[Federal Register Volume 83, Number 204 (Monday, October 22, 2018)]
[Notices]
[Pages 53248-53250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22914]


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FEDERAL RESERVE SYSTEM


Proposed Agency Information Collection Activities; Comment 
Request

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice, request for comment.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
invites comment on a proposal to extend for three years, without 
revision, the Basel II Interagency Pillar 2 Supervisory Guidance 
(Pillar 2 Guidance) (FR 4199; OMB No. 7100-0320).

DATES: Comments must be submitted on or before December 21, 2018.

ADDRESSES: You may submit comments, identified by FR 4199, by any of 
the following methods:
     Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Email: [email protected]. Include OMB 
number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.

All public comments are available from the Board's website at http://www.federalreserve.gov/apps/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 a.m. and 5 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.
    Additionally, commenters may send a copy of their comments to the 
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.

FOR FURTHER INFORMATION CONTACT: A copy of the PRA OMB submission, 
including the proposed reporting form and instructions, supporting 
statement, and other documentation will be placed into OMB's public 
docket files, if approved. These documents will also be made available 
on the Board's public website at: http://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested from the agency clearance 
officer, whose name appears below.

[[Page 53249]]

    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.

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. 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.

Request for Comment on Information Collection Proposal

    The Board invites public comment on the following information 
collection, which is being reviewed under authority delegated by the 
OMB under the PRA. Comments are invited on the following:
    a. Whether the proposed collection of information is necessary for 
the proper performance of the Board's functions, including whether the 
information has practical utility;
    b. The accuracy of the Board's estimate of the burden of the 
proposed information collection, 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 information collection 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.

At the end of the comment period, the comments and recommendations 
received will be analyzed to determine the extent to which the Board 
should modify the proposal.

Proposal Under OMB Delegated Authority To Extend for Three Years, 
Without Revision, the Following Information Collection

    Report title: Basel II Interagency Pillar 2 Supervisory Guidance 
(Pillar 2 Guidance).
    Agency form number: FR 4199.
    OMB control number: 7100-0320.
    Frequency: As needed.
    Respondents: Banking institutions.
    Estimated number of respondents: 13.
    Estimated average hours per response: 420.
    Estimated annual burden hours: 5,460.
    General description of report: The advanced approaches framework 
requires certain banks and bank holding companies (BHCs) to use an 
internal ratings-based approach to calculate regulatory credit risk 
capital requirements and advance measurement approaches to calculate 
regulatory operational risk capital requirements.
    A bank is required to comply with the advanced approaches framework 
if it meets either of two independent threshold criteria: (1) 
Consolidated total assets of $250 billion or more, as reported on the 
most recent year-end regulatory reports; or (2) consolidated total on-
balance sheet foreign exposure of $10 billion or more at the most 
recent year-end.
    A BHC is required to comply with the advanced approaches framework 
if the BHC has (1) consolidated total assets (excluding assets held by 
an insurance underwriting subsidiary) of $250 billion or more, as 
reported on the most recent year-end regulatory reports; (2) 
consolidated total on-balance sheet foreign exposure of $10 billion or 
more at the most recent year-end; or (3) a subsidiary depository 
institution (DI) that meets the criteria to be subject to the advanced 
approaches rule or elects to adopt the advanced approaches. As of year-
end 2017, 13 BHCs meet the above criteria and are therefore subject to 
the advanced approaches rule.\1\
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    \1\ Regulation YY permits a bank holding company that is a 
subsidiary of a foreign banking institution to elect not to comply 
with the advanced approaches rule prior to formation of an 
intermediate holding companies (IHCs) with the prior approval of the 
Board. 12 CFR 252.153(e)(2)(C). Currently, no savings and loan 
holding companies are subject to the advanced approaches rule.
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    Also, some banks or BHCs may voluntarily decide to adopt the 
advanced approaches framework. Both mandatory and voluntary respondents 
are required to meet certain qualification requirements before they can 
use the advanced approaches framework for risk-based capital purposes.
    The Pillar 2 Guidance sets the expectation that respondents 
maintain certain documentation as described in paragraphs 37, 41, 43, 
and 46 of this portion of the guidance. Details of the expectations for 
each section are provided below.

