[Federal Register Volume 85, Number 62 (Tuesday, March 31, 2020)]
[Rules and Regulations]
[Pages 17723-17738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06770]



[[Page 17723]]

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DEPARTMENT OF TREASURY

Office of the Comptroller of the Currency

12 CFR Part 3

[Docket ID OCC-2020-0010]
RIN 1557-AE82

FEDERAL RESERVE SYSTEM

12 CFR Part 217

[Regulation Q; Docket No. R-1708]
RIN 7100-AF82

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 324

RIN 3064-AF42


Regulatory Capital Rule: Revised Transition of the Current 
Expected Credit Losses Methodology for Allowances

AGENCY: Office of the Comptroller of the Currency, Treasury; the Board 
of Governors of the Federal Reserve System; and the Federal Deposit 
Insurance Corporation.

ACTION: Interim final rule, request for comment.

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SUMMARY: The Office of the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, and the Federal Deposit 
Insurance Corporation (collectively, the agencies) are inviting comment 
on an interim final rule that delays the estimated impact on regulatory 
capital stemming from the implementation of Accounting Standards Update 
No. 2016-13, Financial Instruments--Credit Losses, Topic 326, 
Measurement of Credit Losses on Financial Instruments (CECL). The 
interim final rule provides banking organizations that implement CECL 
before the end of 2020 the option to delay for two years an estimate of 
CECL's effect on regulatory capital, relative to the incurred loss 
methodology's effect on regulatory capital, followed by a three-year 
transition period. The agencies are providing this relief to allow such 
banking organizations to better focus on supporting lending to 
creditworthy households and businesses in light of recent strains on 
the U.S. economy as a result of the coronavirus disease 2019 (COVID-
19), while also maintaining the quality of regulatory capital.

DATES: Effective date: The interim final rule is effective March 31, 
2020. Comment date: Comments on the interim final rule must be received 
no later than May 15, 2020.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to all of the agencies. Commenters are encouraged to use the 
title ``Regulatory Capital Rule: Revised Transition of the Current 
Expected Credit Losses Methodology for Allowances'' to facilitate the 
organization and distribution of comments among the agencies. 
Commenters are also encouraged to identify the number of the specific 
question for comment to which they are responding. Comments should be 
directed to:
    OCC: You may submit comments to the OCC by any of the methods set 
forth below. Commenters are encouraged to submit comments through the 
Federal eRulemaking Portal or email, if possible. Please use the title 
``Regulatory Capital Rule: Revised Transition of the Current Expected 
Credit Losses Methodology for Allowances'' to facilitate the 
organization and distribution of the comments. You may submit comments 
by any of the following methods:

Federal eRulemaking Portal--``Regulations.gov Classic or 
Regulations.gov Beta''

    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter 
``Docket ID [Ogr]CC-2020-0010'' in the Search Box and click ``Search.'' 
Click on ``Comment Now'' to submit public comments. For help with 
submitting effective comments please click on ``View Commenter's 
Checklist.'' Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click 
``Visit New Regulations.gov Site'' from the Regulations.gov Classic 
homepage. Enter ``Docket ID [Ogr]CC-2020-0010'' in the Search Box and 
click ``Search.'' Public comments can be submitted via the ``Comment'' 
box below the displayed document information or by clicking on the 
document title and then clicking the ``Comment'' box on the top-left 
side of the screen. For help with submitting effective comments please 
click on ``Commenter's Checklist.'' For assistance with the 
Regulations.gov Beta site, please call (877) 378-5457 (toll free) or 
(703) 454-9859 Monday-Friday, 9 a.m.-5 p.m. ET or email 
[email protected].
     E-mail: [email protected].
     Mail: Chief Counsel's Office, Office of the Comptroller of 
the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID [Ogr]CC-2020-0010'' in your comment. In general, the OCC 
will enter all comments received into the docket and publish the 
comments on the Regulations.gov website without change, including any 
business or personal information that you provide such as name and 
address information, email addresses, or phone numbers. Comments 
received, including attachments and other supporting materials, are 
part of the public record and subject to public disclosure. Do not 
include any information in your comment or supporting materials that 
you consider confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically--Regulations.gov Classic 
or Regulations.gov Beta:
    Regulations.gov Classic: Go to https://www.regulations.gov/. Enter 
``Docket ID [Ogr]CC-2020-0010'' in the Search box and click ``Search.'' 
Click on ``Open Docket Folder'' on the right side of the screen. 
Comments and supporting materials can be viewed and filtered by 
clicking on ``View all documents and comments in this docket'' and then 
using the filtering tools on the left side of the screen. Click on the 
``Help'' tab on the Regulations.gov home page to get information on 
using Regulations.gov. The docket may be viewed after the close of the 
comment period in the same manner as during the comment period.
    Regulations.gov Beta: Go to https://beta.regulations.gov/ or click 
``Visit New Regulations.gov Site'' from the Regulations.gov Classic 
homepage. Enter ``Docket ID [Ogr]CC-2020-0010'' in the Search Box and 
click ``Search.'' Click on the ``Comments'' tab. Comments can be viewed 
and filtered by clicking on the ``Sort By'' drop-down on the right side 
of the screen or the ``Refine Results'' options on the left side of the 
screen. Supporting materials can be viewed by clicking on the 
``Documents'' tab and filtered by clicking on the ``Sort By'' drop-down 
on the right side of the screen or the ``Refine Results'' options on 
the left side of the screen. For assistance with the Regulations.gov 
Beta site, please call (877) 378-5457 (toll free) or (703) 454-9859 
Monday-Friday, 9 a.m.-5 p.m. ET or email 
[email protected].

[[Page 17724]]

    The docket may be viewed after the close of the comment period in 
the same manner as during the comment period.
    Board: You may submit comments, identified by Docket No. R-1708 and 
RIN 7100-AF82, by any of the following methods:
     Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Email: [email protected]. Include docket 
number and RIN 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/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons or to remove sensitive 
personally identifiable information at the commenter's request. Public 
comments may also be viewed electronically or in paper form in Room 
146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. 
and 5:00 p.m. on weekdays.
    FDIC: You may submit comments, identified by RIN 3064-AF42, by any 
of the following methods:
     Agency Website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the Agency 
website.
     Email: [email protected]. Include the RIN 3064-AF42 in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW, Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street NW, building 
(located on F Street) on business days between 7:00 a.m. and 5:00 p.m.
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AF42.'' Comments received will be posted without change to https://www.fdic.gov/regulations/laws/federal/, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Margot Schwadron, Director, or Benjamin Pegg, Risk Expert, 
Capital and Regulatory Policy, (202) 649-6370; or Kevin Korzeniewski, 
Counsel, or Marta Stewart-Bates, Senior Attorney, Chief Counsel's 
Office, (202) 649-5490, for persons who are deaf or hearing impaired, 
TTY, (202) 649-5597, Office of the Comptroller of the Currency, 400 7th 
Street SW, Washington, DC 20219.
    Board: Constance M. Horsley, Deputy Associate Director, (202) 452-
5239; Juan C. Climent, Manager, (202) 872-7526; Andrew Willis, Lead 
Financial Institution Policy Analyst, (202) 912-4323; or Michael Ofori-
Kuragu, Senior Financial Institution Policy Analyst II, (202) 475-6623, 
Division of Supervision and Regulation; or Benjamin W. McDonough, 
Assistant General Counsel, (202) 452-2036; David W. Alexander, Senior 
Counsel, (202) 452-2877; or Jonah Kind, Senior Attorney, (202) 452-
2045, Legal Division, Board of Governors of the Federal Reserve System, 
20th and C Streets NW, Washington, DC 20551. For the hearing impaired 
only, Telecommunication Device for the Deaf (TDD), (202) 263-4869.
    FDIC: Bobby R. Bean, Associate Director, [email protected]; Benedetto 
Bosco, Chief, Capital Policy Section, [email protected]; Noah Cuttler, 
Senior Policy Analyst, [email protected]; Andrew Carayiannis, Senior 
Policy Analyst, [email protected]; [email protected]; 
Capital Markets Branch, Division of Risk Management Supervision, (202) 
898-6888; or Michael Phillips, Counsel, [email protected]; Catherine 
Wood, Counsel, [email protected]; Francis Kuo, Counsel, [email protected]; 
Supervision and Legislation Branch, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street NW, Washington, DC 20429. For 
the hearing impaired only, Telecommunication Device for the Deaf (TDD), 
(800) 925-4618.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. The Interim Final Rule
    A. Approximating the Impact of CECL
    B. Mechanics of the Five-Year Transition Option
    C. Other Key Revisions
III. Impact Assessment
IV. Administrative Law Matters
    A. Administrative Procedure Act
    B. Congressional Review Act
    C. Paperwork Reduction Act
    D. Regulatory Flexibility Act
    E. Riegle Community Development and Regulatory Improvement Act 
of 1994
    F. Plain Language
    G. Unfunded Mandates Reform Act

I. Background

    In 2016, the Financial Accounting Standards Board issued Accounting 
Standards Update No. 2016-13, Financial Instruments--Credit Losses, 
Topic 326, Measurement of Credit Losses on Financial Instruments.\1\ 
The update resulted in significant changes to credit loss accounting 
under U.S. generally accepted accounting principles (U.S. GAAP). The 
revisions to credit loss accounting under U.S. GAAP included the 
introduction of the current expected credit losses methodology (CECL), 
which replaces the incurred loss methodology for financial assets 
measured at amortized cost. For these assets, CECL requires banking 
organizations \2\ to recognize lifetime expected credit losses and to 
incorporate reasonable and supportable forecasts in developing an 
estimate of lifetime expected credit losses, while also maintaining the 
current requirement that banking organizations consider past events and 
current conditions.
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    \1\ ASU 2016-13 covers measurement of credit losses on financial 
instruments and includes three subtopics within Topic 326: (i) 
Subtopic 326-10 Financial Instruments--Credit Losses--Overall; (ii) 
Subtopic 326-20: Financial Instruments--Credit Losses--Measured at 
Amortized Cost; and (iii) Subtopic 326-30: Financial Instruments--
Credit Losses--Available-for-Sale Debt Securities.
    \2\ Banking organizations subject to the capital rule include 
national banks, state member banks, state nonmember banks, savings 
associations, and top-tier bank holding companies and savings and 
loan holding companies domiciled in the United States not subject to 
the Board's Small Bank Holding Company Policy Statement (12 CFR part 
225, appendix C), but exclude certain savings and loan holding 
companies that are substantially engaged in insurance underwriting 
or commercial activities or that are estate trusts, and bank holding 
companies and savings and loan holding companies that are employee 
stock ownership plans.
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    On February 14, 2019, the Office of the Comptroller of the Currency 
(OCC), the Board of Governors of the Federal Reserve System (Board), 
and the Federal Deposit Insurance Corporation (FDIC) (collectively, the 
agencies) issued a final rule that revised certain regulations to 
account for the aforementioned changes to credit loss accounting under 
U.S. GAAP, including CECL (the 2019 CECL rule).\3\ The 2019 CECL rule 
revised the agencies' regulatory capital rule (capital rule),\4\ stress 
testing rules, and regulatory disclosure requirements to reflect CECL, 
and made conforming amendments to other regulations that reference 
credit loss allowances. The 2019 CECL rule applies to banking 
organizations that file regulatory reports that are uniform and 
consistent with U.S. GAAP,\5\ including banking

