[Federal Register Volume 86, Number 21 (Wednesday, February 3, 2021)]
[Rules and Regulations]
[Pages 7927-7949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02182]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 217, 225, 238, and 252
[Regulations Q, Y, LL, and YY; Docket No. R-1724]
RIN 7100-AF95
Capital Planning and Stress Testing Requirements for Large Bank
Holding Companies, Intermediate Holding Companies and Savings and Loan
Holding Companies
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Final rule.
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SUMMARY: The Board is adopting a final rule (final rule) to tailor the
requirements in the Board's capital plan rule (capital plan rule) based
on risk. Specifically, as indicated in the Board's October 2019
rulemaking that updated the prudential framework for large bank holding
companies and U.S. intermediate holding companies of foreign banking
organizations (tailoring framework), the final rule modifies the
capital planning, regulatory reporting, and stress capital buffer
requirements for firms subject to ``Category IV'' standards under that
framework. To be consistent with recent changes to the Board's stress
testing rules, the final rule makes other changes to the Board's stress
testing rules, Stress Testing Policy Statement, and regulatory
reporting requirements, such as the assumptions relating to business
plan changes and capital actions and the publication of company-run
stress test results for savings and loan holding companies. The final
rule also applies the capital planning and stress capital buffer
requirements to covered saving and loan holding companies subject to
Category II, Category III, and Category IV standards under the
tailoring framework.
DATES: The final rule is effective April 5, 2021.
FOR FURTHER INFORMATION CONTACT: Constance Horsley, Deputy Associate
Director, (202) 452-5239, Mark Handzlik, Manager (202) 475-6316, Sean
Healey, Lead Financial Institution Policy Analyst, (202) 912-4611,
Hillel Kipnis, Senior Financial Institution Policy Analyst II, (202)
452-2924, John Simone, Senior Financial Institution Policy Analyst II,
(202) 245-4256, Brendan Rowan, Senior Financial
[[Page 7928]]
Institution Policy Analyst I, (202) 475-6685, and Palmer Osteen,
Financial Institution Policy Analyst II, (202) 785-6025, Division of
Supervision and Regulation; Benjamin McDonough, Associate General
Counsel, (202) 452-2036, Julie Anthony, Senior Counsel, (202) 475-6682,
Asad Kudiya, Senior Counsel, (202) 475-6358, Jonah Kind, Counsel, (202)
452-2045, or Jasmin Keskinen, Attorney, (202) 475-6650, Legal Division,
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington, DC 20551. Users of
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning, Stress Testing and Stress
Capital Buffer Requirements
ii. Background on Tailoring Framework
iii. Overview of Proposed Rule and Summary of Comments
iv. Overview of Final Rule
B. Changes to Capital Planning Requirements for Firms Subject to
Category IV Standards
C. Calculation and Timing of the Stress Capital Buffer
Requirement for Firms Subject to Category IV Standards
D. Changes to Stress Test Rules for Firms With Total
Consolidated Assets of at Least $100 Billion
i. Business Plan Change Assumption
ii. Changes to Reporting Requirements Related to Stress Test
Rule Changes
E. Covered Savings and Loan Holding Companies
i. Application of Capital Plan Rule
ii. Stress Test Rule Changes
F. Definition of Common Stock Dividend in Capital Plan Rule
G. Impact Analysis
II. Board Guidance on Capital Planning
III. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Solicitation of Comments of Use of Plain Language
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning, Stress Testing and Stress Capital
Buffer Requirements
Stress testing is a core element of the Board's regulatory
framework and supervisory program for large firms. Stress testing
enables the Board to assess whether large firms have sufficient capital
to absorb potential losses and continue lending under severely adverse
conditions. Experience has demonstrated that rigorous stress testing--
together with stronger capital requirements implemented in the Board's
capital rule--have significantly improved the resilience of the U.S.
banking system.\1\
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\1\ The common equity capital ratios of firms subject to
Comprehensive Capital Analysis and Review (CCAR) have more than
doubled since 2009. Combined, these firms hold more than $1 trillion
of common equity tier 1 capital and are substantially more resilient
than they were ten years ago.
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The Board implemented its capital plan rule to require large firms
to develop and maintain capital plans supported by robust processes for
assessing their capital adequacy, in 2011.\2\ The Board made changes to
its regulatory capital rule--which establishes minimum regulatory
capital requirements--in 2013. These changes address weaknesses
observed during the 2008-2009 financial crisis, including the
establishment of a minimum common equity tier 1 (CET1) capital
requirement and a fixed capital conservation buffer equal to 2.5
percent of risk-weighted assets.\3\
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\2\ See 12 CFR 225.8; see also Capital Plans, 76 FR 74631 (Dec.
1, 2011). Originally, as a part of the capital plan rule, the
Federal Reserve could object to a firm's capital plan based on a
qualitative assessment. A subsequent rulemaking changed this
requirement such that after CCAR 2020 no firm will be subject to a
potential qualitative objection if the firm successfully passed
several qualitative evaluations. Amendments to the Capital Plan
Rule, 84 FR 8953 (March 13, 2019). All firms subject to the capital
plan rule have successfully passed the required number of
qualitative evaluations such that no firms are subject to the
qualitative objection going forward. As a result, the final rule
revises the capital plan rule to remove references to the
qualitative objection.
\3\ See 12 CFR part 217. Large banking organizations also became
subject to a countercyclical capital buffer requirement, and the
largest and most systemically important firms--global systemically
important bank holding companies, or GSIBs--became subject to an
additional capital buffer based on a measure of their systemic risk,
the GSIB surcharge. See Regulatory Capital Rules: Implementation of
Risk-Based Capital Surcharges for Global Systemically Important Bank
Holding Companies, 80 FR 49082 (Aug. 14, 2015).
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In March 2020, the Board adopted a final rule (stress capital
buffer rule) to integrate its capital plan rule and regulatory capital
rule through the establishment of a stress capital buffer requirement,
creating a single, risk-sensitive framework for large banking
organizations.\4\ To achieve individually tailored and risk-sensitive
capital requirements for banking organizations subject to the capital
plan rule, the stress capital buffer rule establishes the size of a
firm's stress capital buffer requirement based in part on a supervisory
stress test conducted by the Federal Reserve.
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\4\ See Regulations Q, Y, and YY: Regulatory Capital, Capital
Plan, and Stress Test Rules, 85 FR 15576 (March 18, 2020).
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The stress capital buffer rule included several changes to the
assumptions embedded in the supervisory stress test, notably removing
the assumption that firms make all planned common distributions and
excluding material business plan changes from the stress capital buffer
requirement calculation. Previously, under the Comprehensive Capital
Analysis and Review (CCAR), the Board assumed that a firm would
continue to make all planned dividends and share repurchases under
stress, and therefore required firms to pre-fund nine quarters of
planned dividends and share repurchases. Under the stress capital
buffer rule, the Board no longer assumes that a firm would continue to
make all planned dividends and share repurchases under stress. The
stress capital buffer requirement includes four-quarters of planned
dividends in a firm's capital buffer requirements; therefore, firms are
subject to a pre-funding requirement of four quarters of planned
dividends. This approach recognizes the capital rule's automatic
limitations on capital distributions while continuing to promote
forward-looking capital planning and mitigate pro-cyclicality.
Prior to the implementation of the stress capital buffer rule, the
impact of expected material changes to a firm's business plan were
incorporated into a firm's CCAR results. In order to simplify the
stress test framework and to reduce burden, material business plan
changes are not included in the stress capital buffer requirement.
Instead, material changes to a firm's business plan resulting from a
merger or acquisition are incorporated into a firm's capital and risk-
weighted assets upon consummation of the transaction.
ii. Background on Tailoring Framework
In October 2019, the Board issued a final rule that established a
revised framework for applying prudential standards to large firms to
align prudential standards more closely to a large firm's risk profile
(tailoring rule).\5\ The tailoring rule established four categories of
prudential standards and applies them based on indicators designed to
measure the risk profile of a firm.\6\ Table I outlines the scoping
[[Page 7929]]
criteria for categories of prudential standards adopted in the final
tailoring rule.
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\5\ See Prudential Standards for Large Bank Holding Companies,
Savings and Loan Holding Companies, and Foreign Banking
Organizations, 84 FR 59032 (Nov. 1, 2019).
\6\ The final rule increased the threshold for general
application of these standards from $50 billion to $100 billion in
total consolidated assets.
Table I--Scoping Criteria for Categories of Prudential Standards
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U.S. banking Foreign banking
Category organizations organizations
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I.................... U.S. GSIBs and their N/A.
depository
institution
subsidiaries.
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II................... $700 billion or more in total assets; or $75
billion or more in cross-jurisdictional
activity; and do not meet the criteria for
Category I.
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III.................. $250 billion or more in total assets; or $75
billion or more in weighted short-term wholesale
funding, nonbank assets, or off-balance sheet
exposure; and do not meet the criteria for
Category I or II.
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IV................... $100 billion or more in total assets; and do not
meet the criteria for Category I-III.
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The tailoring rule made two changes to the stress testing rules for
firms subject to Category IV standards. First, the tailoring rule
removed the requirement for firms subject to Category IV standards to
conduct and publicly disclose the results of company-run stress tests
as defined in the Board's stress testing rules. Second, the tailoring
rule changed the frequency of the supervisory stress test for firms
subject to Category IV standards from annual to biennial.\7\ In the
tailoring rule, the Board also foreshadowed that it intended to provide
greater flexibility to firms subject to Category IV standards to
develop their annual capital plans and consider additional regulatory
reporting burden relief in a separate proposal.\8\
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\7\ Both changes related to stress testing rules for firms
subject to Category IV standards--(1) to remove the requirement to
conduct and to publicly disclose the results of the company-run
stress tests; and (2) to change the frequency of the supervisory
stress test to biennial--were consistent with amendments to section
165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act), Public Law 111-203, 124 Stat. 1376 (2010), made by
the Economic Growth, Regulatory Relief and Consumer Protection Act
(EGRRCPA). See Public Law 115-174, 132 Stat. 1296 (2018).
\8\ See 85 FR 15576, 15593, fn 57.
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As a part of the tailoring rule, covered savings and loan holding
companies were made subject to the Board's supervisory stress test and
company-run stress test requirements in the same manner as comparable
bank holding companies. In the tailoring rule, the Board indicated that
it would apply capital planning requirements to savings and loan
holding companies as part of a separate notice.
iii. Overview of Proposed Rule and Summary of Comments
On October 7, 2020, the Board issued a proposed rule (proposed rule
or proposal) that would have modified the Board's capital planning and
stress capital buffer requirements to be more consistent with the
tailoring framework.\9\ Specifically, for firms subject to Category IV
standards, the proposal would have generally removed the requirement
under the capital plan rule to calculate forward-looking projections of
capital under scenarios provided by the Board. In addition, the
proposal would have reduced the frequency with which the Federal
Reserve would calculate the decline in the CET1 capital ratios for
firms subject to Category IV standards for purposes of the stress
capital buffer requirement, by revising it from an annual to a biennial
calculation. The proposal also would have given these firms the ability
to elect to participate in the supervisory stress test--and receive an
updated stress capital buffer requirement--in a year in which they
would not generally be subject to the supervisory stress test.\10\
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\9\ 85 FR 63222 (Oct. 7, 2020).
\10\ The proposal would have allowed the Board, under certain
circumstances, based on the macroeconomic outlook or based on the
firm's risk profile, financial condition or corporate structure, to
require a firm subject to Category IV standards to submit a capital
plan under scenarios provided by the Board.
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The proposal included changes to the Board's supervisory stress
test and the company-run stress test rules.\11\ In particular, the
proposal would have clarified the assumptions related to business plan
changes, introduced revisions to the capital action assumptions, and
required certain savings and loan holding companies to publicly
disclose their stress tests results in a parallel manner to bank
holding companies.
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\11\ See 12 CFR part 252, subparts E and F.
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The proposal also solicited comment on several topics, including
the Federal Reserve's guidance on capital planning, a definition of
``common stock dividend'' for purposes of the capital plan rule, and
the application of capital planning and stress capital buffer
requirements to savings and loan holding companies.
The Board received thirteen comment letters from banking
organizations, public interest groups, trade associations, and
individuals. While many commenters were supportive of the proposal,
some commenters opposed or requested additional clarification on parts
of the proposed rule, including the changes related to capital planning
requirements, the calculation and timing of the stress capital buffer
requirement, and regulatory reporting changes for firms subject to
Category IV requirements. In addition, commenters provided input on the
Board's capital planning guidance, a definition of a common stock
dividend for purposes of the capital plan rule, and the application of
capital planning and stress capital buffer requirements to savings and
loan holding companies. The Board's responses to the comments are
provided in the discussion of the final rule. The Board also received
several comments on issues not related to the proposal, which are not
addressed below as they are outside the scope of this rulemaking.\12\
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\12\ In particular, the Board received comments related to
allowed distributions during a capital plan resubmission period, the
definition of ``material'' in the capital plan rule, collecting
additional data related to purchase accounting, reintroducing the
materiality threshold for a regulatory reporting requirement,
including climate risks in the stress test, the criteria for
application of the global market shock and large counterparty
default components, the calculation of capital and loss absorbing
capacity requirements for intermediate holding companies, the
requirements for including capital actions in company-run stress
tests, the inclusion of leverage ratios in the stress test, and the
volatility of the stress capital buffer requirement. The Board also
received several technical comments on the supervisory stress test
models, including related to its revenue model, global market shock
losses, and losses related to large counterparty defaults.
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[[Page 7930]]
iv. Overview of Final Rule
Consistent with the proposal, the final rule revises the capital
planning requirements for firms subject to Category IV standards to
better align such requirements with the risk profiles of these firms.
Specifically, the final rule removes the requirement for firms subject
to Category IV standards to provide projections in a firm's capital
plan under the supervisory scenarios and the requirement to submit FR
Y-14A schedules associated with company-run stress test results. The
final rule also replaces the use of ``large and noncomplex bank holding
company'' with the definition of a firm subject to Category IV
standards.
The final rule requires the stress test portion of the stress
capital buffer requirement of a firm subject to Category IV standards
to be updated in a manner consistent with the frequency of the
supervisory stress test. The stress test portion of such a firm's
stress capital buffer requirement will not be updated in a year in
which it does not participate in the supervisory stress test. The final
rule allows such a firm to elect to opt-in to a stress test in a year
in which the firm would not generally be subject to the supervisory
stress test and to receive an updated stress capital buffer requirement
in that year.
The final rule adopts the proposed changes to the Board's
supervisory stress test and the company-run stress test rules, which
clarify the assumptions firms and the Federal Reserve should make
regarding the effects of material business plan changes in their stress
test results and require certain savings and loan holding companies to
publicly disclose their stress tests results.
The final rule also applies capital planning and stress capital
buffer requirements to covered saving and loan holding companies
subject to Category II, Category III, or Category IV standards under
the tailoring framework.
B. Changes to Capital Planning Requirements for Firms Subject to
Category IV Standards
Consistent with section 401(e) of EGRRCPA, the tailoring rule
adjusted the frequency of supervisory stress testing for firms subject
to Category IV standards to every other year and eliminated the
requirement to conduct and publicly disclose the results of a company-
run stress test under the scenarios provided by the Board. These
adjustments reflected the lower risk profile of a firm subject to
Category IV standards relative to firms subject to Category I, II, or
III standards. The final rule tailors the requirements in the capital
plan rule that currently apply to Category IV firms, as discussed
below.
