[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31144-31146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14304]


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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) 
is adopting a proposal to extend for three years, with revision, the 
mandatory Banking Organization Systemic Risk Report (FR Y-15; OMB No. 
7100-0352). The revisions are effective as of the June 30, 2018, report 
date.

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 
or by fax to (202) 395-6974.

SUPPLEMENTARY INFORMATION: On June 15, 1984, the Office of Management 
and Budget (OMB) delegated to the Board authority under the Paperwork 
Reduction Act (PRA) to approve and assign OMB control numbers to 
collection of information requests and requirements conducted or 
sponsored by the Board. Board-approved collections of information are 
incorporated into the official OMB inventory of currently approved 
collections of information. Copies of the Paperwork Reduction Act 
Submission, supporting statements and approved collection of 
information instrument(s) are placed into OMB's public docket files. 
The Board may not conduct or sponsor, and the respondent is not 
required to respond to, an information collection that has been 
extended, revised, or implemented on or after October 1, 1995, unless 
it displays a currently valid OMB control number.

Final Approval Under OMB Delegated Authority of the Extension for Three 
Years, With Revision, of the Following Information Collection

    Report title: Banking Organization Systemic Risk Report.
    Agency form number: FR Y-15.
    OMB control number: 7100-0352.
    Effective date: June 30, 2018.
    Frequency: Quarterly.
    Respondents: U.S. bank holding companies (BHCs), covered savings 
and loan holding companies (SLHCs), and U.S. intermediate holding 
companies (IHCs) of foreign banking organizations with $50 billion or 
more of total consolidated assets, and any BHC designated as a global 
systemically important bank holding company (GSIB) that does not 
otherwise meet the consolidated assets threshold for BHCs.
    Estimated number of respondents: 41.
    Estimated average hours per response: 401 hours.
    Estimated annual burden hours: 65,764 hours.
    General description of report: The FR Y-15 quarterly report 
collects systemic risk data from U.S. bank holding companies (BHCs), 
covered savings and loan holding companies (SLHCs),\1\ and U.S. 
intermediate holding companies (IHCs) with total consolidated assets of 
$50 billion or more, and any BHC identified as a global systemically 
important banking organization (GSIB) based on its method 1 score 
calculated as of December 31 of the previous calendar year.\2\ The 
Board uses the FR Y-15 data to monitor, on an ongoing basis, the 
systemic risk profile of institutions that are subject to enhanced 
prudential standards under section 165 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act).\3\ In addition, 
the FR Y-15 is used to (1) facilitate the implementation of the GSIB 
surcharge rule,\4\ (2) identify other institutions that may present 
significant systemic risk, and (3) analyze the systemic risk 
implications of proposed mergers and acquisitions.
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    \1\ Covered SLHCs are those which are not substantially engaged 
in insurance or commercial activities. See 12 CFR 217.2.
    \2\ See 12 CFR 217.402.
    \3\ 12 U.S.C. 5365.
    \4\ A firm that is identified as a GSIB is required to hold 
additional capital to increase its resiliency in light of the 
greater threat it poses to the financial stability of the United 
States. The Board's rule on the GSIB surcharge establishes the 
criteria for identifying a GSIB and the methods that those firms use 
to calculate a risk-based capital surcharge, which is calibrated to 
each firm's overall systemic risk. See 81 FR 90952 (December 16, 
2016).
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    Legal authorization and confidentiality: The mandatory FR Y-15 is 
authorized by sections 163 and 165 of the Dodd-Frank Act (12 U.S.C. 
5463 and 5365), the International Banking Act (12 U.S.C. 3106 and 
3108), the Bank Holding Company Act (12 U.S.C. 1844), and the Home 
Owners' Loan Act (12 U.S.C. 1467a).
    Most of the data collected on the FR Y-15 is made public unless a 
specific request for confidentiality is submitted by the reporting 
entity, either on the FR Y-15 or on the form from which the data item 
is obtained.\5\ Such information will be accorded confidential 
treatment under Exemption 4 of the Freedom of Information Act (FOIA) (5 
U.S.C. 552(b)(4)) if the submitter substantiates its assertion that 
disclosure would likely cause substantial competitive harm. In 
addition, items 1 through 4 of Schedule G of the FR Y-15, which contain 
granular information regarding the