[[Page 17725]]

organizations that are subject to the capital rule and those that are 
subject to stress testing requirements.
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    \3\ 84 FR 4222 (February 14, 2019).
    \4\ 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR part 
324 (FDIC).
    \5\ See 12 U.S.C. 1831n; See also current versions of the 
following: Instructions for Preparation of Consolidated Financial 
Statements for Holding Companies, Reporting Form FR Y-9C; 
Instructions for Preparation of Consolidated Reports of Condition 
and Income, Reporting Forms FFIEC 031 and FFIEC 041; Instructions 
for Preparation of Consolidated Reports of Condition and Income for 
a Bank with Domestic Offices Only and Total Assets Less than $1 
Billion, Reporting Form FFIEC 051.
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    The 2019 CECL rule also included a transition option that allows 
banking organizations to phase in over a three-year period the day-one 
adverse effects of CECL on their regulatory capital ratios. The 
agencies intended for the transition option to address concerns that 
despite adequate capital planning, unexpected economic conditions at 
the time of CECL adoption could result in higher-than-anticipated 
increases in allowances. This is largely because CECL requires banking 
organizations to consider current and future expected economic 
conditions to estimate credit loss allowances.
    The spread of coronavirus disease 2019 (COVID-19) has disrupted 
economic activity in many countries, including the United States. While 
the U.S. government is taking significant steps to mitigate the 
magnitude and persistence of the effects of COVID-19, the magnitude and 
persistence of the overall effects on the economy remain highly 
uncertain. This uncertainty has presented significant operational 
challenges to banking organizations at the same time they have been 
required to direct significant resources to implement CECL. In 
addition, due to the nature of CECL and the uncertainty of future 
economic forecasts, banking organizations that have adopted CECL may 
continue to experience higher-than-anticipated increases in credit loss 
allowances.
    To address these concerns and allow banking organizations to better 
focus on supporting lending to creditworthy households and businesses, 
the agencies are providing banking organizations that adopt in the 
current environment an alternate option to temporarily delay a measure 
of CECL's effect on regulatory capital, relative to the incurred loss 
methodology. The transitional relief provided in the interim final rule 
is intended to be simple to implement without imposing undue 
operational burden, while reducing the potential for competitive 
inequities across banking organizations during this time of economic 
uncertainty and maintaining the quality of regulatory capital.

II. The Interim Final Rule

    The interim final rule provides banking organizations that adopt 
CECL during the 2020 calendar year with the option to delay for two 
years the estimated impact of CECL on regulatory capital, followed by a 
three-year transition period to phase out the aggregate amount of the 
capital benefit provided during the initial two-year delay (i.e., a 
five-year transition, in total). The interim final rule does not 
replace the current three-year transition option in the 2019 CECL rule, 
which remains available to any banking organization at the time that it 
adopts CECL. Banking organizations that have already adopted CECL have 
the option to elect the three-year transition option contained in the 
2019 CECL rule or the five-year transition contained in the interim 
final rule, beginning with the March 31, 2020, Call Report or FR Y-9C.
    A banking organization is eligible to use the interim final rule's 
five-year transition if was required to adopt CECL for purposes of U.S. 
GAAP (as in effect January 1, 2020) for a fiscal year that begins 
during the 2020 calendar year, and elects to use the transition option 
in a Call Report or FR Y-9C (electing banking organization). The 
interim final rule provides electing banking organizations with a 
methodology for delaying the effect on regulatory capital of an 
estimated amount of the increase in the allowance for credit loss (ACL) 
that can be attributed to the adoption of CECL, relative to the 
increase in the allowance for loan and lease losses (ALLL) that would 
occur for banking organizations operating under the incurred loss 
methodology.

A. Approximating the Impact of CECL

    The agencies considered different ways to determine the portion of 
credit loss allowances attributable to CECL eligible for the 
transitional relief provided in this interim final rule. To best 
capture the effects of CECL on regulatory capital, it would be 
necessary for a banking organization to charge against retained 
earnings (and common equity tier 1 capital), on a quarterly basis, 
provisions for credit losses estimated under the incurred loss 
methodology, and to exclude additional provisions for credit losses 
estimated under CECL. This approach, however, would require a banking 
organization to maintain the equivalent of two separate loss 
provisioning processes. For many banking organizations that have 
adopted CECL, it may be burdensome to track credit loss allowances 
under both CECL and the incurred loss methodology, due to significant 
CECL-related changes already incorporated in internal systems or third-
party vendor systems.
    To address this concern regarding burden and to promote a 
consistent approach across electing banking organizations, the interim 
final rule provides a uniform approach for estimating the effect of 
CECL during the five-year transition period. Specifically, the interim 
final rule introduces a scaling factor that approximates the average 
after-tax provision for credit losses attributable to CECL, relative to 
the incurred loss methodology, in a given reporting quarter. The 
interim final rule uses a 25 percent scaling factor as an approximation 
of the impact of differences in credit loss allowances reflected under 
CECL versus the incurred loss methodology. Various analyses suggest 
that credit losses under CECL can be expected to be higher than under 
the incurred loss methodology.\6\ The calibration of the scaling factor 
is also designed to promote competitive equity in the current economic 
environment between electing banking organizations and those banking 
organizations that have not yet adopted CECL.
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    \6\ See Loudis, Bert and Ben Ranish. (2019) ``CECL and the 
Credit Cycle.'' Finance and Economics Discussion Series Working 
Paper 061. Available at: https://www.federalreserve.gov/econres/feds/files/2019061pap.pdf and Covas, Francisco and William Nelson. 
``Current Expected Credit Loss: Lessons from 2007-2009.'' (2018) 
Banking Policy Institute Working Paper. Available at: https://bpi.com/wpcontent/uploads/2018/07/CECL_WP-2.pdf; the agencies 
reviewed data from public securities filings of various large 
banking organizations. These organizations reported allowances and 
provisions under CECL, on a weighted-average basis, approximately 30 
percent higher on a pre-tax basis and 25 percent higher on an after-
tax basis. The agencies chose a scalar closer to the after-tax 
median to avoid additional burden involved with making quarterly tax 
adjustments throughout the transition period.
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B. Mechanics of the Five-Year Transition Provision

    An electing banking organization must calculate transitional 
amounts for the following items: Retained earnings, temporary 
difference deferred tax assets (DTAs), and credit loss allowances 
eligible for inclusion in regulatory capital. For each of these items, 
the transitional amount is equal to the difference between the electing 
banking organization's closing balance sheet amount for the fiscal 
year-end immediately prior to its adoption of CECL (pre-CECL amount) 
and its balance sheet amount as of the beginning of the fiscal year in 
which it adopts CECL (post-CECL amount). To calculate the transition 
for these items, an electing banking organization must first calculate 
the CECL transitional amount, the adjusted allowances for credit losses 
(AACL) transitional amount, and the DTA transitional amount, consistent 
with the 2019 CECL

[[Page 17726]]

rule. The CECL transitional amount is equal to the difference between 
an electing banking organization's pre-CECL and post-CECL amounts of 
retained earnings at adoption. The AACL transitional amount is equal to 
the difference between an electing banking organization's pre-CECL 
amount of ALLL and its post-CECL amount of AACL at adoption. The DTA 
transitional amount is the difference between an electing banking 
organization's pre-CECL amount and post-CECL amount of DTAs at adoption 
due to temporary differences.
    An electing banking organization must adjust several key inputs to 
regulatory capital for purposes of the five-year transition. First, an 
electing banking organization must increase retained earnings by a 
modified CECL transitional amount. The modified CECL transitional 
amount is similar to the CECL transitional amount, but is adjusted to 
reflect changes in retained earnings due to CECL that occur during the 
first two years of the five-year transition period. The change in 
retained earnings due to CECL is calculated by taking the change in 
reported AACL relative to the day CECL was adopted, and applying a 
scaling multiplier of .25 during the first two years of the transition 
period.
    Second, an electing banking organization must decrease AACL by the 
modified AACL transitional amount. The modified AACL transitional 
amount is similar to the AACL transitional amount, but reflects the 
change in AACL due to CECL that occurs during the first two years of 
the five-year transition period. The change in AACL due to CECL is 
calculated with the same method used for the modified CECL transitional 
amount.
    Two additional regulatory capital inputs--temporary difference 
DTAs, and average total consolidated assets--are also subject to 
adjustments. Reported average total consolidated assets for purposes of 
the leverage ratio is increased by the amount of the modified CECL 
transitional amount, and temporary difference DTAs are decreased by the 
DTA transitional amount as under the 2019 CECL rule.
    The modified CECL and AACL transitional amounts will be calculated 
on a quarterly basis during the first two years of the transition 
period. An electing banking organization will reflect the modified 
transitional amount which includes 100 percent of the day one impact of 
CECL plus the quarterly changes that result from CECL in transition 
amounts applied to regulatory capital calculations. After two years, 
the cumulative amount of quarterly-modified transitional amounts become 
fixed and are phased out of regulatory capital along with the 
transitional amounts that were calculated to reflect the day one impact 
of CECL. The transitional phase out occurs over the subsequent three-
year period: 75 percent of transitional amounts are recognized in 
regulatory capital in year three; 50 percent in year four; and 25 
percent in year five. After that point the banking organization would 
have fully reversed out the temporary regulatory capital benefits of 
the two-year delay and adjustments.
    Finally, an electing banking organization will apply the 
adjustments calculated above during each quarter of the transition 
period for purposes of calculating the banking organization's 
regulatory capital. No adjustments are reflected in balance sheet or 
income statement amounts. The banking organization reflects the 
transition adjustment to the extent the banking organization has 
reflected CECL in the Call Report or FR Y-9C, as applicable, in that 
quarter. If the Coronavirus Aid, Relief, and Economic Security Act 
(CARES Act) becomes law and a banking organization chooses to revert to 
the incurred loss methodology pursuant to the CARES Act in any quarter 
in 2020, the banking organization would not apply any transition 
amounts in that quarter but would be allowed to apply the transition in 
subsequent quarters when the banking organization returns to the use of 
CECL. However, an institution that has elected the transition, but does 
not apply it in any quarter, does not receive any extension of the 
transition period.