The proposal would have updated the terminology in the capital plan
rule to conform to the terminology used in the tailoring rule by
removing the term ``large and noncomplex bank holding company'' and
replacing it with the definition of a firm subject to Category IV
standards. No comments were received on this change and the final rule
adopts it as proposed. Given the effective date of this final rule, the
definition of ``large and noncomplex bank holding company'' will be
changed on the FR Y-14 reports beginning with the December 31, 2020, as
of date.\13\
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\13\ The proposal also would have modified the terms ``BHC
baseline scenario'' and ``BHC stress scenario'' in the capital plan
rule to ``Firm baseline scenario'' and ``Firm stress scenario,''
respectively. To clarify that these are scenarios generated
internally by firms, the final rule modifies the terms ``BHC
baseline scenario'' and ``BHC stress scenario'' to ``Internal
baseline scenario'' and ``Internal stress scenario,'' respectively.
These terms will be changed on the FR Y-14 reports beginning with
the December 31, 2020, as of date.
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Under the proposal, firms subject to Category IV standards
generally would not have been required to calculate estimates of
projected revenues, losses, reserves, or pro forma capital levels
(effectively a form of stress testing) using scenarios provided by the
Board. However, under certain circumstances, based on the macroeconomic
outlook or based on the firm's risk profile, financial condition, or
corporate structure, the proposal would have allowed the Board to
require a firm subject to Category IV standards to submit a capital
plan under scenarios provided by the Board. No comments were received
on the removal of the general requirement for firms subject to Category
IV standards to calculate stress test results under scenarios provided
by the Board, or on the stipulation that the Board may require firms to
make such calculations in particular circumstances. The final rule
adopts these changes as proposed.
The proposal would have updated regulatory reporting requirements
to reflect the tailoring rule's elimination of the company-run stress
test requirement for a firm subject to Category IV standards.
Specifically, under the proposal such firms would no longer have been
required to submit to the Federal Reserve forward-looking projections
in the granular form prescribed by the FR Y-14A, Schedule A--Summary,
Schedule B--Scenario, Schedule F--Business Plan Changes, and Appendix
A--Supporting Documentation.
A commenter on the proposal noted that the Federal Reserve did not
articulate the public benefits of removing the reporting requirements
for firms subject to Category IV standards. Removing these reporting
requirements is necessary to effectuate the elimination of the company-
run stress test requirement for these firms adopted in the tailoring
rule. As discussed in the tailoring rule, eliminating the company-run
stress test requirement for firms subject to Category IV standards is
consistent with the statutory provisions and appropriate for these
firms' risk profile. These reporting schedules are not publicly
available, so the adjustments to the reporting requirements do not
affect the information in the public domain. This revision comes into
effect beginning with the 2021 capital planning cycle.\14\
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\14\ Firms subject to Category IV standards will continue to be
required to complete the FR Y-14A, Schedule C--Regulatory Capital
Instruments, Schedule E--Operational Risk, and the Collection of
Supplemental CECL Information.
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The proposal would have added four line items to FR Y-14A, Schedule
C--Regulatory Capital Instruments, to provide the information needed to
determine whether planned capital distributions included in a firm's
capital plan are consistent with any effective capital distribution
limitations that would apply under the firm's projections in the
Internal baseline scenario, as required by the capital plan rule.\15\
No comments were received on this aspect of the proposal. To support
compliance with the capital plan rule, these line items have been added
to FR Y-14A, Schedule C, and are effective for the April 5, 2021,
submission with a December 31, 2020, as of date.\16\ This will ensure
that the Board can confirm compliance with the capital plan rule during
the 2021 capital planning cycle. Under the final rule, firms subject to
Category IV standards will continue to be required to provide a
forward-looking analysis of income and capital levels under expected
and stressful conditions in their annual capital plans. These
projections are required to be tailored to, and sufficiently capture,
the firm's exposures, activities, and idiosyncratic risks in their
capital plans.\17\ This includes projections under a scenario
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designed by the firm that stresses the specific vulnerabilities of the
firm's risk profile and operations. This scenario should incorporate
stressful conditions and events that could adversely affect the firm's
capital adequacy.
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\15\ The line items would be the projections of Common Equity
Tier 1 capital ratio, Tier 1 capital ratio, Total capital ratio, and
net income under the Internal baseline scenario.
\16\ FR Y-14A, Schedule C, is required for all firms subject to
the capital plan rule on an annual basis.
\17\ The analysis should cover an appropriate period (usually a
period of at least two years) to capture the relevant risks to a
firm. A firm should estimate losses, revenues, expenses, and capital
using sound methods that relate macroeconomic and other risk drivers
to its estimates.
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While the final rule does not require firms subject to Category IV
standards to include certain elements in their capital plans, all
banking organizations, regardless of size and complexity, are expected
to have the capacity to analyze the potential impact of adverse
outcomes on their financial condition, including on capital.\18\
Therefore, risk-management practices should be tailored to the risk and
complexity of the individual firm and should include practices to
identify and assess its sensitivity to unexpected adverse outcomes
before they occur. The Federal Reserve will continue to conduct an
annual assessment of the capital plan of a firm subject to Category IV
standards as part of its ongoing supervisory process, and the results
of this assessment will continue to be an input into the firm's capital
planning and positions component of the Large Financial Institution
Rating System.
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\18\ For example, bank holding companies with less than $50
billion in total consolidated assets are subject to guidance that
clarifies such firms are expected to hold capital commensurate with
their overall risk profile. See SR Letter 09-4, Applying Supervisory
Guidance and Regulations on the Payment of Dividends, Stock
Redemptions, and Stock Repurchases at Bank Holding Companies (Feb.
24, 2009, revised July 24, 2020). Holding companies with less than
$100 billion in total consolidated assets are subject to an overall
evaluation and rating of managerial and financial condition and an
assessment of future potential risk to subsidiary depository
institution(s) as part of the RFI or Modified RFI rating. See SR
Letter 19-4/CA Letter 19-3, Supervisory Rating System for Holding
Companies with Total Consolidated Assets Less Than $100 billion
(Feb. 26, 2019) and SR Letter 13-21, Inspection Frequency and Scope
Requirements for Bank Holding Companies and Savings and Loan Holding
Companies with Total Consolidated Assets of $10 Billion or Less
(Dec. 17, 2019, revised Mar. 6, 2019). Bank holding companies with
total consolidated assets of $100 billion or greater and certain
savings and loan holding companies are subject to a supervisory
evaluation of whether a covered firm possesses sufficient financial
and operational strength and resilience to maintain safe-and-sound
operations through a range of conditions, including stressful ones.
See SR Letter 19-3, Large Financial Institution (LFI) Rating System
(Feb. 26, 2019).
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C. Calculation and Timing of the Stress Capital Buffer Requirement for
Firms Subject to Category IV Standards
Firms subject to Category IV standards are currently subject to
supervisory stress testing on a two-year cycle. To align with the
stress testing cycle for firms subject to Category IV standards, the
proposal would have required the portion of the stress capital buffer
requirement that is calculated as the decline in a firm's CET1 capital
ratio to be calculated every other year. During a year in which a firm
subject to Category IV standards does not undergo a supervisory stress
test, the firm would have received an updated stress capital buffer
requirement that reflects the firm's updated planned common stock
dividends.
A commenter objected to the proposed frequency of adjustments for
the calculation of the decline in CET1 capital ratios for purposes of
stress capital buffer requirement for firms subject to Category IV
standards. This commenter argued that a biennial frequency would
adversely affect comparability across firms subject to the stress
capital buffer requirement and cause their stress capital buffer
requirements to rely on outdated information. As stated in the
proposal, these adjustments align with the requirement under EGRRCPA to
apply supervisory stress testing on a ``periodic'' basis to firms with
$100 billion to $250 billion in assets, and the revisions to the
supervisory stress test under the tailoring rule that changed the
stress testing cycle for firms subject to Category IV standards from
annual to biennial.19 20 Therefore, consistent with the
proposal, the final rule requires the portion of the stress capital
buffer requirement that is calculated as the decline in the CET1
capital ratio for firms subject to Category IV standards to be
calculated every other year.\21\
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\19\ See Economic Growth, Regulatory Relief, and Consumer
Protection Act, S. 2155, 115th Congress (2018).
\20\ See Prudential Standards for Large Bank Holding Companies,
Savings and Loan Holding Companies, and Foreign Banking
Organizations, 84 FR 59032 (Nov. 1, 2019).
\21\ The final rule also clarifies that a firm will not receive
notice of its stress capital buffer requirement until the first year
the Board conducts a supervisory stress test of the firm.
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The proposal would have allowed a firm subject to Category IV
standards to elect to participate in the supervisory stress test in a
year in which the firm would not normally be subject to the supervisory
stress test. A firm that makes such an election would be a full
participant in that year's supervisory stress test, including being
subject to the disclosure requirements related to the firm's
supervisory stress test results, and would receive an updated stress
capital buffer requirement.
Commenters generally supported the opt-in election set forth in the
proposal and stated that the flexibility provided under this approach
is appropriate for the risk profile of firms subject to Category IV
standards. By contrast, one commenter argued that the opt-in election
could undermine the credibility of the stress testing framework and
cause concern regarding banking organizations that choose not to
participate (that is, firms that choose not to participate may be
perceived as being in weaker condition).
The final rule allows firms subject to Category IV standards to
request an updated stress capital buffer requirement in a year in which
it would not generally be subject to the supervisory stress test. A
firm's decision to request such an update could stem from various
factors, such as recent significant changes to the firm's risk profile
or corporate structure. The approach in the final rule reduces burden
as a general matter while also providing flexibility for firm-specific
requests.
The proposal would have required a firm subject to Category IV
standards to provide written notice of its election to the Board and
appropriate Federal Reserve Bank by December 31 of the year preceding
the year in which it seeks to opt in to the supervisory stress test.
For purposes of the 2021 supervisory stress test, the proposal included
transitional procedures such that a firm subject to Category IV
standards would have had until February 15, 2021, to provide written
notice of its opt-in election to the Board and appropriate Federal
Reserve Bank.
A number of commenters argued that the proposal's December 31 cut-
off date for the opt-in notification is too early and requested that
the final rule provide a mid-March deadline for a firm subject to
Category IV standards to notify the Board and the appropriate Federal
Reserve Bank in writing of its opt-in election for that year's
supervisory stress test. Additionally, these commenters argued that the
February 15 deadline is too early for the 2021 stress test cycle and
requested more time to make their opt-in election.
In response to these comments, the final rule requires firms
subject to Category IV standards to provide prior written notice of
their opt-in election to the Board and the appropriate Federal Reserve
Bank by January 15 of any year in which they are not required to
participate in the supervisory stress test, rather than the earlier
December 31 deadline. The January 15 date will provide these firms with
more time to better understand their year-end financial results. The
Board is also selecting this date because it generally precedes the
announcement of stress test scenarios. Under the final rule, for
purposes of the 2021 stress testing cycle, firms subject to Category IV
standards have until April 5, 2021, to provide prior written notice of
their opt-in
[[Page 7932]]
election to the Board and the appropriate Federal Reserve Bank.\22\
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\22\ In order to provide notice to the Federal Reserve, firms
should send a letter to the appropriate Federal Reserve Bank and to
the Stress Testing Communication mailbox
([email protected]).
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Commenters requested clarity on whether there would be required
disclosure of the stress capital buffer requirement for a firm subject
to Category IV standards that did not participate in the supervisory
stress test. One of these commenters supported mandatory disclosure of
such a firm's stress capital buffer requirement, regardless of opt-in
or mandatory participation in the supervisory stress test for any given
year.
For all firms subject to the capital plan rule, the stress capital
buffer requirement will be updated and publicly disclosed on an annual
basis. During a year in which a firm subject to Category IV standards
is not generally subject to the supervisory stress test, this firm will
receive an updated stress capital buffer requirement that reflects the
firm's updated planned common stock dividends.
As discussed in the proposal and allowed under the current capital
plan rule, the Board retains the ability to require a firm to resubmit
its capital plan if, among other reasons, the Board determines that
there has been or will likely be a material change in the firm's risk
profile, financial condition, or corporate structure, or if changes to
financial market conditions or the macroeconomic outlook require the
use of updated scenarios. If a firm resubmits its capital plan, the
Board may recalculate its stress capital buffer requirement and may use
a new severely adverse scenario. These requirements help ensure that a
firm's stress capital buffer requirement remains commensurate with its
risk profile.
D. Changes to Stress Test Rules for Firms With Total Consolidated
Assets of at Least $100 Billion
i. Business Plan Change Assumption
For purposes of the supervisory stress test, the Board does not
incorporate the impact of expected changes to a firm's business plan
that are likely to have a material impact on the firm's capital
adequacy and funding profile (material business plan changes) in the
balance sheet, risk-weighted asset, and capital projections. In order
to ensure alignment in the assumptions in the supervisory and company-
run stress tests, the proposal would have clarified that the Board and
firms would exclude the impacts of unconsummated material business plan
changes in the supervisory and company-run stress tests conducted
pursuant to the Dodd-Frank Act. As this assumption would be reflected
in the stress test rules, the proposal would have removed the
corresponding section from the Stress Testing Policy Statement. No
comments were received on these aspects of the proposal, and the final
rule adopts them as proposed.
Under the final rule, each firm will continue to be required to
include in its capital plan a discussion of any expected changes to the
firm's business plan that are likely to have a material impact on the
firm's capital adequacy or liquidity. Each firm will also continue to
be required to incorporate impacts of material business plan changes in
projections of income and capital levels under all scenarios required
for purposes of capital planning. This requirement helps to ensure that
a firm appropriately understands the impact of changes to its business
on the firm's forward-looking capital position. If a material business
plan change resulted in or would result in a material change in a
firm's risk profile, the firm would still be required to resubmit its
capital plan.
ii. Changes to Reporting Requirements Related to Stress Test Rule
Changes
The proposal would have updated the FR Y-14 reporting requirements
for firms with total consolidated assets of at least $100 billion to
conform with changes made to the stress test rules.
Consistent with the proposal and as described above, the final rule
no longer requires firms subject to Category IV standards to submit FR
Y-14A schedules associated with company-run stress test results. These
schedules include FR Y-14A, Schedule A, Schedule B, Schedule F, and
Appendix A.
In order to reflect the exclusion of material business plan changes
in company-run stress test projections while also ensuring firms
incorporate impacts of material business plan changes in projections of
income and capital levels required for purposes of capital planning,
the proposal would create two sub-schedules for all items on FR Y-14A,
Schedule A and Schedule C: One where a firm would not incorporate the
effects of material business plan changes and one where a firm would
incorporate the effects of business plan changes, consistent with prior
FR Y-14A reporting requirements.23 24 Firms subject to
Category I, II, or III standards would be required to submit the two
sub-schedules for both FR Y-14A, Schedule A and Schedule C, and firms
subject to Category IV standards would be required to submit the two
sub-schedules for only FR Y-14A, Schedule C.
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\23\ These sub-schedules include FR Y-14A, Schedule A.1.a--
Income Statement, Schedule A.1.b--Balance Sheet, Schedule A.1.c.1--
Standardized RWA, Schedule A.1.d--Capital, Schedule A.2.a--Retail
Balance and Loss Projections, Schedule A.3--AFS/HTM Securities,
Schedule A.4--Trading, Schedule A.5--Counterparty Credit Risk,
Schedule A.6--Operational Risk, and Schedule A.7--Pre-Provision Net
Revenue.
\24\ On FR Y-14A, Schedule A, the ``DFAST'' sub-schedule would
not include the effects of material business plan changes and the
``CCAR'' sub-schedule would include these effects. On FR Y-14A,
Schedule C, the ``SCB'' sub-schedule would not include the effects
of material business plan changes and the ``CCAR'' sub-schedule
would include these effects.
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Firms would report projections on the ``DFAST'' sub-schedule under
the scenarios provided by the Federal Reserve, and firms would report
projections on the ``CCAR'' sub-schedule under expected conditions and
under a range of scenarios, including the supervisory severely adverse
scenario provided by the Federal Reserve and at least one baseline
scenario and one stress scenario generated by the firms. Given the
changes made to FR Y-14A, Schedule A, firms subject to Category I, II,
or III standards would no longer be required to submit the supervisory
baseline scenario for FR Y-14A, Schedule F--Business Plan Changes. As
noted in sections of the proposal and this final rule on the Paperwork
Reduction Act, firms are required to report FR Y-14A, Schedule F, under
the Internal baseline and supervisory severely adverse scenarios.