[[Page 31145]]

reporting entity's short-term funding, will be accorded confidential 
treatment under exemption 4 for observation dates that occur prior to 
the liquidity coverage ratio disclosure standard being implemented.\6\ 
To the extent confidential data collected under the FR Y-15 will be 
used for supervisory purposes, it may be exempt from disclosure under 
Exemption 8 of FOIA (5 U.S.C. 552(b)(8)).
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    \5\ A number of the items in the FR Y-15 are retrieved from the 
FR Y-9C, and certain items may be retrieved from the FFIEC 101 and 
FFIEC 009. Confidential treatment will also extend to any 
automatically-calculated items on the FR Y-15 that have been derived 
from confidential data items and that, if released, would reveal the 
underlying confidential data.
    \6\ The liquidity coverage ratio (LCR) disclosure requirement 
for companies subject to the transition period under 12 CFR 
249.50(a) (i.e., institutions with $700 billion or more in total 
consolidated assets or $10 trillion or more in assets under custody) 
was implemented on April 1, 2017. Therefore, all Schedule G data for 
these firms is already available to the public. The LCR disclosure 
requirement for companies subject to the transition period under 12 
CFR 249.50(b) (i.e., institutions with $250 billion or more in total 
consolidated assets or $10 billion or more in total on-balance sheet 
foreign exposure) was implemented on April 1, 2018. Therefore, all 
Schedule G data for these firms will be made available to the public 
starting with the June 30, 2018, as-of date. The LCR disclosure 
requirement for companies subject to 12 CFR 249, Subpart G will be 
implemented on October 1, 2018. As this will mark the full 
implementation of the LCR disclosure standard, items 1 through 4 of 
Schedule G for all other firms will be made available to the public 
starting with the December 31, 2018, as-of date.
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    Current actions: On August 24, 2017, the Board published a notice 
in the Federal Register (82 FR 40154) requesting public comment for 60 
days on the extension, with revision, of the FR Y-15. The Board 
proposed to amend the FR Y-15 to include Mexican pesos in total 
payments activity rather than as a memorandum item; add securities 
brokers to the definition of financial institutions; expressly include 
derivative transactions where a clearing member bank guarantees 
performance of a client to a central counterparty; and specify how 
certain cleared derivatives transactions are reported. The proposal was 
amended October 18, 2017, to extend the proposed implementation date 
from December 31, 2017, to March 31, 2018, and to extend the public 
comment period for the proposal for an additional 30 days (82 FR 
49608). The comment period for the proposal expired on November 23, 
2017.
    The Board received seven comments on the proposal. One commenter 
expressed general support of the proposal. Six comments focused on the 
Board's proposal to include in Schedule D, item 1 the notional amount 
of over-the-counter (OTC) derivative transactions where a clearing 
member bank guarantees the performance of a client to a central 
counterparty (CCP). The comments are discussed below. The comments did 
not address the other proposed changes in detail and either supported 
or did not object to the other proposed changes.