Table 1--CECL Transitional Amounts To Apply to Regulatory Capital Components During the Final Three Years of the
                                              Five-Year Transition
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                                                                           Year 3        Year 4        Year 5
----------------------------------------------------------------------------------------------------------------
Increase retained earnings and average total consolidated assets by
 the following percentages of the modified CECL transitional amount...
Decrease temporary difference DTAs by the following percentages of the          75%           50%           25%
 DTA transitional amount..............................................
Decrease AACL by the following percentages of the modified AACL
 transitional amount..................................................
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C. Other Key Revisions

    The interim final rule similarly adjusts the transitional amounts 
related to eligible credit reserves for advanced approaches banking 
organizations \7\ that elect to use the 2020 CECL five-year transition 
option. The interim final rule also adjusts the transitional amounts 
related to the supplementary leverage ratio's total exposure amount. 
Advanced approaches banking organizations that elect the five-year 
transition will continue to be required to disclose two sets of 
regulatory capital ratios in section 173 of the capital rule: One set 
would reflect the banking organization's capital ratios with the CECL 
transition option and the other set would reflect the banking 
organization's capital ratios on a fully phased-in basis.
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    \7\ A banking organization is an advanced approaches banking 
organization if it (1) is a global systemically important bank 
holding company, (2) is a Category II banking organization, (3) has 
elected to be an advanced approached banking organization, (4) is a 
subsidiary of a company that is an advanced approaches banking 
organization, or (5) has a subsidiary depository institution that is 
an advanced approaches banking organization. See 12 CFR 3.100 (OCC); 
12 CFR 217.100 (Board); 12 CFR 324.100 (FDIC).
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    The interim final rule provides banking organizations that were 
required to adopt CECL for purposes of accounting under U.S. GAAP (as 
in effect January 1, 2020) in 2020, but that do not use CECL for 
regulatory reporting or regulatory capital purposes, with flexibility 
to elect the CECL transition when the banking organization is required 
to begin using CECL for regulatory reporting purposes. A banking 
organization that chooses to delay use of CECL for regulatory reporting 
but elects to use CECL during 2020 would also be eligible for a five-
year transition period.
    The interim final rule maintains other aspects of the CECL 
transition option, such as the requirements for business 
combinations.\8\ Through the supervisory process, the agencies will 
continue to examine banking organizations' credit loss estimates and 
allowance balances regardless of whether the banking

[[Page 17727]]

organization has elected to use the CECL transition option. In 
addition, the agencies may assess the capital plans at electing banking 
organizations for ensuring sufficient capital at the expiration of the 
CECL transition option period.\9\
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    \8\ 12 CFR 3.301(c)(4) (OCC); 217.301(c)(4) (Board); 
324.301(c)(4) (FDIC).
    \9\ The Board is extending the due date for the Y-14A collection 
of supplemental CECL information from April 6th until May 11th (due 
date of the March 31 FR Y-9C) and is including changes in the Y-14A 
instructions to align with the changes outlined in the interim final 
rule. These changes are effective for the submission associated with 
the FR Y-14 as of December 31, 2019.
    Under the Federal Reserve's December 2018 amendments to its 
stress test rules, a banking organization that had adopted CECL in 
2020 was required to include the impact of CECL into their stressed 
projections beginning in the 2020 stress testing cycle. As a result 
of this interim final rule, firms that have already adopted CECL 
have the option to either include the adjustments from this interim 
final rule in their 2020 stress projections or delay doing so. As 
noted in the 2020 CCAR summary instructions, the Federal Reserve 
will not issue supervisory findings on banking organizations' 
stressed estimates of allowances under CECL until the 2022 CCAR 
cycle, at the earliest.
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    Question #1: The agencies seek comment on the feasibility of 
calculating the modified AACL transitional amount, including whether 
there are more suitable methods for determining the amount, and 
rationale in support of such methods. In particular, the agencies seek 
comment on whether banking organizations would prefer to calculate 
provisions under both the CECL and incurred loss methodologies and use 
that difference as the basis for the transition, the operational 
challenges of doing so, and any concerns associated with using such an 
approach.
    Question #2: The agencies seek comment on the feasibility of 
calculating the modified CECL transitional amount, including whether 
there are more suitable methods for determining the amount, and 
rationale in support of such methods.
    Question #3: For banks that do not adopt CECL in 2020, including 
community banking organizations, the agencies seek comment on whether 
they should consider any modifications to transitions from the 2019 
CECL rule to reduce burden in light of recent disruptions in economic 
activity caused by COVID-19.
    Question #4: The agencies seek comment on whether a banking 
organization that adopts the five-year transition should be required to 
also transition the change in temporary difference DTAs related to 
provision expenses recognized for the first two years after CECL 
adoption. What are the costs associated with such a requirement? Does 
ignoring the effect on temporary difference DTAs related to provision 
expenses recognized during years one and two of the five-year 
transition period when calculating the modified CECL transition amount, 
relative to a banking organization that applies the incurred loss 
methodology raise any competitive equity concerns? Would the temporary 
difference DTAs related to provision expenses during years one and two 
of the five-year transition period be material for banking 
organizations and should they be reflected in the 2020 transition?
    Question #5: The agencies seek comment on the interaction of the 
interim final rule and the potential deferral of CECL described in the 
pending CARES Act. Further, the agencies seek comment on whether the 
interim final rule's requirement that a banking organization adopt CECL 
by the end of 2020 in order to be eligible for the five-year 
transitional relief, limit a banking organization's ability to utilize 
any potential relief from CECL as described in the pending CARES Act.

III. Impact Assessment

    CECL is expected to affect the timing and magnitude of banking 
organizations' loss provisioning, particularly around periods of 
economic stress. As recently as late last year, economic conditions 
appeared stable and the introduction of CECL was expected to have only 
a modest effect on operations. However, the additional uncertainty due 
to the introduction of a new credit loss accounting standard in a 
period of stress associated with COVID-19 poses a unique and 
unanticipated challenge to business operations.
    The agencies intend for the interim final rule to mitigate the 
extent to which CECL implementation complicates capital planning 
challenges posed by COVID-19 by making the regulatory capital impact of 
near-term accounting for credit losses under CECL through the crisis 
roughly comparable to the regulatory capital impact under the incurred 
loss methodology. To do so, the five-year transition includes the 
entire day-one impact as well as an estimate of the incremental 
increase in credit loss allowances attributable to CECL as compared to 
the incurred loss methodology. With the five-year transition option 
provided by the interim final rule, banking organizations have time to 
adapt capital planning under stress to the new standard, improving 
their flexibility and enhancing their ability to serve as a source of 
credit to the U.S. economy.
    The uniform 25 percent scaling factor is only an approximation of 
the impact of differences in provisions reflected under CECL versus 
incurred loss methodology. Each institution will have a unique impact 
due to the adoption of CECL, which may be higher or lower than the 
amount calculated using the scaling factor. Additionally, the 
transition option does not directly address likely differences in the 
timing of loss recognition under CECL and the incurred loss 
methodology. To the extent that allowances related to COVID-19 build 
sooner under CECL than they would have under the incurred loss 
methodology, the transition option provided in the interim final rule 
will not fully offset the capital impact of CECL. However, the agencies 
believe that there is a significant benefit to operational simplicity 
from using a single scalar for the quarterly adjustments for all 
electing banking organizations.

IV. Administrative Law Matters

A. Administrative Procedure Act

    The agencies are issuing this interim final rule without prior 
notice and the opportunity for public comment and the 30-day delayed 
effective date ordinarily prescribed by the Administrative Procedure 
Act (APA).\10\ Pursuant to section 553(b)(B) of the APA, general notice 
and the opportunity for public comment are not required with respect to 
a rulemaking when an ``agency for good cause finds (and incorporates 
the finding and a brief statement of reasons therefor in the rules 
issued) that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \11\
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    \10\ 5 U.S.C. 553.
    \11\ 5 U.S.C. 553(b)(B).
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    The agencies believe that the public interest is best served by 
implementing the interim final rule as soon as possible. As discussed 
above, recent events have suddenly and significantly affected global 
economic activity. In addition, financial markets have experienced 
significant volatility. The magnitude and persistence of the overall 
effects on the economy remain highly uncertain.
    The CECL transition rule was adopted by the agencies to address 
concerns that despite adequate capital planning, uncertainty about the 
economic environment at the time of CECL adoption could result in 
higher-than-anticipated increases in credit loss allowances. Because of 
recent economic dislocations and disruptions in financial markets, 
banking organizations may face higher-than-anticipated increases in 
credit loss allowances. The interim final

[[Page 17728]]

rule is intended to mitigate some of the uncertainty that comes with 
the increase in credit loss allowances during a challenging economic 
environment by temporarily limiting the approximate effects of CECL in 
regulatory capital. This will allow banking organizations to better 
focus on supporting lending to creditworthy households and businesses.
    The APA also requires a 30-day delayed effective date, except for 
(1) substantive rules which grant or recognize an exemption or relieve 
a restriction; (2) interpretative rules and statements of policy; or 
(3) as otherwise provided by the agency for good cause.\12\ Because the 
rules relieve a restriction, the interim final rule is exempt from the 
APA's delayed effective date requirement.\13\ Additionally, the 
agencies find good cause to publish the interim final rule with an 
immediate effective date for the same reasons set forth above under the 
discussion of section 553(b)(B) of the APA.
---------------------------------------------------------------------------

    \12\ 5 U.S.C. 553(d).
    \13\ 5 U.S.C. 553(d)(1).
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    While the agencies believe that there is good cause to issue the 
rule without advance notice and comment and with an immediate effective 
date, the agencies are interested in the views of the public and 
requests comment on all aspects of the interim final rule.

B. Congressional Review Act

    For purposes of Congressional Review Act, the OMB makes a 
determination as to whether a final rule constitutes a ``major'' 
rule.\14\ If a rule is deemed a ``major rule'' by the Office of 
Management and Budget (OMB), the Congressional Review Act generally 
provides that the rule may not take effect until at least 60 days 
following its publication.\15\
---------------------------------------------------------------------------

    \14\ 5 U.S.C. 801 et seq.
    \15\ 5 U.S.C. 801(a)(3).
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    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in (A) 
an annual effect on the economy of $100,000,000 or more; (B) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions, or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\16\
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    \16\ 5 U.S.C. 804(2).
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    For the same reasons set forth above, the agencies are adopting the 
interim final rule without the delayed effective date generally 
prescribed under the Congressional Review Act. The delayed effective 
date required by the Congressional Review Act does not apply to any 
rule for which an agency for good cause finds (and incorporates the 
finding and a brief statement of reasons therefor in the rule issued) 
that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.\17\ In light of 
current market uncertainty, the agencies believe that delaying the 
effective date of the rule would be contrary to the public interest.
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    \17\ 5 U.S.C. 808.
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    As required by the Congressional Review Act, the agencies will 
submit the final rule and other appropriate reports to Congress and the 
Government Accountability Office for review.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) 
states that no agency may conduct or sponsor, nor is the respondent 
required to respond to, an information collection unless it displays a 
currently valid OMB control number. The interim final rule affects the 
agencies' current information collections for the Call Reports (OCC OMB 
Control No. 1557-0081; Board OMB Control No. 7100-0036; and FDIC OMB 
Control No. 3064-0052) and the FFIEC 101 (OCC OMB Control No. 1557-
0239; Board OMB Control No. 7100-0319; FDIC OMB Control No. 3064-0159). 
The Board has reviewed this interim final rule pursuant to authority 
delegated by the OMB.
    While this interim final rule contains no information collection 
requirements, the agencies have determined that there are changes that 
should be made to the Call Reports and the FFIEC 101 as a result of 
this rulemaking. Although there may be a substantive change resulting 
from the temporary delay of recognition of credit loss allowances in 
regulatory capital for purposes of the Call Reports and the FFIEC 101, 
the change should be minimal and result in a zero net change in hourly 
burden under the agencies' information collections. Submissions will, 
however, be made by the agencies to OMB. The changes to the Call 
Reports, the FFIEC 101 and their related instructions will be addressed 
in a separate Federal Register notice.
    However, the Board has temporarily revised certain reporting forms 
to accurately reflect various aspects of this interim final rule. These 
reporting forms are the Consolidated Financial Statements for Holding 
Companies (FR Y-9C; OMB No. 7100-0128) and Capital Assessments and 
Stress Testing Reports (FR Y-14A/Q/M; OMB No. 7100-0341). On June 15, 
1984, OMB delegated to the Board authority under the PRA to temporarily 
approve a revision to a collection of information without providing 
opportunity for public comment if the Board determines that a change in 
an existing collection must be instituted quickly and that public 
participation in the approval process would defeat the purpose of the 
collection or substantially interfere with the Board's ability to 
perform its statutory obligation.
    The Board's delegated authority requires that the Board, after 
temporarily approving a collection, solicit public comment to extend 
the information collections for a period not to exceed three years. 
Therefore, the Board is inviting comment to extend each of these 
information collections for three years, with the revisions discussed 
below.
    The Board invites public comment on the following information 
collections, which are being reviewed under authority delegated by the 
OMB under the PRA. Comments must be submitted on or before June 1, 
2020. Comments are invited on the following:
    a. Whether the collections of information are 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 
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 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.
    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 collections.