A commenter opposed the proposed reporting changes as they would
increase the reporting burden for firms subject to Category I, II, or
III standards, and instead suggested that the Board add scenarios to
the FR Y-14A, Schedule F--Business Plan Changes. Although the changes
in the proposal would modestly increase reporting requirements for
firms subject to Category I, II, or III standards that include material
business plan changes in their capital plan submission, projections
both inclusive and exclusive of material business plan changes are
necessary for the Federal Reserve to monitor that a firm appropriately
plans for changes to its business for purposes of capital planning. In
addition, the proposed reporting changes ensure
[[Page 7933]]
reporting of company-run stress results that are comparable to the
supervisory stress test results. These projections are also necessary
for the Federal Reserve to be able to project stress losses and
calculate the dividend add-on for the stress capital buffer requirement
using the assumptions in the stress test rules. In response to the
commenter's suggestion, subtracting the values reported on FR Y-14A,
Schedule F, from those reported on FR Y-14A, Schedule A, would not
provide the impact of the business plan change on projections, as
Schedule F only captures the ``day one'' impact of the business plan
change. Therefore, the final rule adopts these reporting requirements
as proposed.
In addition, several commenters requested clarification about
whether the proposed FR Y-14A reporting requirements include all or
only material business plan changes. Under the final rule, firms should
exclude the effects of material business plan changes from the
``DFAST'' sub-schedule of FR Y-14A, Schedule A--Summary, and the
``SCB'' sub-schedule of Schedule C--Regulatory Capital Instruments.
Firms should include only material business plan changes in FR Y-14A,
Schedule F--Business Plan Changes.
These revisions to the FR Y-14A will be effective as of the FR Y-
14A submission due on April 5, 2021.
E. Covered Savings and Loan Holding Companies
i. Application of Capital Plan Rule
The Board currently assesses the condition, performance, and
activities of savings and loan holding companies on a consolidated
basis in the same manner that the Board assesses the condition,
performance, and activities of bank holding companies, taking into
account any unique characteristics of savings and loan holding
companies and the requirements of the Home Owners' Loan Act.\25\ Under
the tailoring rule, the Board applies supervisory stress testing
requirements to covered savings and loan holding companies subject to
Category II, III, or IV standards.\26\ The tailoring rule also applies
company-run stress test requirements to covered savings and loan
holding companies subject to Category II or III standards. The scale,
complexity, and risk factors for these firms warrant more sophisticated
capital planning, more frequent company-run stress testing, and greater
supervisory oversight through supervisory stress testing than for
smaller and less complex firms. To implement the supervisory stress
test for covered savings and loan holding companies, the tailoring rule
required a covered savings and loan holding company to report the FR Y-
14 report in the same manner as a bank holding company.
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\25\ 12 U.S.C. 1461 et seq.
\26\ A covered savings and loan holding company is a savings and
loan holding company not predominantly engaged in insurance or
commercial activities (see 12 CFR 217.2).
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The proposal solicited comment on whether to apply capital planning
and stress capital buffer requirements to covered savings and loan
holding companies subject to Category II, III, or IV standards. In
particular, the Board solicited comment on the advantages and
disadvantages of applying these requirements to large covered savings
and loan holding companies in the same manner as they apply to large
bank holding companies, whether any adjustments to those requirements
should be made for covered savings and loan holding companies, what
other approaches to applying capital planning requirements to covered
savings and loan holding companies the Board should consider, and
whether the current transition period in the capital plan rule for
large bank holding companies would be appropriate for covered savings
and loan holding companies. The Board received two comments on this
element of the proposal. Commenters suggested that the Board provide
covered savings and loan holding companies the option to comply with
capital planning and stress capital buffer requirements, particularly
for those covered savings and loan holding companies that are subject
to less risk. To the extent compliance is mandatory, commenters
asserted that the Board should tailor the requirements to a covered
savings and loan holding company's risk profile and provide an extended
transition period for covered savings and loan holding companies to
come into compliance with such requirements.
For the reasons set forth below, the Board is applying the capital
planning and stress capital buffer requirements to covered savings and
loan holding companies subject to Category II, III, or IV standards in
the same manner as they apply to large bank holding companies subject
to Category II, III, or IV standards.\27\ Additionally, the Board is
adopting capital planning reporting requirements for covered savings
and loan holding companies.\28\ A covered savings and loan holding
company that becomes subject to capital planning requirements as of the
effective date of this rule would be required to submit its first
capital plan on April 5, 2022.
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\27\ The capital planning and stress capital buffer requirements
for covered savings and loan holding companies subject to Category
II, III, or IV standards are codified at 12 CFR 238.170. The Board
also has made conforming changes to its capital rule and stress
testing rules for covered savings and loan holding companies.
\28\ Covered savings and loan holding companies subject to
Category II or III standards will be required to submit FR Y-14A,
Schedule A--Summary, Schedule B--Scenario, Schedule C--Regulatory
Capital Instruments, Schedule E--Operational Risk, and Schedule F--
Business Plan Changes. Covered savings and loan holding companies
subject to Category IV standards will be required to submit FR Y-
14A, Schedule C--Regulatory Capital Instruments.
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Capital is central to a firm's ability to absorb unexpected losses
and continue to lend to creditworthy businesses and consumers. The
Board's capital planning requirements for large bank holding companies
help to ensure that these firms have robust systems and processes that
incorporate forward-looking projections of revenue and losses to
monitor and maintain their internal capital adequacy. The stress
capital buffer requirement helps ensure that a firm can meet its
obligations to creditors and other counterparties, as well as continue
to serve as a financial intermediary through periods of financial and
economic stress. As the Board noted in its final tailoring rule,
covered savings and loan holding companies engage in many of the same
activities and face similar risks as bank holding companies.
Accordingly, the final rule applies capital planning and stress capital
buffer requirements to covered savings and loan holding companies
subject to Category II, III, or IV standards in the same manner as they
apply to large bank holding companies subject to Category II, III, or
IV standards.
While commenters recommended that the Board permit a covered
savings and loan holding company to opt out of these requirements
because they have different risk profiles than similarly sized bank
holding companies, the final rule does not include such an option
because these requirements will promote the safety and soundness of a
covered savings and loan holding company by ensuring that a covered
savings and loan holding company is required to maintain capital
commensurate with its risk profile and activities. Moreover, the
capital planning and stress testing requirements that apply to bank
holding companies do not provide for such an opt-out election.
One commenter asserted that capital planning requirements should be
appropriately tailored to the risk profile of covered savings and loan
holding companies, including that these firms
[[Page 7934]]
should not be subject to the large counterparty default component or
the qualitative objection, and should only have to file certain
schedules of the FR Y-14A. The Board's capital planning requirements
are tailored based on a firm's tailoring category as outlined above in
Section I.B of this Supplementary Information section, as well as
certain attributes of the firm that are independent of its tailoring
category. Specifically, the components of the capital planning
requirements that apply to a firm are naturally tailored as they
require a firm's capital plan to include an assessment of the expected
uses and sources of capital over the planning horizon that reflects the
firm's size, complexity, risk profile, and scope of operations,
assuming both expected and stressful conditions.\29\ Similarly, the
large counterparty default component in the Board's company-run stress
testing requirements for bank holding companies and covered savings and
loan holding companies is also tailored based on a firm's risk profile
as it only applies based on the firm's financial condition, size,
complexity, risk profile, scope of operations, or activities.\30\
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\29\ The Federal Reserve's supervisory guidance for capital
planning is also tailored to a firm's risk profile. For example, the
Federal Reserve SR Letter 15-19 notes that ``a firm should employ
risk measurement approaches that are appropriate for its size,
complexity, and risk profile.'' See SR Letter 15-19, ``Federal
Reserve Supervisory Assessment of Capital Planning and Positions for
Large and Noncomplex Firms,'' December 18, 2015.
\30\ See 12 CFR 238.143(b)(2)(ii); 12 CFR 252.54(b)(2)(ii).
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Further, like the capital planning requirements for large bank
holding companies, the Board will not have the ability to issue a
qualitative objection to a covered savings and loan holding company's
capital plan; rather, it will conduct a robust qualitative review of
covered savings and loan holding companies' capital planning practices
during the traditional supervisory process. Finally, reporting
requirements on the FR Y-14A are also tailored, as certain firms are
not required to complete certain schedules based on their size and
complexity (i.e., firms subject to Category IV standards are not
required to complete FR Y-14A, Schedule A--Summary).
A commenter also asserted that the Board should provide a
transition period until at least the 2024 capital planning cycle for
covered and savings and loan holding companies to come into compliance
with capital planning and stress capital buffer requirements, and
should provide feedback on firms' initial capital plans on a
confidential basis without the initial submission being evaluated under
the Federal Reserve's LFI ratings framework. The commenter asserted
that such a transition would provide the firm with additional time to
understand the Federal Reserve's supervisory expectations prior to
receiving public feedback.
Under the tailoring final rules, covered savings and loan holding
companies were required to comply with stress testing requirements on
the first day of the ninth quarter following the effective date of the
final rule. A firm that was subject to the requirements on the date of
the tailoring final rule would be required to comply with stress
testing requirements for the 2022 stress test cycle. In addition, a
firm would be required to file its first FR Y-14A submission on April
5, 2022. To align the stress testing requirements with the capital
planning requirements, the capital plan rule applicable to covered
savings and loan holding companies would have the same transition
provision as the rule applicable to bank holding companies.
Specifically, a firm that becomes subject to the rule on or before
September 30 of a calendar year must comply with the rule on January 1
of the next calendar year and a firm that becomes subject to the rule
after September 30 of a calendar year must comply with the requirements
beginning on January 1 of the second calendar year after it meets the
relevant threshold. A covered savings and loan holding company will not
receive a stress capital buffer requirement until the first year the
Board conducts a supervisory stress test of the firm.
Moreover, the Federal Reserve generally does not provide firms with
public feedback on their capital plans. However, the initial submission
will provide the Federal Reserve with information about the firm's
capital planning practices that will be considered as part of the
firm's rating evaluation.
The Board also proposed to revise the FR Y-14A report to require
covered savings and loan holding companies subject to Category II or
III standards to submit FR Y-14A, Schedule A--Summary, Schedule B--
Scenario, Schedule E--Operational Risk, and Schedule F--Business Plan
Changes, as these schedules are needed for the company-run and
supervisory stress tests and for capital planning supervision. In the
proposal, the Board asked whether it should revise the regulatory
reporting requirements for covered savings and loan holding companies
if they were to become subject to the capital plan rule. Given that the
Board is applying capital planning and stress capital buffer
requirements to savings and loan holding companies, the Board is also
requiring covered savings and loan holding companies subject to
Category II, III, or IV standards to submit FR Y-14A, Schedule C--
Regulatory Capital Instruments, as this schedule is essential for
monitoring compliance with the capital plan rule. Requiring covered
savings and loan holding companies to submit this information would
better align the FR Y-14A reporting requirements for firms with similar
risk characteristics.
ii. Stress Test Rule Changes
As a part of the tailoring rule, covered savings and loan holding
companies were made subject to the Board's supervisory stress test and
company-run stress test requirements in the same manner as bank holding
companies. Currently, the capital action assumptions in the stress test
rules for covered savings and loan holding companies are different than
those for bank holding companies because they were not included in the
stress capital buffer rule, in which the Board updated the distribution
assumptions for bank holding companies. The proposal would have amended
the stress test rules for covered savings and loan holding companies so
the capital distribution assumptions for covered savings and loan
holding companies would match the assumptions for bank holding
companies.
The proposal also would have addressed an omission in the Board's
company-run stress test requirements to ensure that all savings and
loan holding companies with more than $250 billion in assets are
required to publicly disclose the results of their stress tests,
similar to the requirement for bank holding companies. This would have
ensured the requirements are consistent with the Dodd-Frank Act.
No comments were received on these aspects of the proposal, and the
final rule adopts them as proposed.
F. Definition of Common Stock Dividend in Capital Plan Rule
As a part of the proposal, the Board sought comment on a definition
for common stock dividends in the capital plan rule. The proposal noted
that the definition of common stock dividend could be aligned with the
definition on the FR Y-9C or could include payments of cash to parent
organizations irrespective of whether the amount paid is debited from
the firm's retained earnings.
Some commenters, particularly foreign banking organizations,
opposed a definition of dividends for the capital
[[Page 7935]]
plan rule. These commenters noted that the definition provided in the
proposal was overly broad and could capture capital actions that may
not be considered dividends from corporate law or accounting
perspectives. Additionally, they noted that the definition could have
unforeseen consequences on intercompany agreements, including payments
for intercompany services, tax sharing, and other purposes.
The Board is not at this time adopting a definition of dividends
for the capital plan rule. The FR Y-14A defines dividends by
referencing the definition of dividend in the Glossary to the FR Y-9C
instructions. That definition provides, among other things, that cash
dividends are ``payments of cash to shareholders in proportion to the
number of shares they own.'' Firms should continue to use this
definition when reporting the FR Y-14A.
The Board will continue to monitor firm behavior on the
classification of capital actions and the timing of those actions over
the capital plan projection horizon. Using this information, the Board
will continue to consider whether a definition of dividends for the
capital plan rule is required in order to provide comparable treatment
to all firms subject to the requirements.
G. Impact Analysis
The regulatory reporting aspects of the final rule include
additional compliance burden on firms subject to Category I through III
standards, but a reduction in compliance burden on firms subject to
Category IV standards.
Covered savings and loan holding companies have not been subject to
supervisory stress testing requirements to date. One covered savings
and loan holding company would become subject to the requirements based
on third quarter 2020 data, and this firm is currently constrained by
its leverage requirement. It is estimated that this firm's stress
capital buffer would need to be over 2.75 times the median of firms'
2020 stress capital buffers for there to be an increase in its capital
requirements.
II. Board Guidance on Capital Planning
The Board has issued guidance related to sound capital planning
practices that has been tailored based on the size, scope of
operations, activities, and systemic importance of a firm. In the
proposal, the Board requested comment on all aspects of its guidance on
capital planning for firms of all sizes, consistent with its ongoing
practice of reviewing its policies to ensure that they are having their
intended effect. The Board's key capital planning guidance includes
supervision and regulation (SR) letters, ``Federal Reserve Supervisory
Assessment of Capital Planning and Positions for LISCC Firms and Large
and Complex Firms'' (SR 15-18),\31\ ``Federal Reserve Supervisory
Assessment of Capital Planning and Positions for Large and Noncomplex
Firms'' (SR 15-19),\32\ ``Applying Supervisory Guidance and Regulations
on the Payment of Dividends, Stock Redemptions, and Stock Repurchases
at Bank Holding Companies'' (SR 09-4),\33\ and the ``Policy Statement
on the Payment of Cash Dividends.'' \34\ The Board also encouraged
feedback on any other aspects of its guidance that relate to capital
planning.
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\31\ SR letter 15-18, ``Federal Reserve Supervisory Assessment
of Capital Planning and Positions for LISCC Firms and Large and
Complex Firms,'' December 18, 2015. See https://www.federalreserve.gov/supervisionreg/srletters/sr1518.htm.
\32\ SR letter 15-19, ``Federal Reserve Supervisory Assessment
of Capital Planning and Positions for Large and Noncomplex Firms,''
December 18, 2015. See https://www.federalreserve.gov/supervisionreg/srletters/sr1519.htm.
\33\ SR letter 09-4, ``Applying Supervisory Guidance and
Regulations on the Payment of Dividends, Stock Redemptions, and
Stock Repurchases at Bank Holding Companies,'' February 24, 2009.
