[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Rules and Regulations]
[Pages 7951-7954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03687]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / 
Rules and Regulations  

[[Page 7951]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 46

[Docket ID OCC-2017-0021]
RIN 1557-AE28


Annual Stress Test--Technical and Conforming Changes

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: On October 27, 2017, the Office of the Comptroller of the 
Currency (OCC) published a proposed rule that would have made several 
revisions to its stress testing regulation. The OCC is now adopting the 
proposed rule as final. The final rule changes the range of possible 
``as-of'' dates used in the global market shock component to conform to 
changes already made by the Board of Governors of the Federal Reserve 
System (Board) to its stress testing regulations. The final rule also 
changes the transition process for covered institutions with $50 
billion or more in assets. Under the final rule, a covered institution 
that becomes an over $50 billion covered institution, as that term is 
defined in the OCC stress testing regulation, before September 30 will 
become subject to the requirements applicable to an over $50 billion 
covered institution beginning on January 1 of the second calendar year 
after the covered institution becomes an over $50 billion covered 
institution, and a covered institution that becomes an over $50 billion 
covered institution after September 30 will become subject to the 
requirements applicable to an over $50 billion covered institution 
beginning on January 1 of the third calendar year after the covered 
institution becomes an over $50 billion covered institution. The final 
rule also makes certain technical changes to clarify the requirements 
of the OCC's stress testing regulation.

DATES: The rule is effective March 26, 2018.

FOR FURTHER INFORMATION CONTACT: Hein Bogaard, Lead Economic Expert, 
International Analysis and Banking Condition, (202) 649-5450; Andrew 
Tschirhart, Financial Analyst, Large Bank Supervision, (202) 649-6210; 
Kari Falkenborg, Senior Financial Analyst, Midsize and Community Bank 
Supervision, (312) 917-5000; Henry Barkhausen, Counsel, or Ron 
Shimabukuro, Senior Counsel, Legislative and Regulatory Activities 
Division, (202) 649-5490; for persons who are deaf or hearing impaired, 
TTY, (202) 649-5597.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \1\ (``Dodd-Frank Act'') requires two types of stress 
tests. Section 165(i)(1) requires the Board to conduct annual stress 
tests of holding companies with $50 billion or more in assets 
(``supervisory stress tests''). Section 165(i)(2) requires the federal 
banking agencies to issue regulations requiring financial companies 
with more than $10 billion in assets to conduct annual stress tests 
themselves (``company-run stress tests''). In October 2012, the OCC, 
the Board, and the Federal Deposit Insurance Corporation issued final 
rules implementing the company-run stress tests.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
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    The Dodd-Frank Act requires that the OCC and other federal primary 
financial regulatory agencies issue consistent and comparable 
regulations to implement the statutory stress testing requirement. In 
order to fulfill this requirement and minimize regulatory burden, the 
OCC has worked to ensure that its stress testing regulation remains 
consistent and comparable to the regulations enacted by other 
regulatory agencies, including the Board.

II. Description of the Final Rule

A. New Range of Possible As-Of Dates for Trading and Counterparty 
Scenario Component

    Under 12 CFR 46.5(c) the OCC may require a covered institution with 
significant trading activities to include trading and counterparty 
components in its adverse and severely adverse scenarios. The trading 
and counterparty position data to be used in this component is as of a 
date between January 1 and March 1 of a calendar year. On February 3, 
2017, the Board issued a final rule that extended this range to run 
from October 1 of the calendar year preceding the year of the stress 
test to March 1 of the calendar year of the stress test.\2\ The 
proposed rule would have made this same change to the OCC's stress 
testing regulation. The OCC received no comments on this change and is 
adopting the change as proposed. Extending this range will increase the 
OCC's flexibility to choose an appropriate as-of date. The OCC 
continues to coordinate its stress testing program with the Board in 
order to minimize regulatory burden.
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    \2\ 82 FR 9308 (February 3, 2017).
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B. New Applicability Transition and Terminology for Covered 
Institutions With $50 Billion or More in Assets

    The proposed rule would have changed the term ``over $50 billion 
covered institution'' to ``$50 billion or over covered institution.'' 
The change would not have altered the scope of this defined term and 
would not change the substantive requirements of the regulation. The 
OCC did not receive any comments on this change and is adopting the 
change as proposed. The new defined term will be a more precise 
description of the entities included within this category, which 
includes all national banks and federal savings associations ``with 
average total consolidated assets . . . that are not less than $50 
billion.'' \3\ While the final rule will change the defined term ``over 
$50 billion covered institution'' to ``$50 billion or over covered 
institution,'' this supplementary information section will continue to 
use the defined term ``over $50 billion covered institution'' since 
that is the term used in the current regulatory text.
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    \3\ 12 CFR 46.2.
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    The proposed rule would also have changed the transition process 
for covered institutions that become an ``over $50 billion covered 
institution.'' On February 3, 2017, the Board issued a final rule that 
would provide additional time for bank holding companies that cross the 
$50 billion