Detailed Discussion of Public Comments

Comments Related to the Complexity Indicator

    Commenters noted that derivatives are cleared using two models: The 
principal model, where the banking organization facilitates the 
clearing of derivatives by taking opposing positions with the client 
and the CCP; and the agency model, where a clearing member banking 
organization, acting as an agent, guarantees the performance of the 
client to a CCP. The current reporting instructions for derivative 
contracts cleared through a CCP in Schedule D, item 1 state that, when 
the reporting banking organization acts as a financial intermediary 
under the principal model, the notional amounts for each contract--that 
is, the transaction with the client and the transaction with the CCP--
should be reported. In cases where a clearing member banking 
organization acts as an agent, the current instructions state that the 
bank should report the notional amount when the bank guarantees the 
performance of a CCP to a client. As clearing member banking 
organizations rarely guarantee the performance of a CCP to a client, 
the amount of derivatives reported under the agency model is low.
    The proposal would have revised the instructions to require 
reporting of derivative transactions where a clearing member bank 
guarantees the performance of a client to a CCP under the agency model, 
thereby increasing parity between the two clearing models.
    One commenter observed that shifts in global clearing activity 
since 2012 have led to widespread adoption of the agency model of 
clearing in lieu of the principal model, obviating the need to mitigate 
the differences in reporting between the models. Commenters also argued 
that the risk associated with client-cleared transactions would have 
been overstated under the proposal and that the risks associated with 
these transactions are already appropriately captured in total exposure 
(Schedule A, item 1(h)), intra-financial system assets (Schedule B, 
items 5(a) and 5(b)), and intra-financial system liabilities (Schedule 
B, items 11(a) and 11(b)). These commenters stated that banking 
organizations engaged in client clearing businesses focus only on the 
credit risk of their clients and the imposition of applicable credit 
limits. Commenters argued that this significantly reduces the 
complexity of the activity and, therefore, the client leg of these 
transactions should not be included in the complexity indicator.
    After considering the comments, the Board has decided not to adopt 
the proposed reporting of derivative transactions where a clearing 
member bank guarantees the performance of a client to a CCP in Schedule 
D, item 1. Although derivatives are often complex, the Board does not 
believe it is appropriate at this time to treat the client leg of a 
cleared transaction in the agency model as more complex than a simple 
credit exposure, and therefore does not believe it is currently 
necessary to include these exposures in the complexity indicator. 
Further, part of the motivation for including the client leg of the 
agency model was to make sure that, for a regulatory framework that 
encompasses multiple models of clearing, no one model receives 
significantly more or less representation with respect to the GSIB 
indicators. The proposal was intended in part to ensure that the agency 
model would be adequately included in the GSIB indicators compared to 
the principal model. However, the expansion in the availability and 
overall use of the agency model somewhat mitigates concerns about the 
relative treatment of client-cleared transactions between respondents, 
and the Board is thus not currently concerned that excluding the client 
leg from the GSIB indicators will result in a significant disparity 
among reporters. Because the two clearing models remain, however, the 
Board may need to address inequitable treatment of client-cleared 
transactions in the future if the principal model again becomes more 
common.

Comments Related to the Interconnectedness Indicators

    Consistent with the proposed change to Schedule D, item 1 discussed 
above, the Board also proposed to revise the instructions to Schedule 
B, items 5(a) and 11(a) for reporting derivative contracts cleared 
under the agency model. The current instructions state that the bank 
should report the net positive or net negative fair value when the bank 
guarantees the performance of a CCP to a client. As noted, this rarely 
occurs, resulting in almost no reporting of derivatives under the 
agency model in these two items on Schedule B.
    Several commenters stated that requiring cleared derivative 
transactions to be reported where the bank guarantees the performance 
of a financial institution client could discourage derivative clearing 
activities, contrary to public policy goals, because client clearing of 
derivatives may reduce systemic risk. Additionally, these

[[Page 31146]]

commenters argued that the proposed changes could result in the GSIB 
surcharge of several firms increasing, which, in turn, could lead these 
firms to increase clearing costs for derivative end-users.
    After considering the comments, the Board is not adopting its 
proposal with respect to reporting derivatives under the agency model 
on Schedule B in order to allow additional time to consider how to 
cover such activity in the context of interconnectedness. The Board 
will continue to consider whether agency clearing should be 
incorporated into the interconnectedness measures or elsewhere.