See https://www.federalreserve.gov/boarddocs/srletters/2009/SR0904.htm.
\34\ ``UNSOUND BANKING PRACTICES--Cash Dividends Not Fully
Covered by Earnings,'' November 14, 1985. See https://www.federalreserve.gov/boarddocs/srletters/2009/sr0904a2.pdf.
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The Board received numerous comments on its capital planning
guidance. The Board will address these comments separately.
III. Administrative Law Matters
A. Paperwork Reduction Act
Certain provisions of the final rule contain ``collections of
information'' within the meaning of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501-3521). The Board may not conduct or sponsor, and
a respondent is not required to respond to, an information collection
unless it displays a currently valid Office of Management and Budget
(OMB) control number. The Board reviewed the final rule under the
authority delegated to the Board by OMB.
The proposed rule would have revised collection of information
requirements subject to the PRA. The Board proposed to revise the FR Y-
14A/Q/M, FR LL, and the FR YY to reflect the changes proposed in the
proposed rule. The OMB control numbers are 7100-0341, 7100-0380, and
7100-0350, respectively. The Board received no comments regarding these
proposed revisions under the PRA, and is adopting the revisions as
proposed, with certain modifications to account for changes between the
proposed rule and final rule.
Revisions, With Extension for Three Years, of the Following
Information Collections:
(1) Report title: Capital Assessments and Stress Testing Reports.
Agency form number: FR Y-14A/Q/M.
OMB control number: 7100-0341.
Frequency: Annually, quarterly, and monthly.
Respondents: These collections of information are applicable to
bank holding companies (BHCs), U.S. intermediate holding companies
(IHCs), and covered savings and loan holding companies (SLHCs) \35\
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; OMB No. 7100-
0128); 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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\35\ Covered SLHCs are those which are not substantially engaged
in insurance or commercial activities. For more information, see the
definition of ``covered savings and loan holding company'' provided
in 12 CFR 217.2 and 12 CFR 238.2(ff). Covered SLHCs with $100
billion or more in total consolidated assets became members of the
FR Y-14Q and FR Y-14M panels effective June 30, 2020, and will
become members of the FR Y-14A panel effective December 31, 2021.
See 84 FR 59032 (November 1, 2019).
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Estimated number of respondents: FR Y-14A/Q: 36; FR Y-14M: 34.\36\
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\36\ 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: 1,250 hours; FR Y-
14Q: 2,143 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: 45,000 hours; FR Y-14Q:
308,592 hours; FR Y-14M: 437,376 hours; FR Y-14 On-going Automation
[[Page 7936]]
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 \37\ 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.
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\37\ In certain circumstances, a BHC, IHC, or SLHC may be
required to re-submit its capital plan. See 12 CFR 225.8(e)(4); 12
CFR 238.170(e)(4). Firms that must re-submit their capital plan
generally also must provide a revised FR Y-14A in connection with
their resubmission.
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The quarterly FR Y-14Q collects granular data on various
asset classes, including loans, securities, trading assets, and pre-
provision net revenue 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 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.
Respondent firms are currently required to complete and submit up to 17
filings each year: One annual FR Y-14A filing, four quarterly FR Y-14Q
filings, and 12 monthly FR Y-14M filings. Compliance with the
information collection is mandatory.
Current Actions: As previously described in this notice, the Board
proposed to make several FR Y-14A/Q/M revisions. Certain revisions
would only be applicable to firms subject to Category IV or Category I-
III standards, while other revisions would be applicable to all BHCs,
IHCs, and SLHCs. The Board has adopted all revisions as proposed,
except that some revisions are effective for the December 31, 2020, as
of date, and some are effective for the December 31, 2021, as of date.
Firms Subject to Category IV standards
As a result of the adopted changes to company-run stress testing
requirements, the Board has no longer required that firms subject to
Category IV standards report FR Y-14A Schedule A--Summary, Schedule B--
Scenario, Schedule F--Business Plan Changes, and Appendix A--Supporting
Documentation, which are used to report a firm's company-run stress
test results. Firms subject to Category IV standards are no longer
required to submit these schedules beginning with the December 31,
2020, as of date. However, firms subject to Category IV standards are
still required to complete all remaining FR Y-14A schedules, as they
are necessary for the Board to run its supervisory stress test. The
Board believes that the detailed balance sheet information collected on
a monthly and quarterly basis from firms subject to Category IV
standards on the FR Y-14Q and FR Y-14M is crucial for maintaining the
integrity of the stress tests, monitoring financial stability, and
supervising those firms.
Firms Subject to Category I-III Standards
As previously outlined, firms subject to Category I--III standards
are still required to report FR Y-14A, Schedule A--Summary. To conform
the FR Y-14 reports with the stress test assumption changes made per
the stress capital buffer rule, the Board has created two sub-schedules
for all items on the FR Y-14A, Schedule A, effective for the December
31, 2020, as of date: (1) DFAST, where a firm would not incorporate the
effects of material business plan changes and (2) CCAR, where a firm
would incorporate the effects of business plan changes. Specifically,
firms subject to Category I--III standards are required to report a
version of FR Y-14A, Schedule A.1.a--Income Statement, Schedule A.1.b--
Balance Sheet, Schedule A.1.c.1--Standardized RWA, Schedule A.1.d--
Capital, Schedule A.2.a--Retail Balance and Loss, Schedule A.3--AFS/HTM
Securities, Schedule A.4--Trading, Schedule A.5--Counterparty Credit
Risk, Schedule A.6--Operational Risk, and Loss Projections, and
Schedule A.7--Pre-Provision Net Revenue, that incorporates the effects
of business plan changes, as well as a version of these schedules and
items that does not incorporate the effects of material business plan
changes. For Schedule A.1.d, firms subject to Category I--III standards
are still required to report two sub-schedules with different capital
actions, along with the income and balance sheet information reported
in the appropriate sub-schedule. In addition, effective for the
December 31, 2020, as of date, firms subject to Category I--III
standards are only required to report FR Y-14A, Schedule F under the
Internal baseline and supervisory severely adverse scenarios.
All BHCs and IHCs
All BHCs and IHCs are still required to report FR Y-14A, Schedule
C--Regulatory Capital Instruments, and the stress test assumption
changes made per the stress capital buffer rule create a need for firms
to provide certain data excluding the impact of material business plan
changes. As a result, the Board has created two sub-schedules for all
items on the FR Y-14A, Schedule C: (1) SCB, where a firm does not
incorporate the effects of material business plan changes and (2) CCAR,
where a firm does incorporate the effects of business plan changes.
Specifically, all BHCs and IHCs are required to report a version of FR
Y-14A, Schedule C that incorporates the effects of material business
plan changes, as well as a version of this schedule and items that does
not incorporate these effects. These revisions are effective for the
December 31, 2020, as of date.
In order to be able to assess whether a firm's planned capital
distributions included in its capital plan are consistent with any
effective capital distribution limitations that would apply under the
firm's baseline projections, as required by the capital plan rule, the
Board has added four items to FR Y-14A, Schedule C. These items capture
baseline projections of a firm's common equity tier 1 capital ratio,
tier 1 capital ratio, total capital ratio, and net income. These
revisions are effective for the December 31, 2020, as of date.
SLHCs
In order to assess compliance with the stress testing and capital
plan rules, the Board has required SLHCs subject to Category II, or III
standards to submit FR Y-14A, Schedule B--Scenario, and has required
SLHCs subject to Category II, III, or IV standards to submit FR Y-14A,
Schedule C--Regulatory Capital Instruments. These revisions align with
the spirit of the tailoring rule, as it would require all firms subject
to
[[Page 7937]]
applicable Category standards to largely submit the same FR Y-14A
information. These revisions are effective for the December 31, 2021,
as of date.
Other Revisions
As previously mentioned, the Board has replaced the current
definition of ``large and noncomplex bank holding company'' in the
capital plan rule with the definition of a firm subject to Category IV
standards. Therefore, the Board has made this change across the FR Y-
14A/Q/M reports. In addition, to more accurately reflect the types of
firms subject to the stress test reporting requirements, the Board has
renamed the ``BHC baseline scenario'' and ``BHC stress scenario'' to
``Internal baseline scenario'' and ``Internal stress scenario,''
respectively. These revisions are effective for the December 31, 2020,
as of date.
(2) Report title: Reporting, Recordkeeping, and Disclosure
Requirements Associated with Regulation LL.
Agency form number: FR LL.
OMB control number: 7100-0380.
Frequency: Biennial, annual.
Affected Public: Businesses or other for-profit.
Respondents: Savings and loan holding companies.
Estimated number of respondents: 1.
Estimated average hours per response:
Reporting
Section 238.132(c)(2)(ii)--0.25,
Section 238.162(b)(1)(ii)--80,
Section 238.170(e)(1)(ii)--80,
Section 238.170(e)(3)--1,005,
Section 238.170(e)(4)--100,
Section 238.170(h)(2)(ii)(B)--2,
Section 238.170(i)--16,
Section 238.170(j)(1) and (2)--100,
Section 238.170(j)(4)--16,
Recordkeeping
Section 238.170(e)(1)(i)--8,920,
Section 238.170(e)(1)(iii)--100,
Disclosure
Section 238.146 (initial setup)--150,
Section 238.146--60.
Estimated annual burden hours:
Reporting
Section 238.132(c)(2)(ii)--0,
Section 238.162(b)(1)(ii)--40,
Section 238.170(e)(1)(ii)--80,
Section 238.170(e)(3)--1,005,
Section 238.170(e)(4)--100,
Section 238.170(h)(2)(ii)(B)--2,
Section 238.170(i)--16,
Section 238.170(j)(1) and (2)--100,
Section 238.170(j)(4)--16,
Recordkeeping
Section 238.170(e)(1)(i)--8,920,
Section 238.170(e)(1)(iii)--100,
Disclosure
Section 238.146 (initial setup)--75,
Section 238.146--30.
Legal authorization and confidentiality: This information
collection is authorized by section 10 of the Home Owners' Loan Act
(HOLA) and section 165(i)(2) of the Dodd-Frank Act. The obligation of
covered institutions to report this information is mandatory. This
information would be disclosed publicly and, as a result, no issue of
confidentiality is raised.
Current Actions: The final rule includes amendments to Sec.
238.146 of Regulation LL meant to ensure that certain savings and loan
holding companies are required to publicly disclose their stress tests
results. Under the final rule, a covered savings and loan holding
company that is subject to a supervisory stress test under Sec.
238.132 of Regulation LL is required to publicly disclose a summary of
the results of the stress test required under Sec. 238.143 of
Regulation LL within the period that is 15 calendar days after the
Board publicly discloses the results of its supervisory stress test of
the covered company pursuant to Sec. 238.134 of Regulation LL, unless
that time is extended by the Board in writing, while a covered savings
and loan holding company that is not subject to a supervisory stress
test under Sec. 238.132 of Regulation LL is required to publicly
disclose a summary of the results of the stress test required under
Sec. 238.143 of Regulation LL in the period beginning on June 15 and
ending on June 30 in the year in which the stress test is conducted,
unless that time is extended by the Board in writing.
Additionally, the final rule applies capital planning and stress
capital buffer requirements to covered savings and loan holding
companies subject to Category II, III, or IV standards. These savings
and loan holding companies will be required to submit capital plans to
the Board on an annual basis, and to request prior approval from the
Board under certain circumstances before making a capital distribution.
The Board also has revised Regulation LL to permit a savings and
loan holding company subject to Category IV standards to elect to
participate in the supervisory stress test in a year in which the firm
would not normally be subject to the supervisory stress test. To ensure
the Board is provided sufficient notice that the firm is participating
in the supervisory stress test, the firm would need to make its
election by January 15 of the year in which it seeks to opt in to the
supervisory stress test by providing written notice to the Board and
appropriate Federal Reserve Bank.
(3) Report title: Reporting, Recordkeeping, and Disclosure
Requirements Associated with Regulation YY (Enhanced Prudential
Standards).
Agency Form Number: FR YY.
OMB Control Number: 7100-0350.
Frequency: Annual, semiannual, quarterly.
Affected Public: Businesses or other for-profit.
Respondents: State member banks, U.S. bank holding companies,
nonbank financial companies, foreign banking organizations, U.S.
intermediate holding companies, foreign saving and loan holding
companies, and foreign nonbank financial companies supervised by the
Board.
Estimated number of respondents: 23 U.S. bank holding companies
with total consolidated assets of $100 billion or more, 4 U.S. bank
holding companies with total consolidated assets of $50 billion or more
but less than $100 billion, 1 state member bank with total consolidated
assets over $250 billion, 11 U.S. intermediate holding companies with
$100 billion or more in total assets, 23 foreign banking organizations
with total consolidated assets of more than $50 billion but less than
$100 billion; 23 foreign banking organizations with total consolidated
assets of $100 billion or more but combined U.S. operations of at least
$50 billion but less than $100 billion; 17 foreign banking
organizations with total consolidated assets of $100 billion or more
and combined U.S. operations of $100 billion or more.
Estimated annual burden hours: 27,752 hours.
General description of report: Section 165 of the Dodd-Frank Act,
as amended by EGRRCPA, requires the Board to implement enhanced
prudential standards for bank holding companies and foreign banking
organizations with total consolidated assets of $250 billion or more,
and provides the Board with discretion to apply enhanced prudential
standards to certain bank holding companies and foreign banking
organizations with $100 billion or more, but less than $250 billion, in
total consolidated assets. The enhanced prudential standards include
risk-based and leverage capital requirements, liquidity standards,
requirements for overall risk management (including establishing a risk
committee), stress test requirements, and debt-to-equity limits for
companies that the Financial Stability Oversight Council has determined
pose a grave threat to financial stability.
[[Page 7938]]
Current Actions: As described above, the Board has amended
Regulation YY to allow a firm subject to Category IV standards to elect
to participate in the supervisory stress test in a year in which the
firm would not normally be subject to the supervisory stress test. To
ensure the Board is provided sufficient notice that the firm is
participating in the supervisory stress test, the firm would need to
make its election by January 15 of the year in which it seeks to opt in
to the supervisory stress test by providing written notice to the Board
and appropriate Federal Reserve Bank. For purposes of calculating the
stress capital buffer requirement in 2021 for a firm subject to
Category IV standards that elects to participate in the 2021
supervisory stress test, the final rule includes transitional
procedures such that the firm could notify the Board by April 5, 2021.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a final rulemaking, an agency prepare and make
available for public comment a final regulatory flexibility analysis
describing the impact of the proposed rule on small entities.\38\
However, a final regulatory flexibility analysis is not required if the
agency certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. The Small
Business Administration (SBA) has defined ``small entities'' to include
banking organizations with total assets of less than or equal to $600
million that are independently owned and operated or owned by a holding
company with less than or equal to $600 million in total assets.\39\
For the reasons described below and under section 605(b) of the RFA,
the Board certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. As of
December 31, 2019, there were 2,799 bank holding companies, 171 savings
and loan holding companies, and 497 state member banks that would fit
the SBA's current definition of ``small entity'' for purposes of the
RFA.
---------------------------------------------------------------------------
\38\ 5 U.S.C. 601 et. seq.
\39\ See 13 CFR 121.201. Effective August 19, 2019, the SBA
revised the size standards for certain banking organizations to $600
million in assets from $550 million in assets. See 84 FR 34261 (July
18, 2019). Consistent with the General Principles of Affiliation in
13 CFR 121.103, the Board counts the assets of all domestic and
foreign affiliates when determining if the Board should classify a
Board-supervised institution as a small entity.
---------------------------------------------------------------------------
In connection with the proposed rule, the Board stated that it did
not believe the proposed rule would have a significant economic impact
on a substantial number of small entities. Nevertheless, the Board
published and invited comment on an initial regulatory flexibility
analysis of the proposed rule. No comments were received on the initial
regulatory flexibility analysis.