[[Page 7952]]

asset threshold close to the April 5 submission date.\4\ The proposed 
rule would have made a parallel amendment to the OCC's stress testing 
regulation. The OCC did not receive any comments addressing this change 
and is adopting the change as proposed. Under the final rule, a 
national bank or federal savings association that becomes an over $50 
billion covered institution in the fourth quarter of a calendar year 
\5\ will not be subject to the stress testing requirements applicable 
to over $50 billion covered institutions until the third year after it 
crosses the asset threshold. For example, if a national bank or federal 
savings association became an over $50 billion covered institution on 
September 15, 2017, the institution would be expected to comply with 
the requirements applicable to over $50 billion covered institutions 
beginning in 2019 and file the OCC DFAST-14A in April 2019. If a 
national bank or federal savings association became an over $50 billion 
covered institution on October 15, 2017, the institution would be 
required to comply with the stress testing requirements applicable to 
over $50 billion covered institutions beginning in 2020 and file the 
OCC DFAST-14A in April 2020.
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    \4\ 82 FR 9308 (February 3, 2017).
    \5\ An institution becomes an over $50 billion covered 
institution when its average total consolidated assets, as reported 
on the covered institution's Call Reports, for the four most recent 
consecutive quarters, equals $50 billion or more. 12 CFR 46.3(a).
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    The stress testing timeline and transition process for national 
banks or federal savings associations which become $10 to $50 billion 
covered institutions remain unchanged. A national bank or federal 
savings association that becomes a $10 to $50 billion covered 
institution on or before March 31 of a given year would be required to 
conduct its first stress test in the next calendar year. For example, a 
national bank or federal savings association that becomes a $10 to $50 
billion covered institution as of March 31, 2017, would be required to 
conduct its first stress test in the stress testing cycle beginning 
January 1, 2018. A national bank or federal savings association that 
becomes a $10 to $50 billion covered institution after March 31 of a 
given year would be required to conduct its first stress test in the 
second calendar year after the date the national bank or federal 
savings association becomes a covered institution. For example, a 
national bank or federal savings association that becomes a $10 to $50 
billion covered institution on June 30, 2017 would be required to 
conduct its first stress test in the stress testing cycle beginning 
January 1, 2019.

C. Remove Obsolete Transition Language

    In 2014 the OCC, in coordination with the Board and Federal Deposit 
Insurance Corporation, shifted the dates of the annual stress testing 
cycle by approximately three months.\6\ The OCC's stress testing 
regulation continues to include transition language to facilitate this 
schedule shift. The transition to the new schedule is now complete, and 
the final rule removes this obsolete transition language.
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    \6\ 79 FR 71630 (December 3, 2014).
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III. Comments

    The OCC received three comments on the proposed rule from 
individuals. Two of the comments did not address the contents of the 
proposed rule or stress testing. One comment mentioned stress testing 
but was very brief and did not make any specific recommendations. 
Accordingly, the OCC is adopting the final rule as proposed.

IV. Regulatory Analysis

Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520), the 
OCC may not conduct or sponsor, and a person is not required to respond 
to, an information collection unless the information collection 
displays a valid Office of Management and Budget (OMB) control number. 
This final rule amends 12 CFR part 46, which has an approved 
information collection under the PRA (OMB Control No. 1557-0319). The 
amendments do not introduce any new collections of information, nor do 
they amend 12 CFR part 46 in a way that modifies the collection of 
information that OMB has approved. Therefore, this final rule does not 
require a PRA submission to OMB.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires generally that, in connection with a final rule, an agency 
prepare and make available for public comment a regulatory flexibility 
analysis that describes the impact of the rule on small entities. 
However, the regulatory flexibility analysis otherwise required under 
the RFA is not required if an agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities (defined in regulations promulgated by the Small Business 
Administration (SBA) to include banking organizations with total assets 
of less than or equal to $550 million) and publishes its certification 
and a brief explanatory statement in the Federal Register together with 
the rule.
    As discussed in the SUPPLEMENTARY INFORMATION section, the final 
rule will only affect institutions with more than $10 billion in total 
assets. Therefore, the rule will not affect any small entities. As 
such, pursuant to section 605(b) of the RFA, the OCC certifies that 
this final rule would not have a significant economic impact on a 
substantial number of small entities because no small national banks or 
federal savings associations would be affected by the final rule. 
Accordingly, a regulatory flexibility analysis is not required.

