to become U.S. financial holding 
companies (FHCs) and by FBOs that have total consolidated assets of $50 
billion or more, regardless of FHC status. All other FBOs file the FR 
Y-7Q annually.
    Current Actions: On April 4, 2016, the Federal Reserve published a 
notice in the Federal Register requesting public comment for 60 days on 
the extension, with revision, of the FR Y-7N, FR Y-7NS, and FR Y-7Q.\1 
\The comment period for this notice expired on June 3, 2016. In 
general, the commenters supported the proposed changes, but requested 
clarification on the home country capital adequacy certification 
requirement and the confidentiality and disclosure requirements for the 
proposed home country capital information. The Federal Reserve 
previously proposed to collect fourteen

[[Page 88240]]

new data items to monitor compliance with enhanced prudential standards 
for FBOs adopted pursuant to Subparts N and O of Regulation YY. As 
discussed below, as a result of commenters' general concerns regarding 
confidentiality, such as with respect to non-public supervisory capital 
buffers, the Federal Reserve now proposes to collect twelve new data 
items.
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    \1\ 81 FR 19179 (April 4, 2016).
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    On February 18, 2014, the Board approved a final rule, pursuant to 
section 165 of the Dodd-Frank Act, that requires an FBO with total 
consolidated assets of $50 billion or more to certify to the Board that 
it meets capital adequacy standards on a consolidated basis, as 
established by its home-country supervisor, that are consistent with 
the regulatory capital framework published by the Basel Committee on 
Banking Supervision.\2\ This requirement was intended to help ensure 
that the consolidated capital base supporting the activities of U.S. 
branches and agencies remains strong, and to lessen the degree to which 
weaknesses at the consolidated foreign parent could undermine the 
financial strength of its U.S. operations. The following new data items 
would be used to determine whether an FBO with total consolidated 
assets of $50 billion or more meets capital adequacy standards at the 
consolidated level that are consistent with the Basel Capital 
Framework.
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    \2\See 12 CFR part 252. Regulation YY provides that home country 
capital standards that are consistent with the Basel Capital 
Framework include all minimum risk-based capital ratios, any minimum 
leverage ratio, and all restrictions based on any applicable capital 
buffers set forth in ``Basel III: A global regulatory framework for 
more resilient banks and banking systems.'' Basel III was published 
in December 2010 and revised in June 2011. The text is available at 
http://www.bis.org/publ/bcbs189.htm.
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Part 1B (New Section for FBOs >$50 Billion in Total Assets)

    The proposal would require an FBOs with total consolidated assets 
of $50 billion or more to complete a new section, Part 1B, effective 
December 31, 2016 (with three of the proposed items effective March 31, 
2018). Proposed Part 1B would contain 12 items related to home country 
regulatory capital ratios that would be reported on a quarterly 
basis.\3\ The value of each of these items would be calculated on a 
consolidated basis according to the methodologies established by the 
FBO's home-country supervisor that are consistent with the Basel 
Capital Framework, as defined in Regulation YY.\4\ If the home-country 
supervisor has not established capital adequacy standards consistent 
with the Basel Capital Framework, the value of these items would be 
calculated on a pro-forma basis as if the FBO were subject to such 
standards. The proposed line items that would be effective December 31, 
2016, include:
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    \3\The Board had initially proposed to collect two additional 
line items: The Pillar II buffer and any ``other'' applicable 
capital buffer; however, in response to comments on the proposal, 
the Board no longer proposes to collect this information.
    \4\See 12 CFR part 252.143 and 252.154.
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    (1) Common equity tier 1 capital,
    (2) Additional tier 1 capital,
    (3) Tier 1 capital (sum of items 1 and 2),
    (4) Tier 2 capital,
    (5) Total risk-based capital (sum of items 3 and 4),
    (6) Capital conservation buffer,
    (7) Countercyclical capital buffer,
    (8) GSIB buffer,
    (9) Compliance with restrictions on capital distributions and 
discretionary bonus payments associated with a capital buffer.
    The proposed line items that would be effective March 31, 2018, 
include:
    (10) Home country capital measure used in the numerator of the 
leverage ratio as set forth in the Basel Capital Framework,
    (11) Home country exposure measure used in the denominator of the 
leverage ratio as set forth in the Basel Capital Framework,
    (12) Minimum home country leverage ratio (if different from the 
leverage ratio in the Basel Capital Framework, as applicable).