The Board is finalizing amendments to Regulations Q,\40\ Y,\41\
LL,\42\ and YY \43\ that would affect the regulatory requirements that
apply to bank holding companies, intermediate holding companies and
covered savings and loan holding companies with total consolidated
assets of at least $100 billion in total consolidated assets and any
nonbank financial company supervised by the Board that becomes subject
to the capital planning requirements pursuant to a rule or order of the
Board. The reasons and justification for the final rule are described
above in more detail in this SUPPLEMENTARY INFORMATION.
---------------------------------------------------------------------------
\40\ 12 CFR part 217.
\41\ 12 CFR part 225.
\42\ 12 CFR part 238.
\43\ 12 CFR part 252.
---------------------------------------------------------------------------
The Board has considered whether to conduct a final regulatory
flexibility analysis in connection with this final rule. However, the
assets of institutions subject to this final rule substantially exceed
the $600 million asset threshold under which a banking organization is
considered a ``small entity'' under SBA regulations. Because the final
rule is not likely to apply to any depository institution or company
with assets of $600 million or less, it is not expected to apply to any
small entity for purposes of the RFA. The Board does not believe that
the final rule duplicates, overlaps, or conflicts with any other
Federal rules. In light of the foregoing, the Board certifies that the
final rule will not have a significant economic impact on a substantial
number of small entities supervised.
C. Solicitation of Comments of Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board has sought to present the final rule in a
simple and straightforward manner and did not receive any comments on
the use of plain language.
List of Subjects
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 225
Administrative practice and procedure, Banks, Banking, Capital
planning, Holding companies, Reporting and recordkeeping requirements,
Securities, Stress testing.
12 CFR Part 238
Administrative practice and procedure, Banks, Banking, Federal
Reserve System, Reporting and recordkeeping requirements, Securities.
12 CFR Part 252
Administrative practice and procedure, Banks, Banking, Capital
planning, Federal Reserve System, Holding companies, Reporting and
recordkeeping requirements, Securities, Stress testing.
Authority and Issuance
For the reasons stated in the SUPPLEMENTARY INFORMATION, chapter II
of title 12 of the Code of Federal Regulations is amended as follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
1. 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-1, 1831w, 1835, 1844(b), 1851, 3904,
3906-3909, 4808, 5365, 5368, 5371, 5371 note, and sec. 4012, Pub. L.
116-136, 134 Stat. 281.
Subpart B--Capital Ratio Requirements and Buffer
0
2. Amend Sec. 217.11 by:
0
a. Revising paragraphs (a)(2)(iii) and (vi) and paragraphs (a)(3)(i)
introductory text and (a)(4);
0
b. Revising the paragraph (c) subject heading and paragraphs (c)(1)(i)
and (ii), (c)(1)(iii) introductory text, and (c)(1)(iv) introductory
text, (c)(1)(v) introductory text, and (c)(vi) introductory text; and
0
c. Correctly designating the second occurrence of paragraph (c)(1)(v)
as paragraph (c)(1)(vii); and
0
d. Revising paragraph (c)(2).
The revisions read as follows:
Sec. 217.11 Capital conservation buffer, countercyclical capital
buffer amount, and GSIB surcharge.
(a) * * *
(2) * * *
(iii) Maximum payout ratio. The maximum payout ratio is the
percentage of eligible retained income that a Board-
[[Page 7939]]
regulated institution can pay out in the form of distributions and
discretionary bonus payments during the current calendar quarter. For a
Board-regulated institution that is not subject to 12 CFR 225.8 or
238.170, the maximum payout ratio is determined by the Board-regulated
institution's capital conservation buffer, calculated as of the last
day of the previous calendar quarter, as set forth in Table 1 to
paragraph (a)(4)(iv) of this section. For a Board-regulated institution
that is subject to 12 CFR 225.8 or 238.170, the maximum payout ratio is
determined under paragraph (c)(1)(ii) of this section.
* * * * *
(vi) Stress capital buffer requirement. (A) The stress capital
buffer requirement for a Board-regulated institution subject to 12 CFR
225.8 or 238.170 is the stress capital buffer requirement determined
under 12 CFR 225.8 or 238.170 except as provided in paragraph
(a)(2)(vi)(B) of this section.
(B) If a Board-regulated institution subject to 12 CFR 225.8 or
238.170 has not yet received a stress capital buffer requirement, its
stress capital buffer requirement for purposes of this part is 2.5
percent.
(3) * * *
(i) A Board-regulated institution that is not subject to 12 CFR
225.8 or 238.170 has a capital conservation buffer equal to the lowest
of the following ratios, calculated as of the last day of the previous
calendar quarter:
* * * * *
(4) Limits on distributions and discretionary bonus payments. (i) A
Board-regulated institution that is not subject 12 CFR 225.8 or 238.170
shall not make distributions or discretionary bonus payments or create
an obligation to make such distributions or payments during the current
calendar quarter that, in the aggregate, exceed its maximum payout
amount.
(ii) A Board-regulated institution that is not subject 12 CFR 225.8
or 238.170 and that has a capital conservation buffer that is greater
than 2.5 percent plus 100 percent of its applicable countercyclical
capital buffer amount in accordance with paragraph (b) of this section
is not subject to a maximum payout amount under paragraph (a)(2)(ii) of
this section.
(iii) Except as provided in paragraph (a)(4)(iv) of this section, a
Board-regulated institution that is not subject to 12 CFR 225.8 or
238.170 may not make distributions or discretionary bonus payments
during the current calendar quarter if the Board-regulated
institution's:
(A) Eligible retained income is negative; and
(B) Capital conservation buffer was less than 2.5 percent as of the
end of the previous calendar quarter.
(iv) Prior approval--notwithstanding the limitations in paragraphs
(a)(4)(i) through (iii) of this section, the Board may permit a Board-
regulated institution that is not subject to 12 CFR 225.8 or 238.170 to
make a distribution or discretionary bonus payment upon a request of
the Board-regulated institution, if the Board determines that the
distribution or discretionary bonus payment would not be contrary to
the purposes of this section, or to the safety and soundness of the
Board-regulated institution. In making such a determination, the Board
will consider the nature and extent of the request and the particular
circumstances giving rise to the request.
Table 1 to Sec. 217.11(a)(4)(iv)--Calculation of Maximum Payout Amount
------------------------------------------------------------------------
Capital conservation buffer Maximum payout ratio
------------------------------------------------------------------------
Greater than 2.5 percent plus 100 percent of the No payout ratio
Board-regulated institution's applicable limitation applies.
countercyclical capital buffer amount.
Less than or equal to 2.5 percent plus 100 60 percent.
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount, and greater than 1.875 percent plus 75
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount.
Less than or equal to 1.875 percent plus 75 40 percent.
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount, and greater than 1.25 percent plus 50
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount.
Less than or equal to 1.25 percent plus 50 20 percent.
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount and greater than 0.625 percent plus 25
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount.
Less than or equal to 0.625 percent plus 25 0 percent.
percent of the Board-regulated institution's
applicable countercyclical capital buffer
amount.
------------------------------------------------------------------------
(v) Other limitations on distributions. Additional limitations on
distributions may apply under 12 CFR 225.4 and 263.202 to a Board-
regulated institution that is not subject to 12 CFR 225.8 or 238.170.
* * * * *
(c) Calculation of buffers for Board-regulated institutions subject
to 12 CFR 225.8 or 238.170--
(1) * * *
(i) A Board-regulated institution that is subject to 12 CFR 225.8
or 238.170 shall not make distributions or discretionary bonus payments
or create an obligation to make such distributions or payments during
the current calendar quarter that, in the aggregate, exceed its maximum
payout amount.
(ii) Maximum payout ratio. The maximum payout ratio of a Board-
regulated institution that is subject to 12 CFR 225.8 or 238.170 is the
lowest of the payout ratios determined by its standardized approach
capital conservation buffer; if applicable, advanced approaches capital
conservation buffer; and, if applicable, leverage buffer; as set forth
in table 2 to Sec. 217.11(c)(4)(iii).
(iii) Capital conservation buffer requirements. A Board-regulated
institution that is subject to 12 CFR 225.8 or 238.170 has:
* * * * *
(iv) No maximum payout amount limitation. A Board-regulated
institution that is subject to 12 CFR 225.8 or 238.170 is not subject
to a maximum payout amount under paragraph (a)(2)(ii) of this section
if it has:
* * * * *
(v) Negative eligible retained income. Except as provided in
paragraph (c)(1)(vi) of this section, a Board-regulated institution
that is subject to 12 CFR 225.8 or 238.170 may not make distributions
or discretionary bonus payments during the current calendar quarter if,
as of the end of the previous
[[Page 7940]]
calendar quarter, the Board-regulated institution's:
* * * * *
(vi) Prior approval. Notwithstanding the limitations in paragraphs
(c)(1)(i) through (v) of this section, the Board may permit a Board-
regulated institution that is subject to 12 CFR 225.8 or 238.170 to
make a distribution or discretionary bonus payment upon a request of
the Board-regulated institution, if the Board determines that the
distribution or discretionary bonus payment would not be contrary to
the purposes of this section, or to the safety and soundness of the
Board-regulated institution. In making such a determination, the Board
will consider the nature and extent of the request and the particular
circumstances giving rise to the request.
(vii) Other limitations on distributions. Additional limitations on
distributions may apply under 12 CFR 225.4, 225.8, 238.170, 252.63,
252.165, and 263.202 to a Board-regulated institution that is subject
to 12 CFR 225.8 or 238.170.
(2) Standardized approach capital conservation buffer. (i) The
standardized approach capital conservation buffer for Board-regulated
institutions subject to 12 CFR 225.8 or 238.170 is composed solely of
common equity tier 1 capital.
(ii) A Board-regulated institution that is subject to 12 CFR 225.8
or 238.170 has a standardized approach capital conservation buffer that
is equal to the lowest of the following ratios, calculated as of the
last day of the previous calendar quarter:
* * * * *
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
3. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-
1, 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
Subpart A--General Provisions
0
4. Amend Sec. 225.8 by:
0
a. Revising paragraphs (c)(1) and (2) and (d)(3) through (21);
0
b. Removing paragraph (d)(22),
0
c. Revising paragraphs (e)(2)(i)(A) and (e)(4)(i)(B)(3);
0
d. Removing paragraph (e)(4)(i)(B)(4);
0
e. Revising paragraphs (e)(4)(ii) and (iii);
0
f. Removing paragraph (e)(4)(iv);
0
g. Revising paragraph (f)(1);
0
h. Adding paragraph (f)(4);
0
i. Revising paragraphs (h)(2) through (5), (i), (j), and (k); and
0
j. Removing paragraph (l).
The revisions and additions read as follows:
Sec. 225.8 Capital planning and stress capital buffer requirement.
* * * * *
(c) * * *
(1) A bank holding company that meets the $100 billion asset
threshold (as measured under paragraph (b) of this section) on or
before September 30 of a calendar year must comply with the
requirements of this section beginning on January 1 of the next
calendar year, unless that time is extended by the Board in writing.
Notwithstanding the previous sentence, the Board will not provide a
bank holding company with notice of its stress capital buffer
requirement until the first year in which the Board conducts an
analysis of the bank holding company pursuant to 12 CFR 252.44.
(2) A bank holding company that meets the $100 billion asset
threshold after September 30 of a calendar year must comply with the
requirements of this section beginning on January 1 of the second
calendar year after the bank holding company meets the $100 billion
asset threshold, unless that time is extended by the Board in writing.
Notwithstanding the previous sentence, the Board will not provide a
bank holding company with notice of its stress capital buffer
requirement until the first year in which the Board conducts an
analysis of the bank holding company pursuant to 12 CFR 252.44.
* * * * *
(d) * * *
(3) Capital action means any issuance of a debt or equity capital
instrument, any capital distribution, and any similar action that the
Federal Reserve determines could impact a bank holding company's
consolidated capital.
(4) Capital distribution means a redemption or repurchase of any
debt or equity capital instrument, a payment of common or preferred
stock dividends, a payment that may be temporarily or permanently
suspended by the issuer on any instrument that is eligible for
inclusion in the numerator of any minimum regulatory capital ratio, and
any similar transaction that the Federal Reserve determines to be in
substance a distribution of capital.
(5) Capital plan means a written presentation of a bank holding
company's capital planning strategies and capital adequacy process that
includes the mandatory elements set forth in paragraph (e)(2) of this
section.
(6) Capital plan cycle means the period beginning on January 1 of a
calendar year and ending on December 31 of that year.
(7) Capital policy means a bank holding company's written
principles and guidelines used for capital planning, capital issuance,
capital usage and distributions, including internal capital goals; the
quantitative or qualitative guidelines for capital distributions; the
strategies for addressing potential capital shortfalls; and the
internal governance procedures around capital policy principles and
guidelines.
(8) Category IV bank holding company means any bank holding company
or U.S. intermediate holding company subject to this section that, as
of December 31 of the prior capital plan cycle, is a Category IV
banking organization pursuant to 12 CFR 252.5.
(9) Common equity tier 1 capital has the same meaning as under 12
CFR part 217.
(10) Effective capital distribution limitations means any
limitations on capital distributions established by the Board by order
or regulation, including pursuant to 12 CFR 217.11, 225.4, 252.63,
252.165, and 263.202, provided that, for any limitations based on risk-
weighted assets, such limitations must be calculated using the
standardized approach, as set forth in 12 CFR part 217, subpart D.
(11) Final planned capital distributions means the planned capital
distributions included in a capital plan that include the adjustments
made pursuant to paragraph (h) of this section, if any.
(12) GSIB surcharge has the same meaning as under 12 CFR 217.403.
(13) Internal baseline scenario means a scenario that reflects the
bank holding company's expectation of the economic and financial
outlook, including expectations related to the bank holding company's
capital adequacy and financial condition.
(14) Internal stress scenario means a scenario designed by a bank
holding company that stresses the specific vulnerabilities of the bank
holding company's risk profile and operations, including those related
to the bank holding company's capital adequacy and financial condition.
(15) Nonbank financial company supervised by the Board means a
company that the Financial Stability Oversight Council has determined
under section 113 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5323) shall be supervised by the Board and
for which such determination is still in effect.
[[Page 7941]]
(16) Planning horizon means the period of at least nine consecutive
quarters, beginning with the quarter preceding the quarter in which the
bank holding company submits its capital plan, over which the relevant
projections extend.
(17) Regulatory capital ratio means a capital ratio for which the
Board has established minimum requirements for the bank holding company
by regulation or order, including, as applicable, the bank holding
company's regulatory capital ratios calculated under 12 CFR part 217
and the deductions required under 12 CFR 248.12; except that the bank
holding company shall not use the advanced approaches to calculate its
regulatory capital ratios.
(18) Severely adverse scenario has the same meaning as under 12 CFR
part 252, subpart E.
(19) Stress capital buffer requirement means the amount calculated
under paragraph (f) of this section.
(20) Supervisory stress test means a stress test conducted using a
severely adverse scenario and the assumptions contained in 12 CFR part
252, subpart E.
(21) U.S. intermediate holding company means the top-tier U.S.
company that is required to be established pursuant to 12 CFR 252.153.
(e) * * *
(2) * * *
(i) * * *
(A) Estimates of projected revenues, losses, reserves, and pro
forma capital levels, including regulatory capital ratios, and any
additional capital measures deemed relevant by the bank holding
company, over the planning horizon under a range of scenarios,
including:
(1) If the bank holding company is a Category IV bank holding
company, the Internal baseline scenario and at least one Internal
stress scenario, as well as any additional scenarios, based on
financial conditions or the macroeconomic outlook, or based on the bank
holding company's financial condition, size, complexity, risk profile,
or activities, or risks to the U.S. economy, that the Federal Reserve
may provide the bank holding company after giving notice to the bank
holding company; or
(2) If the bank holding company is not a Category IV bank holding
company, any scenarios provided by the Federal Reserve, the Internal
baseline scenario, and at least one Internal stress scenario;
* * * * *
(4) * * *
(i) * * *
(B) * * *
(3) The Internal stress scenario(s) are not appropriate for the
bank holding company's business model and portfolios, or changes in
financial markets or the macro-economic outlook that could have a
material impact on a bank holding company's risk profile and financial
condition require the use of updated scenarios; or
* * * * *
(ii) The Board, or the appropriate Reserve Bank with concurrence of
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this
section for up to an additional 60 calendar days, or such longer period
as the Board or the appropriate Reserve Bank, with concurrence of the
Board, determines appropriate.