Setting and Assessing Capital Adequacy Goals That Relate to Risk

    Paragraph 37. In analyzing capital adequacy, a banking organization 
should evaluate the capacity of its capital to absorb losses. Because 
various definitions of capital are used within the banking industry, 
each banking organization should state clearly the definition of 
capital used in any aspect of its internal capital adequacy assessment 
process (ICAAP).\2\ Since components of capital are not necessarily 
alike and have varying capacities to absorb losses, a banking 
organization should be able to demonstrate the relationship between its 
internal capital definition and its assessment of capital adequacy. If 
a banking organization's definition of capital differs from the 
regulatory definition, the banking organization should reconcile such 
differences and provide an analysis to support the inclusion of any 
capital instruments that are not recognized under the regulatory 
definition. Although common equity is generally the predominant 
component of a banking organization's capital structure, a banking 
organization may be able to support the inclusion of other capital 
instruments in its internal definition of capital if it can demonstrate 
a similar capacity to absorb losses. The banking organization should 
document any changes in its internal definition of capital and the 
reason for those changes.
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    \2\ Under the Board's capital plan rule (12 CFR 225.8), a bank 
holding company with total consolidated assets of $50 billion or 
more is required to develop and maintain a capital plan; however, on 
July 6, 2018, the Board issued a public statement regarding the 
impact of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act (EGRRCPA) (Pub. L. No. 115-174, 132 Stat. 1296 
(2018)). The Board stated, consistent with EGRRCPA, that it will not 
action to require bank holding companies with total consolidated 
assets greater than or equal to $50 billion but less than $100 
billion to comply with the Board's capital plan rule (https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180706b1.pdf). Bank holding companies subject to the capital 
plan rule must have a capital policy that sets forth a capital 
adequacy process. ICAAP would constitute an internal capital 
adequacy process for purposes of the capital plan rule, and bank 
holding companies that have a satisfactory ICAAP generally would be 
considered to have a satisfactory internal capital adequacy process 
for purposes of the capital plan rule.

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[[Page 53250]]

Ensuring Integrity of Internal Capital Adequacy Assessments

    Paragraph 41. A banking organization should maintain thorough 
documentation of its ICAAP to ensure transparency. At a minimum, this 
should include a description of the banking organization's overall 
capital-management process, including the committees and individuals 
responsible for the ICAAP; the frequency and distribution of ICAAP-
related reporting; and the procedures for the periodic evaluation of 
the appropriateness and adequacy of the ICAAP. In addition, where 
applicable, ICAAP documentation should demonstrate the banking 
organization's sound use of quantitative methods (including model 
selection and limitations) and data-selection techniques, as well as 
appropriate maintenance, controls, and validation. A banking 
organization should document and explain the role of third-party and 
vendor products, services and information--including methodologies, 
model inputs, systems, data, and ratings--and the extent to which they 
are used within the ICAAP. A banking organization should have a process 
to regularly evaluate the performance of third-party and vendor 
products, services and information. As part of the ICAAP documentation, 
a banking organization should document the assumptions, methods, data, 
information, and judgment used in its quantitative and qualitative 
approaches.
    Paragraph 43. The board of directors and senior management have 
certain responsibilities in developing, implementing, and overseeing 
the ICAAP. The board should approve the ICAAP and its components. The 
board or its appropriately delegated agent should review the ICAAP and 
its components on a regular basis and approve any revisions. That 
review should encompass the effectiveness of the ICAAP, the 
appropriateness of risk tolerance levels and capital planning, and the 
strength of control infrastructures. Senior management should 
continually ensure that the ICAAP is functioning effectively and as 
intended, under a formal review policy that is explicit and well 
documented. Additionally, a banking organization's internal audit 
function should play a key role in reviewing the controls and 
governance surrounding the ICAAP on an ongoing basis.
    Paragraph 46. As part of the ICAAP, the board or its delegated 
agent, as well as appropriate senior management, should periodically 
review the resulting assessment of overall capital adequacy. This 
review, which should occur at least annually, should include an 
analysis of how measures of internal capital adequacy compare with 
other capital measures (such as regulatory, accounting-based or market-
determined). Upon completion of this review, the board or its delegated 
agent should determine that, consistent with safety and soundness, the 
banking organization's capital takes into account all material risks 
and is appropriate for its risk profile. However, in the event a 
capital deficiency is uncovered (that is, if capital is not consistent 
with the banking organization's risk profile or risk tolerance) 
management should consult and adhere to formal procedures to correct 
the capital deficiency.
    Legal authorization and confidentiality: The collection of 
information is authorized pursuant to the International Lending 
Supervision Act (12 U.S.C. 3907(a)(1) and (b)(3)), section 1831o of the 
Federal Deposit Insurance Act (12 U.S.C. 1831o), section 5 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1844), section 10(b)(2) of the 
Homeowners' Loan Act (12 U.S.C. 1467a(b)), and section 171 of the Dodd-
Frank Act (12 U.S.C. 5371). The FR 4199 is voluntary.
    Because the collections of information associated with the FR 4199 
do not involve the submission of information to the Board, no issues of 
confidentiality would normally arise. To the extent that the Board 
collects information kept by a banking organization as a record during 
an examination of the banking organization, confidential treatment may 
be afforded to the records under exemption 8 of the Freedom of 
Information Act (FOIA) (5 U.S.C. 552(b)(8)), which protects information 
collected as part of the Board's supervisory process. Additionally, 
individual respondents may request that certain information be afforded 
confidential treatment pursuant to exemption 4 of FOIA (5 U.S.C. 
552(b)(4)) if the information has not previously been publically 
disclosed and the release of the data would likely cause substantial 
harm to the competitive position of the respondent.

    Board of Governors of the Federal Reserve System, October 16, 
2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2018-22914 Filed 10-19-18; 8:45 am]
 BILLING CODE 6210-01-P