Part 1A (Renaming Existing Part 1 Section Applicable to All FBOs)

    As noted above, Part 1A of the current FR Y-7Q form, which applies 
to all FBOs, collects tier 1 capital, total risk-based capital, risk-
weighted assets, total consolidated assets and total combined assets of 
U.S. operations, net of intercompany balances and transactions between 
U.S. domiciled affiliates, branches, and agencies, and total U.S. non-
branch assets. While the Federal Reserve does not propose to change 
existing items reported in Part 1A of the FR Y-7Q, the proposal would 
modify the instructions to clarify that an FBO would be required to 
report Tier 1 capital and Total risk-based capital only on Part 1B, if 
the FBO's home country methodologies are consistent with the Basel 
Capital Framework.
    The instructions would also clarify the reporting frequency of Part 
1, in light of the new proposed section. Specifically, FBOs with total 
consolidated assets of less than $50 billion and that are not FHCs 
would only file Part 1A on an annual basis. FBOs who have elected to 
become FHCs and do not have $50 billion or more in total consolidated 
assets will file Part 1A on a quarterly basis. FBOs with total 
consolidated assets of $50 billion or more would complete both Part 1A 
and Part 1B on a quarterly basis.
    The Federal Reserve recommends no changes to the reporting 
frequency of the FR Y-7N/NS and FR Y-7Q. The current reporting 
frequencies provide adequate timely data to meet the analytical and 
supervisory needs of the Federal Reserve.

Detailed Discussion of Public Comments

1. Certification Requirement

    A commenter requested guidance on whether an FBO would be deemed to 
satisfy the requirement to report and certify compliance with its home 
country capital adequacy requirements through its FR Y-7Q report. In 
addition, the commenter asked the Board to confirm the as of date and 
frequency of the certification.
    Regulation YY requires an FBO to report compliance with capital 
adequacy measures that are consistent with the Basel Capital Framework 
(as defined in 12 CFR 252.143(a) and Sec.  252.154(a)) concurrently 
with filing the FR Y-7Q; however it does not specify the frequency or 
the as of date for an FBO's certification of compliance with its home 
country capital requirements. The Board confirms that an FBO's 
completion of the FR Y-7Q on a quarterly basis would satisfy both the 
requirement to report and the requirement to certify to the Board its 
compliance with capital adequacy measures that are consistent with the 
Basel Capital Framework. If an FBO is unable to report that it is in 
compliance with such capital adequacy measures, the Board may impose 
requirements, conditions, and restrictions relating to the U.S. 
operations of the FBO.\5\
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    \5\See 12 CFR part 252.143(c) and 252.154(c).
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2. Confidentiality Determinations

    Commenters raised concerns regarding the potential confidentiality 
of two items required to be reported in the proposal that may be 
considered non-public supervisory capital buffers by an FBO's home 
country supervisor: the Pillar II buffer and any ``other'' applicable 
capital buffer. In response to these concerns, the Board has reviewed 
the information it proposed to collect on the FR Y-7Q and has revised 
the proposal to eliminate these two items from the information 
collection and only collect 12 new data items, each of which are 
expected to be disclosed