(iii) Any updated capital plan must satisfy all the requirements of
this section; however, a bank holding company may continue to rely on
information submitted as part of a previously submitted capital plan to
the extent that the information remains accurate and appropriate.
* * * * *
(f) * * *
(1) General. The Board will determine the stress capital buffer
requirement that applies under 12 CFR 217.11 pursuant to this paragraph
(f). For each bank holding company that is not a Category IV bank
holding company, the Board will calculate the bank holding company's
stress capital buffer requirement annually. For each Category IV bank
holding company, the Board will calculate the bank holding company's
stress capital buffer requirement biennially, occurring in each
calendar year ending in an even number, and will adjust the bank
holding company's stress capital buffer requirement biennially,
occurring in each calendar year ending in an odd number.
Notwithstanding the previous sentence, the Board will calculate the
stress capital buffer requirement of a Category IV bank holding company
in a year ending in an odd number with respect to which that company
makes an election pursuant to 12 CFR 252.44(d)(2)(ii).
* * * * *
(4) Adjustment of stress capital buffer requirement. In each
calendar year in which the Board does not calculate a Category IV bank
holding company's stress capital buffer requirement pursuant to
paragraph (f)(1) of this section, the Board will adjust the Category IV
bank holding company's stress capital buffer requirement to be equal to
the result of the calculation set forth in paragraph (f)(2) of this
section, using the same values that were used to calculate the stress
capital buffer requirement most recently provided to the bank holding
company, except that the value used in paragraph (f)(2)(i)(C)(1) of
this section will be equal to the bank holding company's planned common
stock dividends (expressed as a dollar amount) for each of the fourth
through seventh quarters of the planning horizon as set forth in the
capital plan submitted by the bank holding company in the calendar year
in which the Board adjusts the bank holding company's stress capital
buffer requirement.
(h) * * *
(2) Response to notice--(i) Request for reconsideration of stress
capital buffer requirement. A bank holding company may request
reconsideration of a stress capital buffer requirement provided under
paragraph (h)(1) of this section. To request reconsideration of a
stress capital buffer requirement, a bank holding company must submit
to the Board a request pursuant to paragraph (i) of this section.
(ii) Adjustments to planned capital distributions. Within two
business days of receipt of notice of a stress capital buffer
requirement under paragraph (h)(1) or (i)(5) of this section, as
applicable, a bank holding company must:
(A) Determine whether the planned capital distributions for the
fourth through seventh quarters of the planning horizon under the
Internal baseline scenario would be consistent with effective capital
distribution limitations assuming the stress capital buffer requirement
provided by the Board under paragraph (h)(1) or (i)(5) of this section,
as applicable, in place of any stress capital buffer requirement in
effect; and
(1) If the planned capital distributions for the fourth through
seventh quarters of the planning horizon under the Internal baseline
scenario would not be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect, the bank holding company must adjust its planned capital
distributions such that its planned capital distributions would be
consistent with effective capital distribution limitations assuming the
stress capital buffer requirement provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as applicable, in place of any stress
capital buffer requirement in effect; or
(2) If the planned capital distributions for the fourth through
seventh quarters
[[Page 7942]]
of the planning horizon under the Internal baseline scenario would be
consistent with effective capital distribution limitations assuming the
stress capital buffer requirement provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as applicable, in place of any stress
capital buffer requirement in effect, the bank holding company may
adjust its planned capital distributions. A bank holding company may
not adjust its planned capital distributions to be inconsistent with
the effective capital distribution limitations assuming the stress
capital buffer requirement provided by the Board under paragraph (h)(1)
or (i)(5) of this section, as applicable; and
(B) Notify the Board of any adjustments made to planned capital
distributions for the fourth through seventh quarters of the planning
horizon under the Internal baseline scenario.
(3) Final planned capital distributions. The Board will consider
the planned capital distributions, including any adjustments made
pursuant to paragraph (h)(2)(ii) of this section, to be the bank
holding company's final planned capital distributions on the later of:
(i) The expiration of the time for requesting reconsideration under
paragraph (i) of this section; and
(ii) The expiration of the time for adjusting planned capital
distributions pursuant to paragraph (h)(2)(ii) of this section.
(4) Effective date of final stress capital buffer requirement. (i)
The Board will provide a bank holding company with its final stress
capital buffer requirement and confirmation of the bank holding
company's final planned capital distributions by August 31 of the
calendar year that a capital plan was submitted pursuant to paragraph
(e)(1)(ii) of this section, unless otherwise determined by the Board. A
stress capital buffer requirement will not be considered final so as to
be agency action subject to judicial review under 5 U.S.C. 704 during
the pendency of a request for reconsideration made pursuant to
paragraph (i) of this section or before the time for requesting
reconsideration has expired.
(ii) Unless otherwise determined by the Board, a bank holding
company's final planned capital distributions and final stress capital
buffer requirement shall:
(A) Be effective on October 1 of the calendar year in which a
capital plan was submitted pursuant to paragraph (e)(1)(ii) of this
section; and
(B) Remain in effect until superseded.
(5) Publication. With respect to any bank holding company subject
to this section, the Board may disclose publicly any or all of the
following:
(i) The stress capital buffer requirement provided to a bank
holding company under paragraph (h)(1) or (i)(5) of this section;
(ii) Adjustments made pursuant to paragraph (h)(2)(ii);
(iii) A summary of the results of the supervisory stress test; and
(iv) Other information.
(i) Administrative remedies; request for reconsideration. The
following requirements and procedures apply to any request under this
paragraph (i):
(1) General. To request reconsideration of a stress capital buffer
requirement, provided under paragraph (h) of this section, a bank
holding company must submit a written request for reconsideration.
(2) Timing of request. A request for reconsideration of a stress
capital buffer requirement, provided under paragraph (h) of this
section, must be received within 15 calendar days of receipt of a
notice of a bank holding company's stress capital buffer requirement.
(3) Contents of request. (i) A request for reconsideration must
include a detailed explanation of why reconsideration should be granted
(that is, why a stress capital buffer requirement should be
reconsidered). With respect to any information that was not previously
provided to the Federal Reserve in the bank holding company's capital
plan, the request should include an explanation of why the information
should be considered.
(ii) A request for reconsideration may include a request for an
informal hearing on the bank holding company's request for
reconsideration.
(4) Hearing. (i) The Board may, in its sole discretion, order an
informal hearing if the Board finds that a hearing is appropriate or
necessary to resolve disputes regarding material issues of fact.
(ii) An informal hearing shall be held within 30 calendar days of a
request, if granted, provided that the Board may extend this period
upon notice to the requesting party.
(5) Response to request. Within 30 calendar days of receipt of the
bank holding company's request for reconsideration of its stress
capital buffer requirement submitted under paragraph (i)(2) of this
section or within 30 days of the conclusion of an informal hearing
conducted under paragraph (i)(4) of this section, the Board will notify
the company of its decision to affirm or modify the bank holding
company's stress capital buffer requirement, provided that the Board
may extend this period upon notice to the bank holding company.
(6) Distributions during the pendency of a request for
reconsideration. During the pendency of the Board's decision under
paragraph (i)(5) of this section, the bank holding company may make
capital distributions that are consistent with effective distribution
limitations, unless prior approval is required under paragraph (j)(1)
of this section.
(j) Approval requirements for certain capital actions--(1)
Circumstances requiring approval--Resubmission of a capital plan.
Unless it receives prior approval pursuant to paragraph (j)(3) of this
section, a bank holding company may not make a capital distribution
(excluding any capital distribution arising from the issuance of a
capital instrument eligible for inclusion in the numerator of a
regulatory capital ratio) if the capital distribution would occur after
the occurrence of an event requiring resubmission under paragraph
(e)(4)(i)(A) or (B) of this section.
(2) Contents of request. A request for a capital distribution under
this section must contain the following information:
(i) The bank holding company's capital plan or a discussion of
changes to the bank holding company's capital plan since it was last
submitted to the Federal Reserve;
(ii) The purpose of the transaction;
(iii) A description of the capital distribution, including for
redemptions or repurchases of securities, the gross consideration to be
paid and the terms and sources of funding for the transaction, and for
dividends, the amount of the dividend(s); and
(iv) Any additional information requested by the Board or the
appropriate Reserve Bank (which may include, among other things, an
assessment of the bank holding company's capital adequacy under a
severely adverse scenario, a revised capital plan, and supporting
data).
(3) Approval of certain capital distributions. (i) The Board, or
the appropriate Reserve Bank with concurrence of the Board, will act on
a request for prior approval of a capital distribution within 30
calendar days after the receipt of all the information required under
paragraph (j)(2) of this section.
(ii) In acting on a request for prior approval of a capital
distribution, the Board, or appropriate Reserve Bank with concurrence
of the Board, will apply the considerations and principles in paragraph
(g) of this section, as appropriate. In addition, the Board, or the
appropriate Reserve Bank with concurrence of the Board, may
[[Page 7943]]
disapprove the transaction if the bank holding company does not provide
all of the information required to be submitted under paragraph (j)(2)
of this section.
(4) Disapproval and hearing. (i) The Board, or the appropriate
Reserve Bank with concurrence of the Board, will notify the bank
holding company in writing of the reasons for a decision to disapprove
any proposed capital distribution. Within 15 calendar days after
receipt of a disapproval by the Board, the bank holding company may
submit a written request for a hearing.
(ii) The Board may, in its sole discretion, order an informal
hearing if the Board finds that a hearing is appropriate or necessary
to resolve disputes regarding material issues of fact. An informal
hearing shall be held within 30 calendar days of a request, if granted,
provided that the Board may extend this period upon notice to the
requesting party.
(iii) Written notice of the final decision of the Board shall be
given to the bank holding company within 60 calendar days of the
conclusion of any informal hearing ordered by the Board, provided that
the Board may extend this period upon notice to the requesting party.
(iv) While the Board's decision is pending and until such time as
the Board, or the appropriate Reserve Bank with concurrence of the
Board, approves the capital distribution at issue, the bank holding
company may not make such capital distribution.
(k) Post notice requirement. A bank holding company must notify the
Board and the appropriate Reserve Bank within 15 days of making a
capital distribution if:
(1) The capital distribution was approved pursuant to paragraph
(j)(3) of this section; or
(2) The dollar amount of the capital distribution will exceed the
dollar amount of the bank holding company's final planned capital
distributions, as measured on an aggregate basis beginning in the
fourth quarter of the planning horizon through the quarter at issue.
PART 238--SAVINGS AND LOAN HOLDING COMPANIES (REGULATION LL)
0
5. The authority citation for part 238 continues to read as follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462, 1462a, 1463,
1464, 1467, 1467a, 1468, 5365; 1813, 1817, 1829e, 1831i, 1972, 15
U.S.C. 78l.
Subpart O--Supervisory Stress Test Requirements for Covered Savings
and Loan Holding Companies
0
6. Amend Sec. 238.132 by adding paragraph (a)(4), revising paragraph
(c)(2), and adding paragraph (d) to read as follows:
Sec. 238.132 Analysis conducted by the Board.
(a) * * *
(4) In conducting the analysis, the Board will not incorporate
changes to a firm's business plan that are likely to have a material
impact on the covered company's capital adequacy and funding profile in
its projections of losses, net income, pro forma capital levels, and
capital ratios.
* * * * *
(c) * * *
(2) Change in frequency. (i) The Board may conduct a stress test of
a covered company on a more or less frequent basis than would be
required under paragraph (c)(1) of this section based on the company's
financial condition, size, complexity, risk profile, scope of
operations, or activities, or risks to the U.S. economy.
(ii) A Category IV savings and loan holding company may elect to
have the Board conduct a stress test with respect to the company in a
year ending in an odd number by providing notice to the Board and the
appropriate Federal Reserve Bank by January 15 of that year.
* * * * *
(d) Capital Action Assumptions. In conducting a stress test under
this section, the Board will make the following assumptions regarding a
covered company's capital actions over the planning horizon:
(1) The covered company will not pay any dividends on any
instruments that qualify as common equity tier 1 capital;
(2) The covered company will make payments on instruments that
qualify as additional tier 1 capital or tier 2 capital equal to the
stated dividend, interest, or principal due on such instrument;
(3) The covered company will not make a redemption or repurchase of
any capital instrument that is eligible for inclusion in the numerator
of a regulatory capital ratio; and
(4) The covered company will not make any issuances of common stock
or preferred stock.
Subpart P--Company-Run Stress Test Requirements for Savings and
Loan Holding Companies
0
7. Amend Sec. 238.144 by revising paragraphs (a)(2) and (b)(1) and (2)
and adding paragraphs (b)(3) and (4) to read as follows:
Sec. 238.144 Methodologies and practices.
(a) * * *
(2) The potential impact on pro forma regulatory capital levels and
pro forma capital ratios (including regulatory capital ratios and any
other capital ratios specified by the Board), and in so doing must:
(i) Incorporate the effects of any capital actions over the
planning horizon and maintenance of an allowance for credit losses
appropriate for credit exposures throughout the planning horizon; and
(ii) Exclude the impacts of changes to a firm's business plan that
are likely to have a material impact on the covered company's capital
adequacy and funding profile.
(b) * * *
(1) The covered company will not pay any dividends on any
instruments that qualify as common equity tier 1 capital;
(2) The covered company will make payments on instruments that
qualify as additional tier 1 capital or tier 2 capital equal to the
stated dividend, interest, or principal due on such instrument;
(3) The covered company will not make a redemption or repurchase of
any capital instrument that is eligible for inclusion in the numerator
of a regulatory capital ratio; and
(4) The covered company will not make any issuances of common stock
or preferred stock.
* * * * *
0
8. Amend Sec. 238.146 by revising paragraph (a)(1) to read as follows:
Sec. 238.146 Disclosure of stress test results.
(a) Public disclosure of results--(1) In general. (i) A covered
company that is subject to a supervisory stress test under 12 CFR
238.132 must publicly disclose a summary of the results of the stress
test required under Sec. 238.143 within the period that is 15 calendar
days after the Board publicly discloses the results of its supervisory
stress test of the covered company pursuant to Sec. 238.134, unless
that time is extended by the Board in writing; and
(ii) A covered company that is not subject to a supervisory stress
test under Sec. 238.132 must publicly disclose a summary of the
results of the stress test required under Sec. 238.143 in the period
beginning on June 15 and ending on June 30 in the year in which the
stress test is conducted, unless that time is extended by the Board in
writing.
* * * * *
0
9. Add Subpart S, consisting of Sec. 238.170, to read as follows:
[[Page 7944]]
Subpart S--Capital Planning and Stress Capital Buffer Requirement
Sec. 238.170 Capital planning and stress capital buffer requirement.
(a) Purpose. This section establishes capital planning and prior
notice and approval requirements for capital distributions by certain
savings and loan holding companies. This section also establishes the
Board's process for determining the stress capital buffer requirement
applicable to these savings and loan holding companies.
(b) Scope and reservation of authority--(1) Applicability. Except
as provided in Sec. 238.170(c), this section applies to:
(i) Any top-tier covered savings and loan holding company domiciled
in the United States with average total consolidated assets of $100
billion or more ($100 billion asset threshold); and
(ii) Any other covered savings and loan holding company domiciled
in the United States that is made subject to this section, in whole or
in part, by order of the Board.