[[Page 17729]]

Final Approval Under OMB Delegated Authority of the Temporary Revision 
of, and Solicitation of Comment To Extend for Three Years, With 
Revision, of the Following Information Collections
    (1) Report title: Financial Statements for Holding Companies.
    Agency form number: FR Y-9C, FR Y-9LP, FR Y-9SP, FR Y-9ES, and FR 
Y-9CS.
    OMB control number: 7100-0128.
    Effective date: March 31, 2020.
    Frequency: Quarterly, semiannually, and annually.
    Respondents: Bank holding companies, savings and loan holding 
companies,\18\ securities holding companies, and U.S. intermediate 
holding companies (collectively, HCs).
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    \18\ An SLHC must file one or more of the FR Y-9 series of 
reports unless it is: (1) A grandfathered unitary SLHC with 
primarily commercial assets and thrifts that make up less than 5 
percent of its consolidated assets; or (2) a SLHC that primarily 
holds insurance-related assets and does not otherwise submit 
financial reports with the SEC pursuant to section 13 or 15(d) of 
the Securities Exchange Act of 1934.
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    Estimated number of respondents: FR Y-9C (non-advanced approaches 
CBLR HCs with less than $5 billion in total assets): 7; FR Y-9C (non-
advanced approaches CBLR HCs with $5 billion or more in total assets): 
35; FR Y-9C (non-advanced approaches, non CBLR, HCs with less than $5 
billion in total assets): 84; FR Y-9C (non-advanced approaches, non 
CBLR HCs, with $5 billion or more in total assets): 154; FR Y-9C 
(advanced approaches HCs): 19; FR Y-9LP: 434; FR Y-9SP: 3,960; FR Y-
9ES: 83; FR Y-9CS: 236.
    Estimated average hours per response:
Reporting
    FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion 
in total assets): 29.14 hours; FR Y-9C (non-advanced approaches CBLR 
HCs with $5 billion or more in total assets): 35.11; FR Y-9C (non-
advanced approaches, non CBLR HCs, with less than $5 billion in total 
assets): 40.98; FR Y-9C (non-advanced approaches, non CBLR, HCs with $5 
billion or more in total assets): 46.95 hours; FR Y-9C (advanced 
approaches HCs): 48.59 hours; FR Y-9LP: 5.27 hours; FR Y-9SP: 5.40 
hours; FR Y-9ES: 0.50 hours; FR Y-9CS: 0.50 hours.
Recordkeeping
    FR Y-9C (non-advanced approaches HCs with less than $5 billion in 
total assets), FR Y-9C (non-advanced approaches HCs with $5 billion or 
more in total assets), FR Y-9C (advanced approaches HCs), and FR Y-9LP: 
1.00 hour; FR Y-9SP, FR Y-9ES, and FR Y-9CS: 0.50 hours.
    Estimated annual burden hours:
Reporting
    FR Y-9C (non-advanced approaches CBLR HCs with less than $5 billion 
in total assets): 8,276 hours; FR Y-9C (non-advanced approaches CBLR 
HCs with $5 billion or more in total assets): 4,915; FR Y-9C (non-
advanced approaches non CBLR HCs with less than $5 billion in total 
assets): 13,769; FR Y-9C (non-advanced approaches non CBLR HCs with $5 
billion or more in total assets): 28,921 hours; FR Y-9C (advanced 
approaches HCs): 3,693 hours; FR Y-9LP: 9,149 hours; FR Y-9SP: 42,768 
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
Recordkeeping
    FR Y-9C (non-advanced approaches HCs with less than $5 billion in 
total assets): 620 hours; FR Y-9C (non-advanced approaches HCs with $5 
billion or more in total assets): 756 hours; FR Y-9C (advanced 
approaches HCs): 76 hours; FR Y-9LP: 1,736 hours; FR Y-9SP: 3,960 
hours; FR Y-9ES: 42 hours; FR Y-9CS: 472 hours.
    General description of report: The FR Y-9C consists of standardized 
financial statements similar to the Call Reports filed by commercial 
banks.\19\ The FR Y-9C collects consolidated data from HCs and is filed 
quarterly by top-tier HCs with total consolidated assets of $3 billion 
or more.\20\
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    \19\ The Call Reports consist of the Consolidated Reports of 
Condition and Income for a Bank with Domestic Offices Only and Total 
Assets Less Than $5 Billion (FFIEC 051), the Consolidated Reports of 
Condition and Income for a Bank with Domestic Offices Only (FFIEC 
041) and the Consolidated Reports of Condition and Income for a Bank 
with Domestic and Foreign Offices (FFIEC 031).
    \20\ Under certain circumstances described in the FR Y-9C's 
General Instructions, HCs with assets under $3 billion may be 
required to file the FR Y-9C.
---------------------------------------------------------------------------

    The FR Y-9LP, which collects parent company only financial data, 
must be submitted by each HC that files the FR Y-9C, as well as by each 
of its subsidiary HCs.\21\ The report consists of standardized 
financial statements.
---------------------------------------------------------------------------

    \21\ A top-tier HC may submit a separate FR Y-9LP on behalf of 
each of its lower-tier HCs.
---------------------------------------------------------------------------

    The FR Y-9SP is a parent company only financial statement filed 
semiannually by HCs with total consolidated assets of less than $3 
billion. In a banking organization with total consolidated assets of 
less than $3 billion that has tiered HCs, each HC in the organization 
must submit, or have the top-tier HC submit on its behalf, a separate 
FR Y-9SP. This report is designed to obtain basic balance sheet and 
income data for the parent company, and data on its intangible assets 
and intercompany transactions.
    The FR Y-9ES is filed annually by each employee stock ownership 
plan (ESOP) that is also an HC. The report collects financial data on 
the ESOP's benefit plan activities. The FR Y-9ES consists of four 
schedules: A Statement of Changes in Net Assets Available for Benefits, 
a Statement of Net Assets Available for Benefits, Memoranda, and Notes 
to the Financial Statements.
    The FR Y-9CS is a free-form supplemental report that the Board may 
utilize to collect critical additional data deemed to be needed in an 
expedited manner from HCs on a voluntary basis. The data are used to 
assess and monitor emerging issues related to HCs, and the report is 
intended to supplement the other FR Y-9 reports. The data items 
included on the FR Y-9CS may change as needed.
    Legal authorization and confidentiality: The Board has the 
authority to impose the reporting and recordkeeping requirements 
associated with the Y-9 family of reports on bank holding companies 
(``BHCs'') pursuant to section 5 of the Bank Holding Company Act (``BHC 
Act''), (12 U.S.C. 1844); on savings and loan holding companies 
pursuant to section 10(b)(2) and (3) of the Home Owners' Loan Act, (12 
U.S.C. 1467a(b)(2) and (3)); on U.S. intermediate holding companies 
(``U.S. IHCs'') pursuant to section 5 of the BHC Act, (12 U.S.C. 1844), 
as well as pursuant to sections 102(a)(1) and 165 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''), 
(12 U.S.C. 511(a)(1) and 5365); and on securities holding companies 
pursuant to section 618 of the Dodd-Frank Act, (12 U.S.C. 
1850a(c)(1)(A)). The FR Y-9 series of reports, and the recordkeeping 
requirements set forth in the respective instructions to each report, 
are mandatory, except for the FR Y-9CS, which is voluntary.
    With respect to the FR Y-9C, Schedule HI's memoranda item 7(g), 
Schedule HC-P's item 7(a), and Schedule HC-P's item 7(b) are considered 
confidential commercial and financial information under exemption 4 of 
the Freedom of Information Act (``FOIA''), (5 U.S.C. 552(b)(4)), as is 
Schedule HC's memorandum item 2.b. for both the FR Y-9C and FR Y-9SP 
reports.
    Aside from the data items described above, the remaining data items 
on the FR Y-9 reports are generally not accorded confidential 
treatment. As provided in the Board's Rules Regarding Availability of 
Information (12 CFR part 261), however, a respondent may request 
confidential treatment for any data items the respondent believes

[[Page 17730]]

should be withheld pursuant to a FOIA exemption. The Board will review 
any such request to determine if confidential treatment is appropriate, 
and will inform the respondent if the request for confidential 
treatment has been denied.
    To the extent that the instructions, to the FR Y-9C, FR Y-9LP, FR 
Y-9SP, and FR Y-9ES reports, each respectively direct a financial 
institution to retain the workpapers and related materials used in 
preparation of each report, such material would only be obtained by the 
Board as part of the examination or supervision of the financial 
institution. Accordingly, such information may be considered 
confidential pursuant to exemption 8 of the FOIA (5 U.S.C. 552(b)(8)). 
In addition, the financial institution's workpapers and related 
materials may also be protected by exemption 4 of the FOIA, to the 
extent such financial information is treated as confidential by the 
respondent (5 U.S.C. 552(b)(4)).
    Current Actions: The Board has temporarily revised the instructions 
to FR Y-9C report to accurately reflect the CECL transition provision 
as modified by this interim final rule. Specifically, the Board has 
temporarily revised the instructions to the following FR Y-9C, Schedule 
HC-R, Part I, line items:
     Item 2 (Retained earnings),
     Item 2.a (CECL transition election in effect as of the 
quarter-end report date?),
     Item 15.a (Less: DTAs arising from temporary differences 
that could not be realized through net operating loss carrybacks, net 
of related valuation allowances and net of DTLs that exceed the 25 
percent of line 12,
     Item 15.b (Less: DTAs arising from temporary differences 
that could not be realized through net operating loss carrybacks, net 
of related valuation allowances and net of DTLs, that exceed the 10 
percent common equity tier 1 capital deduction threshold,
     Item 27 (Average total consolidated assets),
     Item 40 (a) (Allowance for loan and lease losses 
includable in tier 2 capital), and
     Item 40 (b) (Advanced approaches holding companies that 
exit parallel run only): Eligible credit reserves includable in tier 2 
capital.

as well as FR Y-9C, Schedule HC-R, Part II, Item 8 (All other assets). 
The Board has determined that the revisions to the FR Y-9C described 
above must be instituted quickly and that public participation in the 
approval process would defeat the purpose of the collection of 
information, as delaying the revisions would result in the collection 
of inaccurate information, and would interfere with the Board's ability 
to perform its statutory duties.
    The Board also invites comment to extend the FR Y-9 for three 
years, with the revisions described above.