Unfunded Mandates Reform Act

    The OCC has analyzed the final rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this 
analysis, the OCC considered whether the final rule includes a federal 
mandate that may result in the expenditure by state, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). The 
OCC has determined that this final rule will not result in expenditures 
by state, local, and tribal governments, or the private sector, of $100 
million or more in any one year. Accordingly, this final rule is not 
subject to section 202 of the UMRA.

Riegle Community Development and Regulatory Improvement Act of 1994

    The Riegle Community Development and Regulatory Improvement Act of 
1994 (RCDRIA) requires that each federal banking agency, in determining 
the effective date and administrative compliance requirements for new 
regulations that impose additional reporting, disclosure, or other 
requirements on insured depository institutions, consider, consistent 
with principles of safety and soundness and the public interest, any 
administrative burdens that such regulations would place on depository 
institutions, including small depository institutions, and customers of 
depository institutions, as well as the benefits of such regulations. 
In addition, new regulations and amendments to regulations that impose 
additional reporting, disclosure, or other new requirements on insured 
depository institutions generally must take effect on the first day of 
a calendar quarter that begins on or after the date on which the 
regulations are published in final form.\7\ The final rule would not 
impose

[[Page 7953]]

additional reporting, disclosure, or other requirements; therefore the 
requirements of the RCDRIA do not apply.
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    \7\ 12 U.S.C. 4802.
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Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The OCC has sought to present the 
final rule in a simple and straightforward manner. The OCC did not 
receive any comments on its use of plain language.

List of Subjects in 12 CFR Part 46

    Banking, Banks, Capital, Disclosures, National banks, 
Recordkeeping, Risk, Savings associations, Stress test.

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends 12 CFR 
part 46 as follows:

PART 46--ANNUAL STRESS TEST

0
1. The authority citation for part 46 continues to read as follows:

    Authority:  12 U.S.C. 93a; 1463(a)(2); 5365(i)(2); and 
5412(b)(2)(B).

0
2. Section 46.2 is amended by:
0
a. Removing the phrase ``an over $50 billion covered institution'' and 
adding the phrase ``a $50 billion or over covered institution'' in its 
place in the definition of ``covered institution''; and
0
b. Removing the definition of ``over $50 billion covered institution'' 
and adding the definition for ``$50 billion or over covered 
institution'' in alphabetical order.
    The addition reads as follows:


Sec.  46.2  Definitions.

* * * * *
    $50 billion or over covered institution means a national bank or 
Federal savings association with average total consolidated assets, 
calculated as required under this part, that are not less than $50 
billion.
* * * * *

0
3. Section 46.3 is amended by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraphs (c) through (e) as paragraphs (b) through 
(d), respectively;
0
c. Revising newly redesignated paragraphs (b) and (c); and
0
d. Removing the phrase ``an over $50 billion covered institution'' and 
adding the phrase ``a $50 billion or over covered institution'' in its 
place wherever it appears in newly redesignated paragraph (d).
    The revisions read as follows:


Sec.  46.3   Applicability.

* * * * *
    (b) Covered institutions that become subject to stress testing 
requirements. A national bank or Federal savings association that 
becomes a $10 to $50 billion covered institution on or before March 31 
of a given year shall conduct its first annual stress test under this 
part in the next calendar year after the date the national bank or 
Federal savings association becomes a $10 to $50 billion covered 
institution, unless that time is extended by the OCC in writing. A 
national bank or Federal savings association that becomes a $10 to $50 
billion covered institution after March 31 of a given year shall 
conduct its first annual stress test under this part in the second 
calendar year after the calendar year in which the national bank or 
Federal savings association becomes a $10 to $50 billion covered 
institution, unless that time is extended by the OCC in writing.
    (c) Ceasing to be a covered institution or changing categories. (1) 
A covered institution shall remain subject to the stress test 
requirements based on its applicable category, as defined in Sec.  
46.2, unless and until total consolidated assets of the covered 
institution falls below the relevant size threshold for each of four 
consecutive quarters as reported by the covered institution's most 
recent Call Reports. The calculation shall be effective on the ``as 
of'' date of the fourth consecutive Call Report.
    (2) Notwithstanding paragraph (c)(1) of this section, a national 
bank or Federal savings association that becomes a $50 billion or over 
covered institution, whether by migrating from being a $10 to $50 
billion covered institution or by directly becoming a $50 billion or 
over covered institution, after September 30 of a calendar year must 
comply with the requirements applicable to a $50 billion or over 
covered institution beginning on January 1 of the third calendar year 
after the national bank or Federal savings association becomes a $50 
billion or over covered institution, unless that time is extended by 
the OCC in writing. A national bank or Federal savings association that 
becomes a $50 billion or over covered institution on or before 
September 30 of a calendar year must comply with the requirements 
applicable to a $50 billion or over covered institution beginning on 
January 1 of the second calendar year after the national bank or 
Federal savings association becomes a $50 billion or over covered 
institution, unless that time is extended by the OCC in writing.
* * * * *
0
4. Revise Sec.  46.5 to read as follows:


