[Federal Register Volume 87, Number 107 (Friday, June 3, 2022)]
[Rules and Regulations]
[Pages 33615-33621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11928]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 87, No. 107 / Friday, June 3, 2022 / Rules 
and Regulations  

[[Page 33615]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1240

RIN 2590-AB16


Capital Planning and Stress Capital Buffer Determination

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA or the Agency) is 
adopting a final rule (final rule) that supplements the FHFA Enterprise 
Regulatory Capital Framework (ERCF) rule by requiring the Federal 
National Mortgage Association (Fannie Mae) and the Federal Home Loan 
Mortgage Corporation (Freddie Mac, and with Fannie Mae, each an 
Enterprise) to submit annual capital plans to FHFA and provide prior 
notice for certain capital actions. The final rule incorporates the 
stress capital buffer determination from the ERCF into the capital 
planning process. The requirements in the final rule are consistent 
with the regulatory framework for capital planning for large bank 
holding companies.

DATES: This rule is effective August 2, 2022.

FOR FURTHER INFORMATION CONTACT: Andrew Varrieur, Acting Senior 
Associate Director, Office of Capital Policy, (202) 649-3141, 
[email protected]; Ron Sugarman, Principal Policy Analyst, 
Office of Capital Policy, (202) 649-3208, [email protected]; or 
Mark Laponsky, Deputy General Counsel, Office of General Counsel, (202) 
649-3054, [email protected] (these are not toll-free numbers); 
Federal Housing Finance Agency, 400 Seventh St. SW, Washington, DC 
20219. For TTY/TRS users with hearing and speech disabilities, dial 711 
and ask to be connected to any of the contact numbers above.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Overview of the Final Rule
III. General Comments on the Proposed Rule
    A. Stress Capital Buffer
    B. Board's Duties
    C. Compliance Date
IV. Paperwork Reduction Act
V. Regulatory Flexibility Act
VI. Congressional Review Act

I. Introduction

    On December 27, 2021, FHFA published in the Federal Register a 
notice of proposed rulemaking (the proposal or proposed rule) seeking 
comments on FHFA's proposal to require each Enterprise to submit annual 
capital plans to FHFA and provide prior notice for certain capital 
actions. The proposal incorporated the determination of the stress 
capital buffer from the ERCF \1\ into the capital planning process. The 
requirements in the proposal were consistent with the regulatory 
framework for capital planning for large bank holding companies. FHFA 
is now adopting this final rule as proposed.
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    \1\ 86 FR 73187 (Dec. 27, 2021).
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    The final rule's requirement to develop capital plans will allow 
the Enterprises to identify the amount of capital they need to raise to 
meet the ERCF's requirements, and to consider the timing of when to 
raise capital, and what types of capital to raise. The final rule, like 
the ERCF, is intended to provide a stable regulatory framework for the 
Enterprises for an extended period, including after they achieve 
adequate capitalization under the ERCF.

II. Overview of the Final Rule

    After carefully considering the comments on the proposed rule, and 
as described in this preamble, FHFA is adopting the capital planning 
requirements and stress capital buffer determination as proposed. FHFA 
continues to believe that the Enterprises should have robust systems 
and processes in place that incorporate forward-looking projections of 
revenue and losses to monitor and maintain their internal capital 
adequacy. Furthermore, each Enterprise should operate with an amount of 
capital that is commensurate with each Enterprise's risk profile. FHFA 
also believes that the stress capital buffer determination should be 
part of the capital planning process.
    Specifically, the final rule will require an Enterprise to develop 
and maintain a capital plan, which the Enterprise must generally submit 
to FHFA by May 20 of each year, after it has been reviewed by the 
Enterprise's board of directors or a designated committee thereof. The 
plan must contain certain mandatory elements, including an assessment 
of the expected sources and uses of capital over a planning horizon 
that reflects the Enterprise's size and complexity, assuming both 
expected and stressful conditions. This includes the Enterprise's 
internal baseline scenario and internal stress scenario, as well as 
additional scenarios that may be provided by FHFA. The planning horizon 
is at least five years for the Enterprise's scenarios and at least nine 
consecutive quarters for the FHFA scenarios. The capital plans also 
must include any planned capital actions and consider the regulatory 
capital buffers.
    The final rule includes the factors that FHFA will consider in 
reviewing a plan, including its comprehensiveness and reasonableness 
given the assumptions and analysis underlying the plan and the 
robustness of the Enterprise's capital adequacy process. A plan must be 
resubmitted if there is a material change in the Enterprise's risk 
profile, financial condition, or corporate structure. FHFA also may 
require an Enterprise to resubmit its capital plan if the plan is 
incomplete or FHFA determines resubmission is necessary to monitor 
risks to capital adequacy. In general, an Enterprise must receive prior 
approval from FHFA to make a capital distribution, if the distribution 
would occur after an event that requires a resubmission. There is also 
a post-notice requirement for certain capital distributions.
    In addition to requiring a capital plan, the rule incorporates the 
stress capital buffer from the ERCF into the capital planning process 
and makes the necessary conforming amendments to the ERCF. After FHFA 
notifies the Enterprise of its stress capital buffer each year, the 
Enterprise must adjust its planned capital distributions to be 
consistent with the capital distribution limitations effective under 
the new stress capital buffer. The final rule

[[Page 33616]]

changes the stress capital buffer's calculation method slightly by 
considering an Enterprise's planned common stock dividends for the 
fourth through seventh quarters of the planning horizon rather than the 
ERCF direction to use each of the nine quarters of the planning 
horizon.