    (2) Report title: Capital Assessments and Stress Testing Reports.
    Agency form number: FR Y-14A/Q/M.
    OMB control number: 7100-0341.
    Effective date: December 31, 2019.
    Frequency: Annually, quarterly, and monthly.
    Respondents: These collections of information are applicable to 
BHCs, U.S. IHCs, and savings and loan holding companies (SLHCs) \22\ 
(collectively, ``holding companies'') with $100 billion or more in 
total consolidated assets, as 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 Holding 
Companies (FR Y-9C); or (ii) if the firm has not filed an FR Y-9C for 
each of the most recent four quarters, then 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. Reporting is required as of 
the first day of the quarter immediately following the quarter in which 
the respondent meets this asset threshold, unless otherwise directed by 
the Board.
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    \22\ SLHCs with $100 billion or more in total consolidated 
assets become members of the FR Y-14Q and FR Y-14M panels effective 
June 30, 2020, and the FR Y-14A panel effective December 31, 2020. 
See 84 FR 59032 (November 1, 2019).
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    Estimated number of respondents: FR Y-14A/Q: 36; FR Y-14M: 34.\23\
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    \23\ The estimated number of respondents for the FR Y-14M is 
lower than for the FR Y-14Q and FR Y-14A because, in recent years, 
certain respondents to the FR Y-14A and FR Y-14Q have not met the 
materiality thresholds to report the FR Y-14M due to their lack of 
mortgage and credit activities. The Board expects this situation to 
continue for the foreseeable future.
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    Estimated average hours per response: FR Y-14A: 1,085 hours; FR Y-
14Q: 1,920 hours; FR Y-14M: 1,072 hours; FR Y-14 On-going Automation 
Revisions: 480 hours; FR Y-14 Attestation On-going Attestation: 2,560 
hours.
    Estimated annual burden hours: FR Y-14A: 39,060 hours; FR Y-14Q: 
276,480 hours; FR Y-14M: 437,376 hours; FR Y-14 On-going Automation 
Revisions: 17,280 hours; FR Y-14 Attestation On-going Attestation: 
33,280 hours.
    General description of report: This family of information 
collections is composed of the following three reports:
    The annual \24\ 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.\25\
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    \24\ In certain circumstances, a BHC or IHC may be required to 
re-submit its capital plan. See 12 CFR 225.8(e)(4). Firms that must 
re-submit their capital plan generally also must provide a revised 
FR Y-14A in connection with their resubmission.
    \25\ On October 10, 2019, the Board issued a final rule that 
eliminated the requirement for firms subject to Category IV 
standards to conduct and publicly disclose the results of a company-
run stress test. See 84 FR 59032 (Nov. 1, 2019). That final rule 
maintained the existing FR Y-14 substantive reporting requirements 
for these firms in order to provide the Board with the data it needs 
to conduct supervisory stress testing and inform the Board's ongoing 
monitoring and supervision of its supervised firms. However, as 
noted in the final rule, the Board intends to provide greater 
flexibility to banking organizations subject to Category IV 
standards in developing their annual capital plans and consider 
further change to the FR Y-14 forms as part of a separate proposal. 
See 84 FR 59032, 59063.
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    The quarterly FR Y-14Q collects granular data on various asset 
classes, including loans, securities, trading assets, and PPNR for the 
reporting period.
    The monthly FR Y-14M is comprised of three retail portfolio- and 
loan-level schedules, and one detailed address-matching schedule to 
supplement two of the portfolio and loan-level schedules.
    The data collected through the FR Y-14A/Q/M reports provide the 
Board with the information needed to help ensure that large firms 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 reports are used to 
support the Board's annual Comprehensive Capital Analysis and Review 
(CCAR) and Dodd-Frank Act Stress Test (DFAST) exercises, which 
complement 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, as 
well as 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 
respondent financial institutions. Compliance with the information 
collection is mandatory.
    Current actions: The Board has temporarily revised the instructions 
to FR Y-14A report to accurately reflect

[[Page 17731]]

the CECL transition provision as modified by this interim final rule. 
Specifically, the Board has temporarily revised the FR Y-14A general 
instructions, as well as the instructions to the following FR Y-14A 
schedules or line items:
     Schedule A.1.d (Capital);
     Schedule A.1.d, Line item 20 (Retained earnings);
     Schedule A.1.d, Line item 39 (DTAs arising from temporary 
differences that could not be realized through net operating loss 
carrybacks, net of related valuation allowances and net of DTLs, that 
exceed the 10 percent common equity tier 1 capital deduction 
threshold);
     Schedule A.1.d, Line item 54 (Allowance for loan and lease 
losses includable in tier 2 capital);
     Schedule A.1.d, Line item 77 (DTAs arising from temporary 
differences that could not be realized through net operating loss 
carrybacks, net of related valuation allowances and net of DTLs); and
     Collection of Supplemental CECL Information, Line Item 2 
(Institutions applying the CECL transition provision),
    In addition, the Board has delayed the due date for the December 
31, 2019, FR Y-14A, Collection of Supplemental CECL Information from 
April 6, 2020, to May 11, 2020, to correspond with the submission date 
for the March 31, 2020, FR Y-9C report. The Board has determined that 
the revisions to the FR Y-14A/Q/M reports described above must be 
instituted quickly and that public participation in the approval 
process would defeat the purpose of the collection of information, as 
delaying the revisions would result in the collection of inaccurate 
information, and would interfere with the Board's ability to perform 
its statutory duties.
    The Board also invites comment to extend the FR Y-14A/Q/M for three 
years, with the revisions described above.
    Legal authorization and confidentiality: The Board has the 
authority to require BHCs to file the FR Y-14 reports pursuant to 
section 5(c) of the BHC Act, 12 U.S.C. 1844(c), and pursuant to section 
165(i) of the Dodd-Frank Act, 12 U.S.C. 5365(i). The Board has 
authority to require SLHCs to file the FR Y-14 reports pursuant to 
section 10(b) of the Home Owners' Loan Act (12 U.S.C. 1467a(b)). 
Lastly, the Board has authority to require U.S. IHCs of FBOs to file 
the FR Y-14 reports pursuant to section 5 of the BHC Act, as well as 
pursuant to sections 102(a)(1) and 165 of the Dodd-Frank Act, 12 U.S.C. 
5311(a)(1) and 5365. In addition, section 401(g) of EGRRCPA, 12 U.S.C. 
5365 note, provides that the Board has the authority to establish 
enhanced prudential standards for foreign banking organizations with 
total consolidated assets of $100 billion or more, and clarifies that 
nothing in section 401 ``shall be construed to affect the legal effect 
of the final rule of the Board. . entitled `Enhanced Prudential 
Standard for [BHCs] and Foreign Banking Organizations' (79 FR 17240 
(March 27, 2014)), as applied to foreign banking organizations with 
total consolidated assets equal to or greater than $100 million.'' \26\ 
The FR Y-14 reports are mandatory. The information collected in the FR 
Y-14 reports is collected as part of the Board's supervisory process, 
and therefore, such information is afforded confidential treatment 
pursuant to exemption 8 of the Freedom of Information Act (FOIA), 5 
U.S.C. 552(b)(8). In addition, confidential commercial or financial 
information, which a submitter actually and customarily treats as 
private, and which has been provided pursuant to an express assurance 
of confidentiality by the Board, is considered exempt from disclosure 
under exemption 4 of the FOIA, 5 U.S.C. 552(b)(4).
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    \26\ The Board's final rule referenced in section 401(g) of 
EGRRCPA specifically stated that the Board would require IHCs to 
file the FR Y-14 reports. See 79 FR 17240, 17304 (March 27, 2014).
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D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \27\ requires an agency to 
consider whether the rules it proposes will have a significant economic 
impact on a substantial number of small entities.\28\ The RFA applies 
only to rules for which an agency publishes a general notice of 
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed 
previously, consistent with section 553(b)(B) of the APA, the agencies 
have determined for good cause that general notice and opportunity for 
public comment is impracticable and contrary to the public's interest, 
and therefore the agencies are not issuing a notice of proposed 
rulemaking. Accordingly, the agencies have concluded that the RFA's 
requirements relating to initial and final regulatory flexibility 
analysis do not apply. Nevertheless, the agencies seek comment on 
whether, and the extent to which, the interim final rule would affect a 
significant number of small entities.
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    \27\ 5 U.S.C. 601 et seq.
    \28\ Under regulations issued by the Small Business 
Administration, a small entity includes a depository institution, 
bank holding company, or savings and loan holding company with total 
assets of $600 million or less and trust companies with total assets 
of $41.5 million or less. See 13 CFR 121.201.
---------------------------------------------------------------------------

E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\29\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
IDIs, each Federal banking agency must consider, consistent with the 
principle 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, section 302(b) of RCDRIA requires new regulations and 
amendments to regulations that impose additional reporting, 
disclosures, or other new requirements on IDIs generally to 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, with certain 
exceptions, including for good cause.\30\ For the reasons described 
above, the agencies find good cause exists under section 302 of RCDRIA 
to publish this interim final rule with an immediate effective date.
---------------------------------------------------------------------------

    \29\ 12 U.S.C. 4802(a).
    \30\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

    As such, the final rule will be effective on immediately. 
Nevertheless, the agencies seek comment on RCDRIA.

F. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \31\ requires the Federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. In light of this requirement, 
the agencies have sought to present the interim final rule in a simple 
and straightforward manner. The agencies invite comments on whether 
there are additional steps it could take to make the rule easier to 
understand. For example:
---------------------------------------------------------------------------

    \31\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
---------------------------------------------------------------------------

     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the regulation clearly stated? If 
not, how could the regulation be more clearly stated?
     Does the regulation contain 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

[[Page 17732]]

easier to understand? If so, what changes to the format would make the 
regulation easier to understand?
     What else could we do to make the regulation easier to 
understand?

G. Unfunded Mandates

    As a general matter, the Unfunded Mandates Act of 1995 (UMRA), 2 
U.S.C. 1531 et seq., requires the preparation of a budgetary impact 
statement before promulgating a rule that 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. However, the UMRA does not apply to 
final rules for which a general notice of proposed rulemaking was not 
published. See 2 U.S.C. 1532(a). Therefore, because the OCC has found 
good cause to dispense with notice and comment for this interim final 
rule, the OCC has not prepared an economic analysis of the rule under 
the UMRA.

List of Subjects

12 CFR Part 3

    Administrative practice and procedure, Capital, National banks, 
Risk.

12 CFR Part 217

    Administrative practice and procedure, Banks, Banking, Capital, 
Federal Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Risk, Securities.

12 CFR Part 324

    Administrative practice and procedure, Banks, Banking, Reporting 
and recordkeeping requirements, Savings associations, State non-member 
banks.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends chapter I 
of title 12 of the Code of Federal Regulations as follows:

PART 3--CAPITAL ADEQUACY STANDARDS

0
1. The authority citation for part 3 continues to read as follows:

    Authority:  12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).

Subpart G--Transition Provisions

0
2. Amend Sec.  3.301 by:
0
a. Revising paragraphs (a)(1) and (2), (b)(1), and (c)(1) introductory 
text;
0
b. Redesignating paragraphs (c)(3) and (4) as paragraphs (e) and (f);
0
c. Adding paragraph (d);
0
d. Adding headings for newly redesignated paragraphs (e) and (f);
0
e. In newly redesignated paragraph (f) introductory text, removing 
``paragraph'' and adding ``paragraph (f)'' in its place; and
0
f. Further redesignating newly redesignated paragraphs (f)(i) and (ii) 
as paragraphs (f)(1) and (2).
    The revisions and addition read as follows:


Sec.  3.301   Current Expected Credit Losses (CECL) transition.