Other Comments Received

    No comments were received regarding the inclusion of Mexican pesos 
in total payments activity or the addition of securities brokers to the 
definition of financial institution. Accordingly, the Board is adopting 
revisions to the FR Y-15 reporting form and instructions to include 
Mexican pesos in total payments activity on Schedule C and remove it 
from the Memorandum items, and to add securities brokers to the 
definition of financial institutions in the instructions for Schedule 
B. These changes are effective for the June 30, 2018, reporting date.
    Several commenters stated that the proposed changes to the 
reporting of OTC derivatives in Schedule D would make the FR Y-15 
inconsistent with the Basel Committee GSIB assessment reporting 
instructions.\7\ In addition, certain commenters stated that the 
proposed revisions to Schedule B, items 5(a) and 11(a), and Schedule D, 
item 1, were inconsistent with the Administrative Procedure Act (APA). 
The Board is not adopting these proposed changes, making these 
arguments moot.\8\
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    \7\ The international GSIB assessment reporting instructions for 
year-end 2017 are available at www.bis.org/bcbs/gsib/reporting_instructions.htm.
    \8\ Even if the argument regarding the APA were not moot, the 
Board would not have violated the APA if it decided to implement the 
proposed revisions to Schedule B, items 5(a) and 11(a), and Schedule 
D, item 1. The proposed revisions to the FR Y-15 constitute an 
interpretive rule or general statement of policy, and therefore may 
be adopted without the publication of a general notice of proposed 
rulemaking in the Federal Register. Even if such publication were 
necessary to adopt the proposed revisions, this requirement was 
satisfied because the proposal was published for comment in the 
Federal Register for a 60-day comment period. After receiving 
initial feedback on the proposal, the comment period was extended 
for 30 days to solicit additional feedback. Moreover, redlined 
forms, instructions, and an OMB supporting statement were made 
available on the Board's public website. The materials afforded 
commenters the opportunity to provide specific feedback regarding 
the exact changes being proposed. Indeed, commenters provided 
significant feedback based on the proposal.
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    One commenter noted that the definition of ``financial 
institution'' in the FR Y-15 is different from other regulatory reports 
and recommended aligning the varying definitions. In response, the 
Board acknowledges that its regulations and reporting sometimes use 
differing definitions for similar concepts and that this may require 
firms to track differences among the definitions. Firms should review 
the definition of ``financial institution'' in the instructions of the 
form on which they are reporting and should not look to similar 
definitions in other forms as dispositive for appropriate reporting on 
the FR Y-15.
    A commenter also asked for clarification about whether securities 
financing transactions follow the regulatory capital rule definition of 
repo-style transactions. As described in the General Instructions of 
Schedule A, several items involve securities financing transactions 
(i.e., repo-style transactions), which are transactions such as 
repurchase agreements, reverse repurchase agreements, and securities 
lending and borrowing, where the value of the transactions depends on 
the market valuations and the transactions are often subject to margin 
agreements. For purposes of reporting on the FR Y-15, the intent is 
that securities financing transactions are synonymous with repo-style 
transactions under the regulatory capital rule. In a future update of 
the FR Y-15, the Board will work to replace the term ``securities 
financing transactions'' with ``repo-style transactions'' to better 
align the FR Y-15 language with the regulatory capital rule.
    In addition, a commenter asked for clarification regarding 
potential inconsistencies between similar items that are reported on 
different reporting forms. In particular, the commenter noted that the 
instructions for the FR Y-15, FFIEC 101 (Regulatory Capital Reporting 
for Institutions Subject to the Advanced Capital Adequacy Framework), 
and FR Y-14Q (Capital Assessments and Stress Testing) do not 
consistently allow for a reduction in fair value of sold credit 
protection. The Board will conduct a coordinated effort with the other 
banking agencies on changes to the FFIEC 101 and the FR Y-14 to ensure 
that the instructions appropriately clarify how any adjustments for 
sold credit protection should be reported.\9\
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    \9\ Any changes to these reporting forms would have to be 
proposed in a future Federal Register notice with a 60-day comment 
period, as required by the Paperwork Reduction Act (PRA).
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    Further, a commenter asked for clarification regarding the 
reporting of holdings of equity investments in unconsolidated 
investment funds sponsored or administered by the respondent. 
Specifically, the commenter wanted to know whether such investments 
would be reported as equity securities in Schedule B, item 3(e). Per 
the general instructions for Schedule B, item 3, firms must include 
``securities issued by equity-accounted associates (i.e., associated 
companies and affiliates accounted for under the equity method of 
accounting) and special purpose entities (SPEs) that are not part of 
the consolidated entity for regulatory purposes.'' Therefore, such 
equity investments would be included in item 3(e).
    A commenter also requested clarification on how collateral may 
reduce the exposure reported in the FR Y-15, Schedule B, items 5(a) and 
11(a). For item 5(a), in cases where a qualifying master netting 
agreement is in place, a reporting bank may reduce its value of 
derivative assets by subtracting the net collateral position from the 
underlying obligation. In circumstances where the net collateral 
exceeds the payment obligation, the bank should report a fair value of 
zero for the netting set. Similarly, for item 11(a), in cases where a 
qualifying master netting agreement is in place, a reporting bank may 
reduce its value of derivative liabilities exposure by subtracting the 
net collateral position from the underlying obligation. In 
circumstances where the net collateral exceeds the payment obligation 
owed to the counterparty, the bank should report a fair value of zero 
for the netting set.

    Board of Governors of the Federal Reserve System, June 28, 2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2018-14304 Filed 7-2-18; 8:45 am]
 BILLING CODE 6210-01-P