(2) Average total consolidated assets. For purposes of this
section, average total consolidated assets means the average of the
total consolidated assets as reported by a covered savings and loan
holding company on its Consolidated Financial Statements for Holding
Companies (FR Y-9C) for the four most recent consecutive quarters. If
the covered savings and loan holding company has not filed the FR Y-9C
for each of the four most recent consecutive quarters, average total
consolidated assets means the average of the company's total
consolidated assets, as reported on the company's FR Y-9C, for the most
recent quarter or consecutive quarters, as applicable. Average total
consolidated assets are measured on the as-of date of the most recent
FR Y-9C used in the calculation of the average.
(3) Ongoing applicability. A covered savings and loan holding
company (including any successor covered savings and loan holding
company) that is subject to any requirement in this section shall
remain subject to such requirements unless and until its total
consolidated assets fall below $100 billion for each of four
consecutive quarters, as reported on the FR Y-9C and effective on the
as-of date of the fourth consecutive FR Y-9C.
(4) Reservation of authority. Nothing in this section shall limit
the authority of the Federal Reserve to issue or enforce a capital
directive or take any other supervisory or enforcement action,
including an action to address unsafe or unsound practices or
conditions or violations of law.
(5) Application of this section by order. The Board may apply this
section, in whole or in part, to a covered savings and loan holding
company by order based on the institution's size, level of complexity,
risk profile, scope of operations, or financial condition.
(c) Transition periods for certain covered savings and loan holding
companies. (1) A covered savings and loan holding company that meets
the $100 billion asset threshold (as measured under paragraph (b) of
this section) on or before September 30 of a calendar year must comply
with the requirements of this section beginning on January 1 of the
next calendar year, unless that time is extended by the Board in
writing. Notwithstanding the previous sentence, the Board will not
provide a covered savings and loan holding company with notice of its
stress capital buffer requirement until the first year in which the
Board conducts an analysis of the covered savings and loan company
pursuant to 12 CFR 238.132.
(2) A covered savings and loan holding company that meets the $100
billion asset threshold after September 30 of a calendar year must
comply with the requirements of this section beginning on January 1 of
the second calendar year after the covered savings and loan holding
company meets the $100 billion asset threshold, unless that time is
extended by the Board in writing. Notwithstanding the previous
sentence, the Board will not provide a covered savings and loan holding
company with notice of its stress capital buffer requirement until the
first year in which the Board conducts an analysis of the covered
savings and loan holding company pursuant to 12 CFR 238.132.
(3) The Board, or the appropriate Reserve Bank with the concurrence
of the Board, may require a covered savings and loan holding company
described in paragraph (c)(1) or (2) of this section to comply with any
or all of the requirements of this section if the Board, or appropriate
Reserve Bank with concurrence of the Board, determines that the
requirement is appropriate on a different date based on the company's
risk profile, scope of operation, or financial condition and provides
prior notice to the company of the determination.
(d) Definitions. For purposes of this section, the following
definitions apply:
(1) Advanced approaches means the risk-weighted assets calculation
methodologies at 12 CFR part 217, subpart E, as applicable.
(2) Average total nonbank assets means the average of the total
nonbank assets, calculated in accordance with the instructions to the
FR Y-9LP, for the four most recent calendar quarters or, if the covered
savings and loan holding company has not filed the FR Y-9LP for each of
the four most recent calendar quarters, for the most recent quarter or
quarters, as applicable.
(3) Capital action means any issuance of a debt or equity capital
instrument, any capital distribution, and any similar action that the
Federal Reserve determines could impact a covered savings and loan
holding company's consolidated capital.
(4) Capital distribution means a redemption or repurchase of any
debt or equity capital instrument, a payment of common or preferred
stock dividends, a payment that may be temporarily or permanently
suspended by the issuer on any instrument that is eligible for
inclusion in the numerator of any minimum regulatory capital ratio, and
any similar transaction that the Federal Reserve determines to be in
substance a distribution of capital.
(5) Capital plan means a written presentation of a covered savings
and loan holding company's capital planning strategies and capital
adequacy process that includes the mandatory elements set forth in
paragraph (e)(2) of this section.
(6) Capital plan cycle means the period beginning on January 1 of a
calendar year and ending on December 31 of that year.
(7) Capital policy means a covered savings and loan holding
company's written principles and guidelines used for capital planning,
capital issuance, capital usage and distributions, including internal
capital goals; the quantitative or qualitative guidelines for capital
distributions; the strategies for addressing potential capital
shortfalls; and the internal governance procedures around capital
policy principles and guidelines.
(8) Category IV savings and loan holding company means a covered
savings and loan holding company identified as a Category IV banking
organization pursuant to 12 CFR 238.10.
(9) Common equity tier 1 capital has the same meaning as under 12
CFR part 217.
(10) Effective capital distribution limitations means any
limitations on capital distributions established by the Board by order
or regulation, including pursuant to 12 CFR 217.11, provided that, for
any limitations based on risk-weighted assets, such limitations must be
calculated using the standardized approach, as set forth in 12 CFR part
217, subpart D.
(11) Final planned capital distributions means the planned capital
[[Page 7945]]
distributions included in a capital plan that include the adjustments
made pursuant to paragraph (h) of this section, if any.
(12) Internal baseline scenario means a scenario that reflects the
covered savings and loan holding company's expectation of the economic
and financial outlook, including expectations related to the covered
saving and loan holding company's capital adequacy and financial
condition.
(13) Internal stress scenario means a scenario designed by a
covered savings and loan holding company that stresses the specific
vulnerabilities of the covered savings and loan holding company's risk
profile and operations, including those related to the covered savings
and loan holding company's capital adequacy and financial condition.
(14) Planning horizon means the period of at least nine consecutive
quarters, beginning with the quarter preceding the quarter in which the
covered savings and loan holding company submits its capital plan, over
which the relevant projections extend.
(15) Regulatory capital ratio means a capital ratio for which the
Board has established minimum requirements for the covered savings and
loan holding company by regulation or order, including, as applicable,
the covered savings and loan holding company's regulatory capital
ratios calculated under 12 CFR part 217 and the deductions required
under 12 CFR 248.12; except that the covered savings and loan holding
company shall not use the advanced approaches to calculate its
regulatory capital ratios.
(16) Severely adverse scenario means a set of conditions that
affect the U.S. economy or the financial condition of a covered company
and that overall are significantly more severe than those associated
with the baseline scenario and may include trading or other additional
components.
(17) Stress capital buffer requirement means the amount calculated
under paragraph (f) of this section.
(18) Supervisory stress test means a stress test conducted using a
severely adverse scenario and the assumptions contained in 12 CFR part
238, subpart O.
(e) Capital planning requirements and procedures--(1) Annual
capital planning. (i) A covered savings and loan holding company must
develop and maintain a capital plan.
(ii) A covered savings and loan holding company must submit its
complete capital plan to the Board and the appropriate Reserve Bank by
April 5 of each calendar year, or such later date as directed by the
Board or by the appropriate Reserve Bank with concurrence of the Board.
(iii) The covered savings and loan holding company's board of
directors or a designated committee thereof must at least annually and
prior to submission of the capital plan under paragraph (e)(1)(ii) of
this section:
(A) Review the robustness of the covered savings and loan holding
company's process for assessing capital adequacy;
(B) Ensure that any deficiencies in the covered savings and loan
holding company's process for assessing capital adequacy are
appropriately remedied; and
(C) Approve the covered savings and loan holding company's capital
plan.
(2) Mandatory elements of capital plan. A capital plan must contain
at least the following elements:
(i) An assessment of the expected uses and sources of capital over
the planning horizon that reflects the covered savings and loan holding
company's size, complexity, risk profile, and scope of operations,
assuming both expected and stressful conditions, including:
(A) Estimates of projected revenues, losses, reserves, and pro
forma capital levels, including regulatory capital ratios, and any
additional capital measures deemed relevant by the covered savings and
loan holding company, over the planning horizon under a range of
scenarios, including:
(1) If the covered savings and loan holding company is a Category
IV savings and loan holding company, the Internal baseline scenario and
at least one Internal stress scenario, as well as any additional
scenarios, based on financial conditions or the macroeconomic outlook,
or based on the covered savings and loan holding company's financial
condition, size, complexity, risk profile, or activities, or risks to
the U.S. economy, that the Federal Reserve may provide the covered
savings and loan holding company after giving notice to the covered
savings and loan holding company; or
(2) If the covered savings and loan holding company is not a
Category IV savings and loan holding company, any scenarios provided by
the Federal Reserve, the Internal baseline scenario, and at least one
Internal stress scenario;
(B) A discussion of the results of any stress test required by law
or regulation, and an explanation of how the capital plan takes these
results into account; and
(C) A description of all planned capital actions over the planning
horizon. Planned capital actions must be consistent with effective
capital distribution limitations, except as may be adjusted pursuant to
paragraph (h) of this section. In determining whether a covered savings
and loan holding company's planned capital distributions are consistent
with effective capital distribution limitations, a covered savings and
loan holding company must assume that any countercyclical capital
buffer amount currently applicable to the covered savings and loan
holding company remains at the same level, except that the covered
savings and loan holding company must reflect any increases or
decreases in the countercyclical capital buffer amount that have been
announced by the Board at the times indicated by the Board's
announcement for when such increases or decreases will take effect.
(ii) A detailed description of the covered savings and loan holding
company's process for assessing capital adequacy, including:
(A) A discussion of how the covered savings and loan holding
company will, under expected and stressful conditions, maintain capital
commensurate with its risks, maintain capital above the regulatory
capital ratios, and serve as a source of strength to its subsidiary
depository institutions;
(B) A discussion of how the covered savings and loan holding
company will, under expected and stressful conditions, maintain
sufficient capital to continue its operations by maintaining ready
access to funding, meeting its obligations to creditors and other
counterparties, and continuing to serve as a credit intermediary;
(iii) The covered savings and loan holding company's capital
policy; and
(iv) A discussion of any expected changes to the covered savings
and loan holding company's business plan that are likely to have a
material impact on the covered savings and loan holding company's
capital adequacy or liquidity.
(3) Data collection. Upon the request of the Board or appropriate
Reserve Bank, the covered savings and loan holding company shall
provide the Federal Reserve with information regarding:
(i) The covered savings and loan holding company's financial
condition, including its capital;
(ii) The covered savings and loan holding company's structure;
(iii) Amount and risk characteristics of the covered savings and
loan holding company's on- and off-balance sheet exposures, including
exposures within the covered savings and loan holding company's trading
account, other
[[Page 7946]]
trading-related exposures (such as counterparty-credit risk exposures)
or other items sensitive to changes in market factors, including, as
appropriate, information about the sensitivity of positions to changes
in market rates and prices;
(iv) The covered savings and loan holding company's relevant
policies and procedures, including risk management policies and
procedures;
(v) The covered savings and loan holding company's liquidity
profile and management;
(vi) The loss, revenue, and expense estimation models used by the
covered savings and loan holding company for stress scenario analysis,
including supporting documentation regarding each model's development
and validation; and
(vii) Any other relevant qualitative or quantitative information
requested by the Board or by the appropriate Reserve Bank to facilitate
review of the covered savings and loan holding company's capital plan
under this section.
(4) Resubmission of a capital plan. (i) A covered savings and loan
holding company must update and resubmit its capital plan to the
appropriate Reserve Bank within 30 calendar days of the occurrence of
one of the following events:
(A) The covered savings and loan holding company determines there
has been or will be a material change in the covered savings and loan
holding company's risk profile, financial condition, or corporate
structure since the covered savings and loan holding company last
submitted the capital plan to the Board and the appropriate Reserve
Bank under this section; or
(B) The Board, or the appropriate Reserve Bank with concurrence of
the Board, directs the covered savings and loan holding company in
writing to revise and resubmit its capital plan for any of the
following reasons:
(1) The capital plan is incomplete or the capital plan, or the
covered savings and loan holding company's internal capital adequacy
process, contains material weaknesses;
(2) There has been, or will likely be, a material change in the
covered savings and loan holding company's risk profile (including a
material change in its business strategy or any risk exposure),
financial condition, or corporate structure;
(3) The Internal stress scenario(s) are not appropriate for the
covered savings and loan holding company's business model and
portfolios, or changes in financial markets or the macro-economic
outlook that could have a material impact on a covered savings and loan
holding company's risk profile and financial condition require the use
of updated scenarios; or
(ii) The Board, or the appropriate Reserve Bank with concurrence of
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this
section for up to an additional 60 calendar days, or such longer period
as the Board or the appropriate Reserve Bank, with concurrence of the
Board, determines appropriate.
(iii) Any updated capital plan must satisfy all the requirements of
this section; however, a covered savings and loan holding company may
continue to rely on information submitted as part of a previously
submitted capital plan to the extent that the information remains
accurate and appropriate.
(5) Confidential treatment of information submitted. The
confidentiality of information submitted to the Board under this
section and related materials shall be determined in accordance with
applicable exemptions under the Freedom of Information Act (5 U.S.C.
552(b)) and the Board's Rules Regarding Availability of Information (12
CFR part 261).
(f) Calculation of the stress capital buffer requirement--(1)
General. The Board will determine the stress capital buffer requirement
that applies under 12 CFR 217.11 pursuant to paragraph (f) of this
section. For each covered savings and loan holding company that is not
a Category IV savings and loan holding company, the Board will
calculate the covered savings and loan holding company's stress capital
buffer requirement annually. For each Category IV savings and loan
holding company, the Board will calculate the covered savings and loan
holding company's stress capital buffer requirement biennially,
occurring in each calendar year ending in an even number, and will
adjust the covered savings and loan holding company's stress capital
buffer requirement biennially, occurring in each calendar year ending
in an odd number. Notwithstanding the previous sentence, the Board will
calculate the stress capital buffer requirement of a Category IV
savings and loan holding company in a year ending in an odd number with
respect to which that company makes an election pursuant to 12 CFR
238.132(c)(2)(ii).
(2) Stress capital buffer requirement calculation. A covered
savings and loan holding company's stress capital buffer requirement is
equal to the greater of:
(i) The following calculation:
(A) The ratio of a covered savings and loan holding company's
common equity tier 1 capital to risk-weighted assets, as calculated
under 12 CFR part 217, subpart D, as of the final quarter of the
previous capital plan cycle, unless otherwise determined by the Board;
minus
(B) The lowest projected ratio of the covered savings and loan
holding company's common equity tier 1 capital to risk-weighted assets,
as calculated under 12 CFR part 217, subpart D, in any quarter of the
planning horizon under a supervisory stress test; plus
(C) The ratio of:
(1) The sum of the covered savings and loan holding company's
planned common stock dividends (expressed as a dollar amount) for each
of the fourth through seventh quarters of the planning horizon; to
(2) The risk-weighted assets of the covered savings and loan
holding company in the quarter in which the covered savings and loan
holding company had its lowest projected ratio of common equity tier 1
capital to risk-weighted assets, as calculated under 12 CFR part 217,
subpart D, in any quarter of the planning horizon under a supervisory
stress test; and
(ii) 2.5 percent.
(3) Recalculation of stress capital buffer requirement. If a
covered savings and loan holding company resubmits its capital plan
pursuant to paragraph (e)(4) of this section, the Board may recalculate
the covered savings and loan holding company's stress capital buffer
requirement. The Board will provide notice of whether the covered
savings and loan holding company's stress capital buffer requirement
will be recalculated within 75 calendar days after the date on which
the capital plan is resubmitted, unless the Board provides notice to
the company that it is extending the time period.