    (a) * * *
    (1) Except as provided in paragraph (d) of this section, a national 
bank or Federal savings organization may elect to use a CECL transition 
provision pursuant to this section only if the national bank or Federal 
savings association records a reduction in retained earnings due to the 
adoption of CECL as of the beginning of the fiscal year in which the 
national bank or Federal savings association adopts CECL.
    (2) A national bank or Federal savings association that is required 
to use CECL for regulatory reporting purposes that intends to use the 
CECL transition provision must elect to use the CECL transition 
provision in the first Call Report that includes CECL filed by the 
national bank or Federal savings association after it is required to 
use CECL for regulatory reporting purposes.
* * * * *
    (b) * * *
    (1) Transition period means, the three-year period, beginning the 
first day of the fiscal year in which a national bank or Federal 
savings association adopts CECL and reflects CECL in its first Call 
Report; or, for the 2020 transition under paragraph (d) of this 
section, the five-year period beginning on the earlier of the date a 
national bank or Federal savings association was required to adopt CECL 
for accounting purposes under U.S. GAAP (as in effect January 1, 2020), 
or the first day of the quarter in which the national bank or Federal 
savings association files regulatory reports that include CECL.
* * * * *
    (c) * * *
    (1) For purposes of the election described in paragraph (a)(1) of 
this section and except as provided in paragraph (d) of this section, a 
national bank or Federal savings association must make the following 
adjustments in its calculation of regulatory capital ratios:
* * * * *
    (d) 2020 CECL transition provision. A national bank or Federal 
savings association that was required to adopt CECL for accounting 
purposes under U.S. GAAP (as in effect on January 1, 2020) as of the 
first day of a fiscal year that begins during the 2020 calendar year, 
and that makes the election described in paragraph (a)(1) of this 
section, may use the transitional amounts and adjusted transitional 
amounts in paragraph (d)(1) of this section with the 2020 CECL 
transition calculation in paragraph (d)(2) of this section to adjust 
its calculation of regulatory capital ratios during each quarter of the 
transition period in which a national bank or Federal savings 
association uses CECL for purposes of its Call Report. A national bank 
or Federal savings association that did not make the election described 
in paragraph (a)(1) of this section because it did not record a 
reduction in retained earnings due to the adoption of CECL as of the 
beginning of the fiscal year in which the national bank or Federal 
savings association adopted CECL may use the transition provision in 
this paragraph (d) if it has a positive modified CECL transitional 
amount during any quarter ending in 2020 and makes the election in the 
Call Report or FR Y-9C filed for the same quarter.
    (1) Definitions. For purposes of the 2020 CECL transition 
calculation in paragraph (d)(2) of this section, the following 
definitions apply:
    (i) Modified CECL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report and 
the AACL as of the beginning of the fiscal year in which the national 
bank or Federal savings association adopts CECL, multiplied by 0.25, 
plus the CECL transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of 
the second year of the transition period and the AACL as of the 
beginning of the fiscal year in which the national bank or Federal 
savings association adopts CECL, multiplied by 0.25, plus the CECL 
transitional amount.
    (ii) Modified AACL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report and 
the AACL as of

[[Page 17733]]

the beginning of the fiscal year in which the national bank or Federal 
savings association adopts CECL, multiplied by 0.25, plus the AACL 
transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of 
the second year of the transition period and the AACL as of the 
beginning of the fiscal year in which the national bank or Federal 
savings association adopts CECL, multiplied by 0.25, plus the AACL 
transitional amount.
    (2) Calculation of 2020 CECL transition provision. (i) A national 
bank or Federal savings association that has made the election 
described in paragraph (a)(1) of this section in its first Call Report 
filed during the 2020 calendar year that reflects CECL adoption may 
make the following adjustments in its calculation of regulatory capital 
ratios:
    (A) Increase retained earnings by one-hundred percent of its 
modified CECL transitional amount during the first year of the 
transition period, increase retained earnings by one hundred percent of 
its modified CECL transitional amount during the second year of the 
transition period, increase retained earnings by seventy-five percent 
of its modified CECL transitional amount during the third year of the 
transition period, increase retained earnings by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase retained earnings by twenty-five 
percent of its modified CECL transitional amount during the fifth year 
of the transition period;
    (B) Decrease amounts of DTAs arising from temporary differences by 
one-hundred percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by one hundred percent of its DTA transitional 
amount during the second year of the transition period, decrease 
amounts of DTAs arising from temporary differences by seventy-five 
percent of its DTA transitional amount during the third year of the 
transition period, decrease amounts of DTAs arising from temporary 
differences by fifty percent of its DTA transitional amount during the 
fourth year of the transition period, and decrease amounts of DTAs 
arising from temporary differences by twenty-five percent of its DTA 
transitional amount during the fifth year of the transition period;
    (C) Decrease amounts of AACL by one-hundred percent of its modified 
AACL transitional amount during the first year of the transition 
period, decrease amounts of AACL by one hundred percent of its modified 
AACL transitional amount during the second year of the transition 
period, decrease amounts of AACL by seventy-five percent of its 
modified AACL transitional amount during the third year of the 
transition period, decrease amounts of AACL by fifty percent of its 
modified AACL transitional amount during the fourth year of the 
transition period, and decrease amounts of AACL by twenty-five percent 
of its modified AACL transitional amount during the fifth year of the 
transition period; and
    (D) Increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by one-hundred percent 
of its modified CECL transitional amount during the first year of the 
transition period, increase average total consolidated assets as 
reported on the Call Report for purposes of the leverage ratio by one 
hundred percent of its modified CECL transitional amount during the 
second year of the transition period, increase average total 
consolidated assets as reported on the Call Report for purposes of the 
leverage ratio by seventy-five percent of its modified CECL 
transitional amount during the third year of the transition period, 
increase average total consolidated assets as reported on the Call 
Report for purposes of the leverage ratio by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase average total consolidated assets as 
reported on the Call Report for purposes of the leverage ratio by 
twenty-five percent of its modified CECL transitional amount during the 
fifth year of the transition period.
    (ii) An advanced approaches national bank or Federal savings 
association that has made the election described in paragraph (a)(1) of 
this section in its first Call Report filed during 2020 may make the 
following additional adjustments to its calculation of regulatory 
capital ratios:
    (A) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by one-hundred percent of its modified 
CECL transitional amount during the first year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by one hundred percent of its modified 
CECL transitional amount during the second year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its modified 
CECL transitional amount during the third year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by fifty percent of its modified CECL 
transitional amount during the fourth year of the transition period, 
and increase total leverage exposure for purposes of the supplementary 
leverage ratio by twenty-five percent of its modified CECL transitional 
amount during the fifth year of the transition period; and
    (B) An advanced approaches national bank or Federal savings 
association that has completed the parallel run process and has 
received notification from the OCC pursuant to Sec.  3.121(d) must 
decrease amounts of eligible credit reserves by one-hundred percent of 
its eligible credit reserves transitional amount during the first year 
of the transition period, decrease amounts of eligible credit reserves 
by one hundred percent of its eligible credit reserves transitional 
amount during the second year of the transition period, decrease 
amounts of eligible credit reserves by seventy-five percent of its 
eligible credit reserves transitional amount during the third year of 
the transition period, decrease amounts of eligible credit reserves by 
fifty percent of its eligible credit reserves transitional amount 
during the fourth year of the transition period, and decrease amounts 
of eligible credit reserves by twenty-five percent of its eligible 
credit reserves transitional amount during the fifth year of the 
transition period.
    (e) Eligible credit reserves shortfall. * * *
    (f) Business combinations. * * *

Board of Governors of the Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set forth in the preamble, the Board amends chapter 
II of title 12 of the Code of Federal Regulations as follows:

PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND 
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)

0
3. The authority citation for part 217 continues to read as follows:

    Authority:  12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 
1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904, 
3906-3909, 4808, 5365, 5368, 5371, and 5371 note.

Subpart G--Transition Provisions

0
4. Revise Sec.  217.301 to read as follows:

[[Page 17734]]

Sec.  217.301   Current expected credit losses (CECL) transition.

    (a) CECL transition provision. (1) Except as provided in paragraph 
(d) of this section, a Board-regulated institution may elect to use a 
CECL transition provision pursuant to this section only if the Board-
regulated institution records a reduction in retained earnings due to 
the adoption of CECL as of the beginning of the fiscal year in which 
the Board-regulated institution adopts CECL.
    (2) A Board-regulated institution that is required to use CECL when 
filing its Call Report or FR Y-9C that intends to use the CECL 
transition provision must elect to use the CECL transition provision in 
the first Call Report or FR Y-9C that includes CECL filed by the Board-
regulated institution after it is required to use CECL for regulatory 
reporting purposes.
    (3) A Board-regulated institution that does not elect to use the 
CECL transition provision as of the first Call Report or FR Y-9C that 
includes CECL filed as described in paragraph (a)(2) of this section 
may not elect to use the CECL transition provision in subsequent 
reporting periods.
    (b) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Transition period means, the three-year period beginning the 
first day of the fiscal year in which a Board-regulated institution 
adopts CECL and reflects CECL in its first Call Report or FR Y-9C; or, 
for the 2020 transition under paragraph (d) of this section, the five-
year period beginning on the earlier of the date a Board-regulated 
institution was required to adopt CECL for accounting purposes under 
U.S. GAAP (as in effect on January 1, 2020), or the first day of the 
quarter in which the Board-regulated institution files regulatory 
reports that include CECL.
    (2) CECL transitional amount means the decrease net of any DTAs in 
the amount of a Board-regulated institution's retained earnings as of 
the beginning of the fiscal year in which the Board-regulated 
institution adopts CECL from the amount of the Board-regulated 
institution's retained earnings as of the closing of the fiscal year-
end immediately prior to the Board-regulated institution's adoption of 
CECL.
    (3) DTA transitional amount means the increase in the amount of a 
Board-regulated institution's DTAs arising from temporary differences 
as of the beginning of the fiscal year in which the Board-regulated 
institution adopts CECL from the amount of the Board-regulated 
institution's DTAs arising from temporary differences as of the closing 
of the fiscal year-end immediately prior to the Board-regulated 
institution's adoption of CECL.
    (4) AACL transitional amount means the difference in the amount of 
a Board-regulated institution's AACL as of the beginning of the fiscal 
year in which the Board-regulated institution adopts CECL and the 
amount of the Board-regulated institution's ALLL as of the closing of 
the fiscal year-end immediately prior to the Board-regulated 
institution's adoption of CECL.
    (5) Eligible credit reserves transitional amount means the increase 
in the amount of a Board-regulated institution's eligible credit 
reserves as of the beginning of the fiscal year in which the Board-
regulated institution adopts CECL from the amount of the Board-
regulated institution's eligible credit reserves as of the closing of 
the fiscal year-end immediately prior to the Board-regulated 
institution's adoption of CECL.
    (c) Calculation of the three-year CECL transition provision. (1) 
For purposes of the election described in paragraph (a)(1) of this 
section and except as provided in paragraph (d) of this section, a 
Board-regulated institution must make the following adjustments in its 
calculation of regulatory capital ratios:
    (i) Increase retained earnings by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase retained earnings by fifty percent of its CECL transitional 
amount during the second year of the transition period, and increase 
retained earnings by twenty-five percent of its CECL transitional 
amount during the third year of the transition period;
    (ii) Decrease amounts of DTAs arising from temporary differences by 
seventy-five percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by fifty percent of its DTA transitional amount 
during the second year of the transition period, and decrease amounts 
of DTAs arising from temporary differences by twenty-five percent of 
its DTA transitional amount during the third year of the transition 
period;
    (iii) Decrease amounts of AACL by seventy-five percent of its AACL 
transitional amount during the first year of the transition period, 
decrease amounts of AACL by fifty percent of its AACL transitional 
amount during the second year of the transition period, and decrease 
amounts of AACL by twenty-five percent of its AACL transitional amount 
during the third year of the transition period; and
    (iv) Increase average total consolidated assets as reported on the 
Call Report or FR Y-9C for purposes of the leverage ratio by seventy-
five percent of its CECL transitional amount during the first year of 
the transition period, increase average total consolidated assets as 
reported on the Call Report or FR Y-9C for purposes of the leverage 
ratio by fifty percent of its CECL transitional amount during the 
second year of the transition period, and increase average total 
consolidated assets as reported on the Call Report or FR Y-9C for 
purposes of the leverage ratio by twenty-five percent of its CECL 
transitional amount during the third year of the transition period.
    (2) For purposes of the election described in paragraph (a)(1) of 
this section, an advanced approaches Board-regulated institution must 
make the following additional adjustments to its calculation of 
regulatory capital ratios:
    (i) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase total leverage exposure for purposes of the supplementary 
leverage ratio by fifty percent of its CECL transitional amount during 
the second year of the transition period, and increase total leverage 
exposure for purposes of the supplementary leverage ratio by twenty-
five percent of its CECL transitional amount during the third year of 
the transition period; and
    (ii) An advanced approaches Board-regulated institution that has 
completed the parallel run process and has received notification from 
the Board pursuant to Sec.  217.121(d) must decrease amounts of 
eligible credit reserves by seventy-five percent of its eligible credit 
reserves transitional amount during the first year of the transition 
period, decrease amounts of eligible credit reserves by fifty percent 
of its eligible credit reserves transitional amount during the second 
year of the transition provision, and decrease amounts of eligible 
credit reserves by twenty-five percent of its eligible credit reserves 
transitional amount during the third year of the transition period.
    (d) Calculation of the five-year CECL transition provision. A 
Board-regulated institution that was required to adopt CECL for 
accounting purposes under U.S. GAAP (as in effect January 1, 2020) as 
of the first day of a fiscal year that begins during the 2020 calendar 
year, and that makes the election described in paragraph (a)(1) of this 
section, may use the transitional amounts and modified