III. General Comments on the Proposed Rule

    FHFA received public comment letters on the proposed rule from a 
total of 12 different commenters. These commenters represented a 
variety of interested parties including one Enterprise (Freddie Mac), 
two trade associations, one corporation, and eight private 
individuals.\2\ Three of the private individuals submitted multiple 
comment letters each, resulting in FHFA receiving a total of 21 comment 
letters on the proposed rule.
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    \2\ See comments on Capital Planning and Stress Capital Buffer 
Determination Proposed Rule, available at https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Comment-List.aspx?RuleID=714. The 
comment period for the proposed rule closed on February 25, 2022.
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    Freddie Mac was very supportive of the capital planning and stress 
capital buffer processes that would be required by the proposal but 
offered specific suggestions for modifying the stress capital buffer 
determination, the board duty provisions, and the compliance date for 
submission of the capital plans in the rule.
    Of the 20 other letters, 19 were on conservatorship issues, while 
one expressed concern about FHFA's Duty to Serve program that was 
unrelated to capital planning or the stress capital buffer. Some of the 
conservatorship related letters dealt with the U.S. Department of the 
Treasury's (Treasury) investment in the Enterprises through the 
Preferred Stock Purchase Agreements and common stock warrants, prospect 
of future exits from the conservatorships, and how that may affect 
capital planning. Other letters dealt with aspects of the 
conservatorships that were unrelated to capital planning or the stress 
capital buffer. Most of the conservatorship letters were from private 
individuals and some of these individuals mentioned they were 
Enterprise shareholders. One conservatorship letter was from a trade 
association and one was from a corporation. The trade association 
commenter, while offering general support for the proposal's objective 
of making certain the Enterprises are operating with capital positions 
that reflect their risk profile, also expressed concern about 
Treasury's investment and desired clarity about exits from the 
conservatorships. The corporation commenter was similarly concerned 
about Treasury's investment as an impediment to raising capital.
    FHFA has determined not to make changes to the rule in response to 
the comments on the Duty to Serve program or conservatorship issues. As 
FHFA stated in the preamble to its proposal, the rule is a framework 
for ongoing capital planning consistent with the regulatory 
requirements for large banks. The final rule, like the ERCF, is 
intended to provide a stable regulatory framework for the Enterprises 
for an extended period, including after they achieve adequate 
capitalization under the ERCF.
    FHFA did not receive any comments regarding the mandatory elements 
of a capital plan, FHFA's review of a capital plan, an Enterprise's 
potential resubmission of a capital plan, FHFA's approval requirements 
for certain capital actions, or post notice requirements. FHFA is 
adopting those portions of the rule as proposed.
    Freddie Mac's comments on the stress capital buffer, board's 
duties, and compliance date are discussed below:

A. Stress Capital Buffer

    The proposal included a minor change to the stress capital buffer 
calculation compared to the finalized ERCF to align with a recent 
amendment to the regulatory banking framework. In addition, the 
proposal incorporated the stress capital buffer from the ERCF into the 
capital planning process.
    Under both the ERCF and proposal, the buffer would be determined by 
FHFA, with the calculation based on the results of a supervisory stress 
test, subject to a floor of 0.75 percent of the Enterprise's adjusted 
total assets as of the last day of the previous calendar quarter. 
However, until such time as FHFA develops its supervisory stress test, 
or in any year that FHFA does not determine the stress capital buffer, 
the buffer would be equal to 0.75 percent of an Enterprise's adjusted 
total assets.
    Consistent with recent amendments to the Federal Reserve Board's 
banking rule, the proposal's calculation method prefunds an 
Enterprise's planned common stock dividends for the fourth through 
seventh quarters of the planning horizon rather than using the existing 
ERCF instruction to use each of the nine quarters of the planning 
horizon.
    The proposal incorporated the stress capital buffer into the 
capital planning process by requiring an Enterprise, within two 
business days of receiving its stress capital buffer from FHFA, to 
adjust its planned capital distributions for the fourth through seventh 
quarters of the planning horizon to be consistent with effective 
capital distribution limitations assuming the stress capital buffer 
provided by FHFA, in place of any stress capital buffer currently in 
effect.
    Freddie Mac proposed to eliminate the 0.75 percent floor, 
supervisory stress test, and inclusion of planned dividends in the 
stress capital buffer calculation. Freddie Mac preferred to use capital 
depletion in Freddie Mac's Dodd-Frank Act Stress Test (DFAST) instead 
of a new supervisory stress test to be developed by FHFA. Freddie Mac 
proposed to apply the severely adverse scenario without a deferred tax 
asset write off or prefunding common stock dividends, holding the 
balance sheet constant over the stress horizon, and observing the 
quarter with the largest cumulative losses, all without applying the 
0.75 percent floor.
    Freddie Mac said the floor of 0.75 percent of adjusted total assets 
is inappropriate for the Enterprises. Freddie Mac stated that for 
banks, the static floor was intended to address concerns that larger 
institutions could use a dynamic stress capital buffer based on stress 
testing to lower their capital requirements relative to smaller peers. 
However, they noted the Enterprises do not have a subset of smaller 
competitors. They said the Federal Reserve Board noted in its rule that 
about half of the bank population would be above the floor making the 
buffer risk sensitive. Freddie Mac believes their buffer would be below 
the floor, blunting risk sensitivity and increasing risk-taking if they 
managed toward the floor.
    Freddie Mac also proposed to remove the add-on for planned common 
stock dividends for the fourth through seventh quarters, given that 
they are not forecasted to pay dividends in the near term due to their 
current capital position.
    Consistent with the banking approach, FHFA believes that the 
development of a supervisory stress test is important for the stress 
capital buffer determination, and preferrable to reliance on the 
Enterprise's DFAST model. The 0.75 percent buffer floor and 
consideration of common stock dividends already were a part of the ERCF 
as published by FHFA on December 17, 2020. FHFA's only change from the 
ERCF regarding common stock dividends was a reduction from using the 
full nine quarter stress horizon to using four quarters to be 
consistent with the banking framework. While the Enterprises are not 
currently able to pay dividends, it is important to keep the