Sec.  46.5   Annual stress test.

    Each covered institution must conduct the annual stress test under 
this part subject to the following requirements:
    (a) Financial data. A covered institution must use financial data 
as of December 31 of the previous calendar year.
    (b) Scenarios provided by the OCC. In conducting the stress test 
under this part, each covered institution must use the scenarios 
provided by the OCC. The scenarios provided by the OCC will reflect a 
minimum of three sets of economic and financial conditions, including 
baseline, adverse, and severely adverse scenarios. The OCC will provide 
a description of the scenarios required to be used by each covered 
institution no later than February 15 of that calendar year.
    (c) Significant trading activities. The OCC may require a covered 
institution with significant trading activities, as determined by the 
OCC, to include trading and counterparty components in its adverse and 
severely adverse scenarios. The trading and counterparty position data 
to be used in this component will be as of a date between October 1 of 
the previous calendar year and March 1 of that calendar year in which 
the stress test is performed, and the OCC will communicate a 
description of the component to the covered institution no later than 
March 1 of that calendar year.
    (d) Use of stress test results. The board of directors and senior 
management of each covered institution must consider the results of the 
stress tests conducted under this section in the normal course of 
business, including but not limited to the covered institution's 
capital planning, assessment of capital adequacy, and risk management 
practices.

0
5. Section 46.7 is amended by revising paragraphs (a) and (b) to read 
as follows:


Sec.  46.7  Reports to the Office of the Comptroller of the Currency 
and the Federal Reserve Board.

    (a) $10 to $50 billion covered institution. A $10 to $50 billion 
covered institution must report to the OCC and to the Board of 
Governors of the Federal Reserve System, on or before July 31, the 
results of the stress test in the manner and form specified by the OCC.
    (b) $50 billion or over covered institution. A $50 billion or over 
covered institution must report to the

[[Page 7954]]

OCC and to the Board of Governors of the Federal Reserve System, on or 
before April 5, the results of the stress test in the manner and form 
specified by the OCC.
* * * * *

0
6. Section 46.8 is amended by revising paragraph (a) to read as 
follows:


Sec.  46.8  Publication of disclosures.

    (a) Publication date. (1) $50 billion or over covered institution. 
A $50 billion or over covered institution must publish a summary of the 
results of its annual stress test in the period starting June 15 and 
ending July 15 provided:
    (i) Unless the OCC determines otherwise, if the $50 billion or over 
covered institution is a consolidated subsidiary of a bank holding 
company or savings and loan holding company subject to supervisory 
stress tests conducted by the Board of Governors of the Federal Reserve 
System pursuant to 12 CFR part 252, then within the June 15 to July 15 
period such covered institution may not publish the required summary of 
its annual stress test earlier than the date that the Board of 
Governors of the Federal Reserve System publishes the supervisory 
stress test results of the covered bank's parent holding company.
    (ii) If the Board of Governors of the Federal Reserve System 
publishes the supervisory stress test results of the covered 
institution's parent holding company prior to June 15, then such 
covered institution may publish its stress test results prior to June 
15, but no later than July 15, through actual publication by the 
covered institution or through publication by the parent holding 
company pursuant to paragraph (b) of this section.
    (2) $10 to $50 billion covered institution. A $10 to $50 billion 
covered institution must publish a summary of the results of its annual 
stress test in the period starting October 15 and ending October 31.
* * * * *

    Dated: February 13, 2018.
Joseph Otting,
Comptroller of the Currency.
[FR Doc. 2018-03687 Filed 2-22-18; 8:45 am]
 BILLING CODE 4810-33-P