[[Page 88241]]

publicly under the Basel Capital Framework, to monitor compliance with 
enhanced prudential standards for FBOs in Regulation YY. These 12 new 
data items would include, among other items, information relating to 
the capital conservation buffer, countercyclical capital buffer, and 
global systemically important banking organization capital buffer.
    A commenter also requested that the Board expand the confidential 
treatment for certain of the proposed new items. The proposal stated 
that the Board would determine confidentiality on the proposed items 
reported on the FR Y-7Q on a case-by-case basis. However, the proposal 
noted that some jurisdictions may treat the information collected as 
confidential on a blanket basis on the grounds that a more selective 
confidential treatment could signal an FBO's financial strength or 
weakness and could thereby cause substantial competitive harm. 
Therefore, the proposal invited comment on whether these items should 
qualify for confidential treatment in all cases, such that treating 
this information as confidential on a blanket basis would be 
appropriate.
    In response to the proposal, a commenter suggested the following 
modifications to the Board's proposed ``case-by-case'' approach: (1) 
Where a home country supervisor treats an item included in Part 1B as 
confidential on a blanket basis, the Board likewise should extend 
blanket confidential treatment of that item to all FBOs supervised by 
the home country authority; and (2) where a home country supervisor 
treats an item included in Part 1B as confidential on a case-by-case 
basis, the Board should automatically treat this item as confidential 
for any FBO whose home country supervisor has extended such treatment.
    As discussed above, in response to commenters' general concerns 
regarding confidentiality, the Board has revised the FR Y-7Q to collect 
only information that is expected to be disclosed under the Basel 
Capital Framework, and therefore will be public and not considered 
confidential. The Board further notes that information disclosed in 
these reports would be collected as part of the Board's supervisory 
process and may be accorded confidential treatment under Exemption 8 of 
FOIA. However, individual respondents may request that certain data be 
protected pursuant to Exemptions 4 and 6 of FOIA, where such data 
relates to trade secrets and financial information, or to personal 
information, respectively. The applicability of these exemptions will 
be determined on a case-by-case basis.
    In addition, the proposed modification to the ``case-by-case'' 
approach set forth by one commenter would require the Federal Reserve 
to determine confidentiality for all FBOs supervised by a particular 
home-country authority on a country-by-country basis. An FBO seeking 
confidential treatment for any information reported on the FR Y-7Q must 
file a request pursuant to Exemption 4 of FOIA and state in reasonable 
detail the facts supporting the request and the legal justification for 
the request. Because the FBO is best suited to describe its home 
country supervisor's confidential treatment of information, the Federal 
Reserve relies on information provided by the FBO in making its 
determination of whether the release of that information would cause 
the FBO substantial competitive harm. In addition, the Federal Reserve 
may need additional information to support such a determination, and 
the home country supervisor's treatment of the information alone may 
not meet the standard for confidential treatment in Exemption 4 of FOIA 
in all cases. Accordingly, as proposed, the Federal Reserve would grant 
an FBO's request for confidential status for information reported on 
the FR Y-7Q, pursuant to Exemption 4 of FOIA, only on a case-by-case 
basis.

3. Prohibited Items

    A commenter also requested that the Board confirm that an FBO would 
not be required to report any item where applicable home country law 
prohibits the FBO from disclosing such item to any person, except an 
appropriate home country supervisor, regardless of whether the other 
person would agree to keep such information strictly confidential.
    The Board is authorized by law to collect information from an FBO 
regarding its financial condition and, in submitting to the Board's 
jurisdiction, an FBO is required to provide the Board with adequate 
assurances that information will be made available to the Board on the 
operations or activities of the FBO and any of its affiliates that the 
Board deems necessary to determine and enforce compliance with 
applicable federal banking statutes, including information on its 
consolidated regulatory capital information. Therefore, an FBO is 
required to provide all of the information requested on the FR Y-7Q 
report. However, there could be infrequent instances that may raise 
questions about an FBO's ability to report a particular item on the FR 
Y-7Q if home country law prohibits an FBO from reporting that 
information to the Board, and, in those limited circumstances, the 
Board may consider an FBO's request not to report that information on 
the FR Y-7Q, on a case-by-case basis.

    Board of Governors of the Federal Reserve System, December 2, 
2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-29329 Filed 12-6-16; 8:45 am]
 BILLING CODE 6210-01-P