[[Page 17735]]

transitional amounts in paragraph (d)(1) of this section with the 2020 
CECL transition calculation in paragraph (d)(2) of this section to 
adjust its calculation of regulatory capital ratios during each quarter 
of the transition period in which a Board-regulated institution uses 
CECL for purposes of its Call Report or FR Y-9C. A Board-regulated 
institution that did not make the election described in paragraph 
(a)(1) of this section because it did not record a reduction in 
retained earnings due to the adoption of CECL as of the beginning of 
the fiscal year in which the Board-regulated institution adopted CECL 
may use the transition provision in this paragraph (d) if it has a 
positive modified CECL transitional amount during any quarter ending in 
2020, and makes the election in the Call Report of FR Y-9C filed for 
the same quarter.
    (1) Definitions. For purposes of the 2020 CECL transition 
calculation in paragraph (d)(2) of this section, the following 
definitions apply:
    (i) Modified CECL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report or 
FR Y-9C, and the AACL as of the beginning of the fiscal year in which 
the Board-regulated institution adopts CECL, multiplied by .25, plus 
the CECL transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report or Y-9C at the 
end of the second year of the transition period and the AACL as of the 
beginning of the fiscal year in which the Board-regulated institution 
adopts CECL, multiplied by 0.25, plus the CECL transitional amount.
    (ii) Modified AACL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report or 
FR Y-9C, and the AACL as of the beginning of the fiscal year in which 
the Board-regulated institution adopts CECL, multiplied by .25, plus 
the AACL transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report or FR Y-9C at 
the end of the second year of the transition period and the AACL as of 
the beginning of the fiscal year in which the Board-regulated 
institution adopts CECL, multiplied by 0.25, plus the AACL transitional 
amount.
    (2) Calculation of 2020 CECL transition provision. (i) A Board-
regulated institution that has made the election described in paragraph 
(a)(1) of this section in a first Call Report or FR Y-9C filed during 
the 2020 calendar year may make the following adjustments in its 
calculation of regulatory capital ratios:
    (A) Increase retained earnings by one-hundred percent of its 
modified CECL transitional amount during the first year of the 
transition period, increase retained earnings by one hundred percent of 
its modified CECL transitional amount during the second year of the 
transition period, increase retained earnings by seventy-five percent 
of its modified CECL transitional amount during the third year of the 
transition period, increase retained earnings by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase retained earnings by twenty-five 
percent of its modified CECL transitional amount during the fifth year 
of the transition period;
    (B) Decrease amounts of DTAs arising from temporary differences by 
one-hundred percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by one hundred percent of its DTA transitional 
amount during the second year of the transition period, decrease 
amounts of DTAs arising from temporary differences by seventy-five 
percent of its DTA transitional amount during the third year of the 
transition period, decrease amounts of DTAs arising from temporary 
differences by fifty percent of its DTA transitional amount during the 
fourth year of the transition period, and decrease amounts of DTAs 
arising from temporary differences by twenty-five percent of its DTA 
transitional amount during the fifth year of the transition period;
    (C) Decrease amounts of AACL by one-hundred percent of its modified 
AACL transitional amount during the first year of the transition 
period, decrease amounts of AACL by one hundred percent of its modified 
AACL transitional amount during the second year of the transition 
period, decrease amounts of AACL by seventy-five percent of its 
modified AACL transitional amount during the third year of the 
transition period, decrease amounts of AACL by fifty percent of its 
AACL transitional amount during the fourth year of the transition 
period, and decrease amounts of AACL by twenty-five percent of its AACL 
transitional amount during the fifth year of the transition period; and
    (D) Increase average total consolidated assets as reported on the 
Call Report or FR Y-9C for purposes of the leverage ratio by one-
hundred percent of its modified CECL transitional amount during the 
first year of the transition period, increase average total 
consolidated assets as reported on the Call Report or FR Y-9C for 
purposes of the leverage ratio by one hundred percent of its modified 
CECL transitional amount during the second year of the transition 
period, increase average total consolidated assets as reported on the 
Call Report or FR Y-9C for purposes of the leverage ratio by seventy-
five percent of its modified CECL transitional amount during the third 
year of the transition period, increase average total consolidated 
assets as reported on the Call Report or FR Y-9C for purposes of the 
leverage ratio by fifty percent of its modified CECL transitional 
amount during the fourth year of the transition period, and increase 
average total consolidated assets as reported on the Call Report or FR 
Y-9C for purposes of the leverage ratio by twenty-five percent of its 
modified CECL transitional amount during the fifth year of the 
transition period.
    (ii) An advanced approaches Board-regulated institution that has 
made the election described in paragraph (a)(1) of this section in its 
first Call Report or FR Y-9C filed during 2020 may make the following 
additional adjustments to its calculation of regulatory capital ratios:
    (A) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by one-hundred percent of its modified 
CECL transitional amount during the first year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by one hundred percent of its modified 
CECL transitional amount during the second year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its modified 
CECL transitional amount during the third year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by fifty percent of its CECL transitional 
amount during the fourth year of the transition period, and increase 
total leverage exposure for purposes of the supplementary leverage 
ratio by twenty-five percent of its CECL transitional amount during the 
fifth year of the transition period; and
    (B) An advanced approaches Board-regulated institution that has 
completed the parallel run process and has received notification from 
the Board pursuant to Sec.  217.121(d) must decrease amounts of 
eligible credit reserves by one-hundred percent of its eligible

[[Page 17736]]

credit reserves transitional amount during the first year of the 
transition period, decrease amounts of eligible credit reserves by one 
hundred percent of its eligible credit reserves transitional amount 
during the second year of the transition period, decrease amounts of 
eligible credit reserves by seventy-five percent of its eligible credit 
reserves transitional amount during the third year of the transition 
period, decrease amounts of eligible credit reserves by fifty percent 
of its eligible credit reserves transitional amount during the fourth 
year of the transition period, and decrease amounts of eligible credit 
reserves by twenty-five percent of its eligible credit reserves 
transitional amount during the fifth year of the transition period.
    (e) Eligible credit reserves shortfall. An advanced approaches 
Board-regulated institution that has completed the parallel run process 
and has received notification from the Board pursuant to Sec.  
217.121(d), whose amount of expected credit loss exceeded its eligible 
credit reserves immediately prior to the adoption of CECL, and that has 
an increase in common equity tier 1 capital as of the beginning of the 
fiscal year in which it adopts CECL after including the first year 
portion of the CECL transitional amount (or modified CECL transitional 
amount) must decrease its CECL transitional amount used in paragraph 
(c) of this section (or modified CECL transitional amount used in 
paragraph (d) of this section) by the full amount of its DTA 
transitional amount (or modified DTA transitional amount).
    (f) Business combinations. Notwithstanding any other requirement in 
this section, for purposes of this paragraph (f), in the event of a 
business combination involving a Board-regulated institution where one 
or both Board-regulated institutions have elected the treatment 
described in this section:
    (1) If the acquirer Board-regulated institution (as determined 
under GAAP) elected the treatment described in this section, the 
acquirer Board-regulated institution must continue to use the 
transitional amounts (unaffected by the business combination) that it 
calculated as of the date that it adopted CECL through the end of its 
transition period.
    (2) If the acquired company (as determined under GAAP) elected the 
treatment described in this section, any transitional amount of the 
acquired company does not transfer to the resulting Board-regulated 
institution.

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the joint preamble, chapter III of 
title 12 of the Code of Federal Regulations is amended as follows:

PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS

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5. The authority citation for part 324 continues to read as follows:

    Authority:  12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, 
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note).


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6. Revise Sec.  324.301 to read as follows:


Sec.  324.301   Current expected credit losses (CECL) transition.

    (a) CECL transition provision. (1) Except as provided in paragraph 
(d) of this section, an FDIC-supervised institution may elect to use a 
CECL transition provision pursuant to this section only if the FDIC-
supervised institution records a reduction in retained earnings due to 
the adoption of CECL as of the beginning of the fiscal year in which 
the FDIC-supervised institution adopts CECL.
    (2) An FDIC-supervised institution that is required to use CECL for 
regulatory reporting purposes that intends to use the CECL transition 
provision must elect to use the CECL transition provision in the first 
Call Report that includes CECL filed by the FDIC-supervised institution 
after it is required to use CECL for regulatory reporting purposes.
    (3) An FDIC-supervised institution that does not elect to use the 
CECL transition provision as of the first Call Report that includes 
CECL filed as described in paragraph (a)(2) of this section may not 
elect to use the CECL transition provision in subsequent reporting 
periods.
    (b) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Transition period means the three-year period, s beginning the 
first day of the fiscal year in which an FDIC-supervised institution 
adopts CECL and reflects CECL in its first Call Report filed after that 
date; or, for the 2020 transition under paragraph (d) of this section, 
the five-year period beginning on the earlier of the date an FDIC-
supervised institution was required to adopt CECL for accounting 
purposes under U.S. GAAP (as in effect January 1, 2020), or the first 
day of the quarter in which the FDIC-supervised institution files 
regulatory reports that include CECL.
    (2) CECL transitional amount means the decrease net of any DTAs in 
the amount of an FDIC-supervised institution's retained earnings as of 
the beginning of the fiscal year in which the FDIC-supervised 
institution adopts CECL from the amount of the FDIC-supervised 
institution's retained earnings as of the closing of the fiscal year-
end immediately prior to the FDIC-supervised's adoption of CECL.
    (3) DTA transitional amount means the increase in the amount of an 
FDIC-supervised institution's DTAs arising from temporary differences 
as of the beginning of the fiscal year in which the FDIC-supervised 
institution adopts CECL from the amount of the FDIC-supervised 
institution's DTAs arising from temporary differences as of the closing 
of the fiscal year-end immediately prior to the FDIC-supervised 
institution's adoption of CECL.
    (4) AACL transitional amount means the difference in the amount of 
an FDIC-supervised institution's AACL as of the beginning of the fiscal 
year in which the FDIC-supervised institution adopts CECL and the 
amount of the FDIC-supervised institution's ALLL as of the closing of 
the fiscal year-end immediately prior to the FDIC-supervised 
institution's adoption of CECL.
    (5) Eligible credit reserves transitional amount means the increase 
in the amount of an FDIC-supervised institution's eligible credit 
reserves as of the beginning of the fiscal year in which the FDIC-
supervised institution adopts CECL from the amount of the FDIC-
supervised institution's eligible credit reserves as of the closing of 
the fiscal year-end immediately prior to the FDIC-supervised 
institution's adoption of CECL.
    (c) Calculation of the three-year CECL transition provision. (1) 
For purposes of the election described in paragraph (a)(1) of this 
section and except as provided in paragraph (d) of this section, an 
FDIC-supervised institution must make the following adjustments in its 
calculation of regulatory capital ratios:
    (i) Increase retained earnings by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase

[[Page 17737]]

retained earnings by fifty percent of its CECL transitional amount 
during the second year of the transition period, and increase retained 
earnings by twenty-five percent of its CECL transitional amount during 
the third year of the transition period;
    (ii) Decrease amounts of DTAs arising from temporary differences by 
seventy-five percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by fifty percent of its DTA transitional amount 
during the second year of the transition period, and decrease amounts 
of DTAs arising from temporary differences by twenty-five percent of 
its DTA transitional amount during the third year of the transition 
period;
    (iii) Decrease amounts of AACL by seventy-five percent of its AACL 
transitional amount during the first year of the transition period, 
decrease amounts of AACL by fifty percent of its AACL transitional 
amount during the second year of the transition period, and decrease 
amounts of AACL by twenty-five percent of its AACL transitional amount 
during the third year of the transition period; and
    (iv) Increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by seventy-five percent 
of its CECL transitional amount during the first year of the transition 
period, increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by fifty percent of its 
CECL transitional amount during the second year of the transition 
period, and increase average total consolidated assets as reported on 
the Call Report for purposes of the leverage ratio by twenty-five 
percent of its CECL transitional amount during the third year of the 
transition period.
    (2) For purposes of the election described in paragraph (a)(1) of 
this section, an advanced approaches FDIC-supervised institution must 
make the following additional adjustments to its calculation of 
regulatory capital ratios:
    (i) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its CECL 
transitional amount during the first year of the transition period, 
increase total leverage exposure for purposes of the supplementary 
leverage ratio by fifty percent of its CECL transitional amount during 
the second year of the transition period, and increase total leverage 
exposure for purposes of the supplementary leverage ratio by twenty-
five percent of its CECL transitional amount during the third year of 
the transition period; and
    (ii) An advanced approaches FDIC-supervised institution that has 
completed the parallel run process and has received notification from 
the FDIC pursuant to Sec.  324.121(d) must decrease amounts of eligible 
credit reserves by seventy-five percent of its eligible credit reserves 
transitional amount during the first year of the transition period, 
decrease amounts of eligible credit reserves by fifty percent of its 
eligible credit reserves transitional amount during the second year of 
the transition provision, and decrease amounts of eligible credit 
reserves by twenty-five percent of its eligible credit reserves 
transitional amount during the third year of the transition period.
    (d) Calculation of the five-year CECL transition provision. An 
FDIC-supervised institution that was required to adopt CECL for 
accounting purposes under U.S. GAAP (as in effect January 1, 2020) as 
of the first day of a fiscal year that begins during the 2020 calendar 
year, and that makes the election described in paragraph (a)(1) of this 
section, may use the transitional amounts and modified transitional 
amounts in paragraph (d)(1) of this section with the 2020 CECL 
transition calculation in paragraph (d)(2) of this section to adjust 
its calculation of regulatory capital ratios during each quarter of the 
transition period in which an FDIC-supervised institution uses CECL for 
purposes of its Call Report. A FDIC supervised-institution that did not 
make the election described in paragraph (a)(1) of this section because 
it did not record a reduction in retained earnings due to the adoption 
of CECL as of the beginning of the fiscal year in which the FDIC-
supervised institution adopted CECL may use the transition provision in 
this paragraph (d) if it has a positive adjusted CECL transitional 
amount during any quarter ending in 2020 and makes the election in the 
Call Report or FR Y-9C filed for the same quarter.
    (1) Definitions. For purposes of the 2020 CECL transition 
calculation in paragraph (d)(2) of this section, the following 
definitions apply:
    (i) Modified CECL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report and 
the AACL as of the beginning of the fiscal year in which the FDIC-
supervised institution adopts CECL, multiplied by .25, plus the CECL 
transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of 
the second year of the transition period and the AACL as of the 
beginning of the fiscal year in which the FDIC-supervised institution 
adopts CECL, multiplied by 0.25, plus the CECL transitional amount.
    (ii) Modified AACL transitional amount means:
    (A) During the first two years of the transition period, the 
difference between AACL as reported in the most recent Call Report, and 
the AACL as of the beginning of the fiscal year in which the FDIC-
supervised institution adopts CECL, multiplied by .25, plus the AACL 
transitional amount; and
    (B) During the last three years of the transition period, the 
difference between AACL as reported in the Call Report at the end of 
the second year of the transition period and the AACL as of the 
beginning of the fiscal year in which the FDIC-supervised institution 
adopts CECL, multiplied by 0.25, plus the AACL transitional amount.
    (2) Calculation of 2020 CECL transition provision. (i) An FDIC-
supervised institution that has made the election described in 
paragraph (a)(1) of this section in its a Call Report filed during the 
2020 calendar year may make the following adjustments in its 
calculation of regulatory capital ratios:
    (A) Increase retained earnings by one-hundred percent of its 
modified CECL transitional amount during the first year of the 
transition period, increase retained earnings by one hundred percent of 
its modified CECL transitional amount during the second year of the 
transition period, increase retained earnings by seventy-five percent 
of its modified CECL transitional amount during the third year of the 
transition period, increase retained earnings by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase retained earnings by twenty-five 
percent of its modified CECL transitional amount during the fifth year 
of the transition period;
    (B) Decrease amounts of DTAs arising from temporary differences by 
one-hundred percent of its DTA transitional amount during the first 
year of the transition period, decrease amounts of DTAs arising from 
temporary differences by one hundred percent of its DTA transitional 
amount during the second year of the transition period, decrease 
amounts of DTAs arising from temporary differences by seventy-five 
percent of its DTA transitional amount during the third year of the 
transition period, decrease amounts of DTAs arising from temporary 
differences by fifty percent of its DTA transitional

[[Page 17738]]

amount during the fourth year of the transition period, and decrease 
amounts of DTAs arising from temporary differences by twenty-five 
percent of its DTA transitional amount during the fifth year of the 
transition period;
    (C) Decrease amounts of AACL by one-hundred percent of its modified 
AACL transitional amount during the first year of the transition 
period, decrease amounts of AACL by one hundred percent of its modified 
AACL transitional amount during the second year of the transition 
period, decrease amounts of AACL by seventy-five percent of its 
modified AACL transitional amount during the third year of the 
transition period, decrease amounts of AACL by fifty percent of its 
AACL transitional amount during the fourth year of the transition 
period, and decrease amounts of AACL by twenty-five percent of its AACL 
transitional amount during the fifth year of the transition period; and
    (D) Increase average total consolidated assets as reported on the 
Call Report for purposes of the leverage ratio by one-hundred percent 
of its modified CECL transitional amount during the first year of the 
transition period, increase average total consolidated assets as 
reported on the Call Report for purposes of the leverage ratio by one 
hundred percent of its modified CECL transitional amount during the 
second year of the transition period, increase average total 
consolidated assets as reported on the Call Report for purposes of the 
leverage ratio by seventy-five percent of its modified CECL 
transitional amount during the third year of the transition period, 
increase average total consolidated assets as reported on the Call 
Report for purposes of the leverage ratio by fifty percent of its 
modified CECL transitional amount during the fourth year of the 
transition period, and increase average total consolidated assets as 
reported on the Call Report for purposes of the leverage ratio by 
twenty-five percent of its modified CECL transitional amount during the 
fifth year of the transition period.
    (ii) An advanced approaches FDIC-supervised institution that has 
made the election described in paragraph (a)(1) of this section in its 
first Call Report filed for the fiscal year that begins during the 2020 
calendar year may make the following additional adjustments to its 
calculation of regulatory capital ratios:
    (A) Increase total leverage exposure for purposes of the 
supplementary leverage ratio by one-hundred percent of its modified 
CECL transitional amount during the first year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by one hundred percent of its modified 
CECL transitional amount during the second year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by seventy-five percent of its modified 
CECL transitional amount during the third year of the transition 
period, increase total leverage exposure for purposes of the 
supplementary leverage ratio by fifty percent of its CECL transitional 
amount during the fourth year of the transition period, and increase 
total leverage exposure for purposes of the supplementary leverage 
ratio by twenty-five percent of its CECL transitional amount during the 
fifth year of the transition period; and
    (B) An advanced approaches FDIC-supervised institution that has 
completed the parallel run process and has received notification from 
the FDIC pursuant to Sec.  324.121(d) must decrease amounts of eligible 
credit reserves by one-hundred percent of its eligible credit reserves 
transitional amount during the first year of the transition period, 
decrease amounts of eligible credit reserves by one hundred percent of 
its eligible credit reserves transitional amount during the second year 
of the transition period, decrease amounts of eligible credit reserves 
by seventy-five percent of its eligible credit reserves transitional 
amount during the third year of the transition period, decrease amounts 
of eligible credit reserves by fifty percent of its eligible credit 
reserves transitional amount during the fourth year of the transition 
period, and decrease amounts of eligible credit reserves by twenty-five 
percent of its eligible credit reserves transitional amount during the 
fifth year of the transition period.
    (e) Eligible credit reserves shortfall. An advanced approaches 
FDIC-supervised institution that has completed the parallel run process 
and has received notification from the FDIC pursuant to Sec.  
324.121(d), whose amount of expected credit loss exceeded its eligible 
credit reserves immediately prior to the adoption of CECL, and that has 
an increase in common equity tier 1 capital as of the beginning of the 
fiscal year in which it adopts CECL after including the first year 
portion of the CECL transitional amount (or modified CECL transitional 
amount) must decrease its CECL transitional amount used in paragraph 
(c) of this section (or modified CECL transitional amount used in 
paragraph (d) of this section) by the full amount of its DTA 
transitional amount (or modified DTA transitional amount).
    (f) Business combinations. Notwithstanding any other requirement in 
this section, for purposes of this paragraph (f), in the event of a 
business combination involving an FDIC-supervised institution where one 
or both FDIC-supervised institutions have elected the treatment 
described in this section:
    (1) If the acquirer FDIC-supervised institution (as determined 
under GAAP) elected the treatment described in this section, the 
acquirer FDIC-supervised institution must continue to use the 
transitional amounts (unaffected by the business combination) that it 
calculated as of the date that it adopted CECL through the end of its 
transition period.
    (2) If the acquired insured depository institution (as determined 
under GAAP) elected the treatment described in this section, any 
transitional amount of the acquired insured depository institution does 
not transfer to the resulting FDIC-supervised institution.

Morris R. Morgan,
First Deputy Comptroller, Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System.
Ann E. Misback,
Secretary of the Board.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.
    Dated at Washington, DC, on or about March 26, 2020.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2020-06770 Filed 3-30-20; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P