(4) Adjustment of stress capital buffer requirement. In each
calendar year in which the Board does not calculate a Category IV
savings and loan holding company's stress capital buffer requirement
pursuant to paragraph (f)(1) of this section, the Board will adjust the
Category IV savings and loan holding company's stress capital buffer
requirement to be equal to the result of the calculation set forth in
paragraph (f)(2) of this section, using the same values that were used
to calculate the stress capital buffer requirement most recently
provided to the covered savings and loan holding company, except that
the value used in paragraph (f)(2)(i)(C)(1) of the calculation will be
equal to the covered savings and loan holding company's planned common
stock dividends (expressed as a dollar amount) for each of the fourth
through seventh quarters of the planning horizon
[[Page 7947]]
as set forth in the capital plan submitted by the covered savings and
loan holding company in the calendar year in which the Board adjusts
the covered savings and loan holding company's stress capital buffer
requirement.
(g) Review of capital plans by the Federal Reserve. The Board, or
the appropriate Reserve Bank with concurrence of the Board, will
consider the following factors in reviewing a covered savings and loan
holding company's capital plan:
(1) The comprehensiveness of the capital plan, including the extent
to which the analysis underlying the capital plan captures and
addresses potential risks stemming from activities across the covered
savings and loan holding company and the covered savings and loan
holding company's capital policy;
(2) The reasonableness of the covered savings and loan holding
company's capital plan, the assumptions and analysis underlying the
capital plan, and the robustness of its capital adequacy process;
(3) Relevant supervisory information about the covered savings and
loan holding company and its subsidiaries;
(4) The covered savings and loan holding company's regulatory and
financial reports, as well as supporting data that would allow for an
analysis of the covered savings and loan holding company's loss,
revenue, and reserve projections;
(5) The results of any stress tests conducted by the covered
savings and loan holding company or the Federal Reserve; and
(6) Other information requested or required by the Board or the
appropriate Reserve Bank, as well as any other information relevant, or
related, to the savings and loan holding company's capital adequacy.
(h) Federal Reserve notice of stress capital buffer requirement;
final planned capital distributions--(1) Notice. The Board will provide
a covered savings and loan holding company with notice of its stress
capital buffer requirement and an explanation of the results of the
supervisory stress test. Unless otherwise determined by the Board,
notice will be provided by June 30 of the calendar year in which the
capital plan was submitted pursuant to paragraph (e)(1)(ii) of this
section or within 90 calendar days of receiving notice that the Board
will recalculate the covered savings and loan holding company's stress
capital buffer requirement pursuant to paragraph (f)(3) of this
section.
(2) Response to notice--(i) Request for reconsideration of stress
capital buffer requirement. A covered savings and loan holding company
may request reconsideration of a stress capital buffer requirement
provided under paragraph (h)(1) of this section. To request
reconsideration of a stress capital buffer requirement, a covered
savings and loan holding company must submit to the Board a request
pursuant to paragraph (i) of this section.
(ii) Adjustments to planned capital distributions. Within two
business days of receipt of notice of a stress capital buffer
requirement under paragraph (h)(1) or (i)(5) of this section, as
applicable, a covered savings and loan holding company must:
(A) Determine whether the planned capital distributions for the
fourth through seventh quarters of the planning horizon under the
Internal baseline scenario would be consistent with effective capital
distribution limitations assuming the stress capital buffer requirement
provided by the Board under paragraph (h)(1) or (i)(5) of this section,
as applicable, in place of any stress capital buffer requirement in
effect; and
(1) If the planned capital distributions for the fourth through
seventh quarters of the planning horizon under the Internal baseline
scenario would not be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect, the covered savings and loan holding company must adjust its
planned capital distributions such that its planned capital
distributions would be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect; or
(2) If the planned capital distributions for the fourth through
seventh quarters of the planning horizon under the Internal baseline
scenario would be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect, the covered savings and loan holding company may adjust its
planned capital distributions. A covered savings and loan holding
company may not adjust its planned capital distributions to be
inconsistent with the effective capital distribution limitations
assuming the stress capital buffer requirement provided by the Board
under paragraph (h)(1) or (i)(5) of this section, as applicable; and
(B) Notify the Board of any adjustments made to planned capital
distributions for the fourth through seventh quarters of the planning
horizon under the Internal baseline scenario.
(3) Final planned capital distributions. The Board will consider
the planned capital distributions, including any adjustments made
pursuant to paragraph (h)(2)(ii) of this section, to be the covered
savings and loan holding company's final planned capital distributions
on the later of:
(i) The expiration of the time for requesting reconsideration under
paragraph (i) of this section; and
(ii) The expiration of the time for adjusting planned capital
distributions pursuant to paragraph (h)(2)(ii) of this section.
(4) Effective date of final stress capital buffer requirement. (i)
The Board will provide a savings and loan holding company with its
final stress capital buffer requirement and confirmation of the covered
savings and loan holding company's final planned capital distributions
by August 31 of the calendar year that a capital plan was submitted
pursuant to paragraph (e)(1)(ii) of this section, unless otherwise
determined by the Board. A stress capital buffer requirement will not
be considered final so as to be agency action subject to judicial
review under 5 U.S.C. 704 during the pendency of a request for
reconsideration made pursuant to paragraph (i) of this section or
before the time for requesting reconsideration has expired.
(ii) Unless otherwise determined by the Board, a covered savings
and loan holding company's final planned capital distributions and
final stress capital buffer requirement shall:
(A) Be effective on October 1 of the calendar year in which a
capital plan was submitted pursuant to paragraph (e)(1)(ii) of this
section; and
(B) Remain in effect until superseded.
(5) Publication. With respect to any covered savings and loan
holding company subject to this section, the Board may disclose
publicly any or all of the following:
(i) The stress capital buffer requirement provided to a covered
savings and loan holding company under paragraph (h)(1) or (i)(5) of
this section;
(ii) Adjustments made pursuant to paragraph (h)(2)(ii);
(iii) A summary of the results of the supervisory stress test; and
(iv) Other information.
[[Page 7948]]
(i) Administrative remedies; request for reconsideration. The
following requirements and procedures apply to any request under this
paragraph (i):
(1) General. To request reconsideration of a stress capital buffer
requirement, provided under paragraph (h) of this section, a covered
savings and loan holding company must submit a written request for
reconsideration.
(2) Timing of request. A request for reconsideration of a stress
capital buffer requirement, provided under paragraph (h) of this
section, must be received within 15 calendar days of receipt of a
notice of a covered savings and loan holding company's stress capital
buffer requirement.
(3) Contents of request. (i) A request for reconsideration must
include a detailed explanation of why reconsideration should be granted
(that is, why a stress capital buffer requirement should be
reconsidered). With respect to any information that was not previously
provided to the Federal Reserve in the covered savings and loan holding
company's capital plan, the request should include an explanation of
why the information should be considered.
(ii) A request for reconsideration may include a request for an
informal hearing on the covered savings and loan holding company's
request for reconsideration.
(4) Hearing. (i) The Board may, in its sole discretion, order an
informal hearing if the Board finds that a hearing is appropriate or
necessary to resolve disputes regarding material issues of fact.
(ii) An informal hearing shall be held within 30 calendar days of a
request, if granted, provided that the Board may extend this period
upon notice to the requesting party.
(5) Response to request. Within 30 calendar days of receipt of the
covered savings and loan holding company's request for reconsideration
of its stress capital buffer requirement submitted under paragraph
(i)(2) of this section or within 30 days of the conclusion of an
informal hearing conducted under paragraph (i)(4) of this section, the
Board will notify the company of its decision to affirm or modify the
covered savings and loan holding company's stress capital buffer
requirement, provided that the Board may extend this period upon notice
to the covered savings and loan holding company.
(6) Distributions during the pendency of a request for
reconsideration. During the pendency of the Board's decision under
paragraph (i)(5) of this section, the covered savings and loan holding
company may make capital distributions that are consistent with
effective distribution limitations, unless prior approval is required
under paragraph (j)(1) of this section.
(j) Approval requirements for certain capital actions--(1)
Circumstances requiring approval--Resubmission of a capital plan.
Unless it receives prior approval pursuant to paragraph (j)(3) of this
section, a covered savings and loan holding company may not make a
capital distribution (excluding any capital distribution arising from
the issuance of a capital instrument eligible for inclusion in the
numerator of a regulatory capital ratio) if the capital distribution
would occur after the occurrence of an event requiring resubmission
under paragraph (e)(4)(i)(A) or (B) of this section.
(2) Contents of request. A request for a capital distribution under
this section must contain the following information:
(i) The covered savings and loan holding company's capital plan or
a discussion of changes to the covered savings and loan holding
company's capital plan since it was last submitted to the Federal
Reserve;
(ii) The purpose of the transaction;
(iii) A description of the capital distribution, including for
redemptions or repurchases of securities, the gross consideration to be
paid and the terms and sources of funding for the transaction, and for
dividends, the amount of the dividend(s); and
(iv) Any additional information requested by the Board or the
appropriate Reserve Bank (which may include, among other things, an
assessment of the covered savings and loan holding company's capital
adequacy under a severely adverse scenario, a revised capital plan, and
supporting data).
(3) Approval of certain capital distributions. (i) The Board, or
the appropriate Reserve Bank with concurrence of the Board, will act on
a request for prior approval of a capital distribution within 30
calendar days after the receipt of all the information required under
paragraph (j)(2) of this section.
(ii) In acting on a request for prior approval of a capital
distribution, the Board, or appropriate Reserve Bank with concurrence
of the Board, will apply the considerations and principles in paragraph
(g) of this section, as appropriate. In addition, the Board, or the
appropriate Reserve Bank with concurrence of the Board, may disapprove
the transaction if the covered savings and loan holding company does
not provide all of the information required to be submitted under
paragraph (j)(2) of this section.
(4) Disapproval and hearing. (i) The Board, or the appropriate
Reserve Bank with concurrence of the Board, will notify the covered
savings and loan holding company in writing of the reasons for a
decision to disapprove any proposed capital distribution. Within 15
calendar days after receipt of a disapproval by the Board, the covered
savings and loan holding company may submit a written request for a
hearing.
(ii) The Board may, in its sole discretion, order an informal
hearing if the Board finds that a hearing is appropriate or necessary
to resolve disputes regarding material issues of fact. An informal
hearing shall be held within 30 calendar days of a request, if granted,
provided that the Board may extend this period upon notice to the
requesting party.
(iii) Written notice of the final decision of the Board shall be
given to the covered savings and loan holding company within 60
calendar days of the conclusion of any informal hearing ordered by the
Board, provided that the Board may extend this period upon notice to
the requesting party.
(iv) While the Board's decision is pending and until such time as
the Board, or the appropriate Reserve Bank with concurrence of the
Board, approves the capital distribution at issue, the covered savings
and loan holding company may not make such capital distribution.
(k) Post notice requirement. A covered savings and loan holding
company must notify the Board and the appropriate Reserve Bank within
15 days of making a capital distribution if:
(1) The capital distribution was approved pursuant to paragraph
(j)(3) of this section; or
(2) The dollar amount of the capital distribution will exceed the
dollar amount of the covered savings and loan holding company's final
planned capital distributions, as measured on an aggregate basis
beginning in the fourth quarter of the planning horizon through the
quarter at issue.
PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)
0
9. The authority citation for part 252 continues to read as follows:
Authority: 12 U.S.C. 321-338a, 481-486, 1467a, 1818, 1828,
1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1844(c), 3101 et seq.,
3101 note, 3904, 3906-3909, 4808, 5361, 5362, 5365, 5366, 5367,
5368, 5371.
[[Page 7949]]
Subpart E--Supervisory Stress Test Requirements for Certain U.S.
Banking Organizations With $100 Billion or More in Total
Consolidated Assets and Nonbank Financial Companies Supervised by
the Board
0
10. Amend Sec. 252.44 by revising paragraphs (a)(3) and (d) to read as
follows:
Sec. 252.44 Analysis conducted by the Board.
(a) * * *
(3) In conducting the analysis, the Board will not incorporate
changes to a firm's business plan that are likely to have a material
impact on the covered company's capital adequacy and funding profile in
its projections of losses, net income, pro forma capital levels, and
capital ratios.
* * * * *
(d) Frequency of analysis conducted by the Board--(1) General.
Except as provided in paragraph (d)(2) of this section, the Board will
conduct its analysis of a covered company according to the frequency in
Table 1 to Sec. 252.44(d)(1).
Table 1 to Sec. 252.44(d)(1)
------------------------------------------------------------------------
Then the Board will conduct its
If the covered company is a: analysis:
------------------------------------------------------------------------
Global systemically important BHC...... Annually.
Category II bank holding company....... Annually.
Category II U.S. intermediate holding Annually.
company.
Category III bank holding company...... Annually.
Category III U.S. intermediate holding Annually.
company.
Category IV bank holding company....... Biennially, occurring in each
year ending in an even number.
Category IV U.S. intermediate holding Biennially, occurring in each
company. year ending in an even number.
Nonbank financial company supervised by Annually.
the Board.
------------------------------------------------------------------------
(2) Change in frequency. (i) The Board may conduct a stress test of
a covered company on a more or less frequent basis than would be
required under paragraph (d)(1) of this section based on the company's
financial condition, size, complexity, risk profile, scope of
operations, or activities, or risks to the U.S. economy.
(ii) A Category IV bank holding company or Category IV U.S.
intermediate holding company may elect to have the Board conduct a
stress test with respect to the company in a year ending in an odd
number by providing notice to the Board and the appropriate Federal
Reserve Bank by January 15 of that year. Notwithstanding the previous
sentence, such a company may elect to have the Board conduct a stress
test with respect to the company in the year 2021 by providing notice
to the Board and the appropriate Federal Reserve Bank by April 5, 2021.
(3) Notice and response--(i) Notification of change in frequency.
If the Board determines to change the frequency of the stress test
under paragraph (d)(2)(i) of this section, the Board will notify the
company in writing and provide a discussion of the basis for its
determination.
(ii) Request for reconsideration and Board response. Within 14
calendar days of receipt of a notification under paragraph (d)(3)(i) of
this section, a covered company may request in writing that the Board
reconsider the requirement to conduct a stress test on a more or less
frequent basis than would be required under paragraph (d)(1) of this
section. A covered company's request for reconsideration must include
an explanation as to why the request for reconsideration should be
granted. The Board will respond in writing within 14 calendar days of
receipt of the company's request.
Subpart F--Company-Run Stress Test Requirements for Certain U.S.
Bank Holding Companies and Nonbank Financial Companies Supervised
by the Board
0
11. Amend Sec. 252.54 revising paragraph (b)(2)(i)(B) to read as
follows:
Sec. 252.54 Stress test.
* * * * *
(b) * * *
(2) * * *
(i) * * *
(B) Is not a Category IV bank holding company.
* * * * *
0
12. Amend Sec. 252.56 by revising paragraph (a)(2) to read as follows:
Sec. 252.56 Methodologies and practices.
(a) * * *
(2) The potential impact on the regulatory capital levels and
ratios applicable to the covered bank, and any other capital ratios
specified by the Board, and in doing so must:
(i) Incorporate the effects of any capital action over the planning
horizon and maintenance of an allowance for loan losses or adjusted
allowance for credit losses, as appropriate, for credit exposures
throughout the planning horizon; and
(ii) Exclude the impacts of changes to a firm's business plan that
are likely to have a material impact on the covered company's capital
adequacy and funding profile.
* * * * *
0
13. Amend Sec. 252.58 by revising paragraph (a)(1) to read as follows:
Sec. 252.58 Disclosure of stress test results.
(a) * * *
(1) In general. A covered company must publicly disclose a summary
of the results of the stress test required under Sec. 252.54 within
the period that is 15 calendar days after the Board publicly discloses
the results of its supervisory stress test of the covered company
pursuant to Sec. 252.46(b), unless that time is extended by the Board
in writing.
* * * * *
Appendix B to Part 252--[Amended]
0
14. Amend appendix B to part 252 by removing and reserving section 2.6.
By order of the Board of Governors of the Federal Reserve
System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021-02182 Filed 2-2-21; 8:45 am]
BILLING CODE P