[[Page 33617]]

dividend provision forward looking since the Enterprises are working 
toward building capital to meet the standards in the ERCF. Therefore, 
FHFA is keeping the stress capital buffer determination unchanged in 
the final rule.

B. Board Duties

    Freddie Mac asked that FHFA clarify the role of its board of 
directors in the final rule. The proposed rule stated that the 
Enterprise's board of directors, or a designated committee thereof, 
must at least annually and prior to submission of the capital plan: (1) 
Review the robustness of the Enterprise's process for assessing capital 
adequacy: (2) Ensure that any deficiencies in the Enterprise's process 
for assessing capital adequacy are appropriately remedied; and (3) 
approve the Enterprise's capital plan. The Enterprise wanted the term 
``ensure'' changed to ``oversee'' or ``review'' since the board plays 
an oversight role. FHFA believes that while an Enterprise's management 
is responsible for remedying any deficiencies in the process for 
assessing capital adequacy, the board, as part of its oversight role, 
is ultimately responsible for ensuring that it gets done. FHFA's 
language on the board's duties is also consistent with the banking 
framework. Therefore, FHFA is keeping the language on the board's 
duties unchanged in the final rule.

C. Compliance Date

    Freddie Mac asked FHFA to clarify that the annual May 20 capital 
plan submission dates will start in 2023, in the event that the final 
rule becomes effective before May 20, 2022, so that they will have 
sufficient time to prepare their first plan submission. FHFA agrees 
that the first plan submission under the final rule will be May 20, 
2023. Given the final rule's publication date and effective date, no 
changes are necessary to the rule.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.) requires 
that regulations involving the collection of information receive 
clearance from the Office of Management and Budget (OMB). The final 
rule contains no such collection of information requiring OMB approval 
under the PRA. Therefore, no information has been submitted to OMB for 
review.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. FHFA need not undertake such an 
analysis if the agency has certified that the regulation will not have 
a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the final 
rule under the Regulatory Flexibility Act and FHFA certifies that the 
final rule will not have a significant economic impact on a substantial 
number of small entities because the final rule is applicable only to 
the Enterprises, which are not small entities for purposes of the 
Regulatory Flexibility Act.

VI. Congressional Review Act

    In accordance with the Congressional Review Act (5 U.S.C. 801 et 
seq.), FHFA has determined that this final rule is a major rule and has 
verified this determination with the Office of Information and 
Regulatory Affairs of OMB.

List of Subjects for 12 CFR Part 1240

    Capital, Credit, Enterprise, Investments, Reporting and 
recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the preamble, under the authority of 12 
U.S.C. 4511, 4513, 4513b, 4514, 4515-17, 4526, 4611-12, 4631-36, FHFA 
amends part 1240 of title 12 of the Code of Federal Regulations as 
follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER C--ENTERPRISES

PART 1240--CAPITAL ADEQUACY OF ENTERPRISES

0
1. The authority citation for part 1240 continues to read as follows:

    Authority: 12 U.S.C. 4511, 4513, 4513b, 4514, 4515, 4517, 4526, 
4611-12, 4631-36.


0
2. In Sec.  1240.11, revise paragraph (a)(7) to read as follows:


Sec.  1240.11  Capital conservation buffer and leverage buffer.

    (a) * * *
    (7) Stress capital buffer. (i) The stress capital buffer for an 
Enterprise is the stress capital buffer determined under Sec.  1240.500 
except as provided in paragraph (a)(7)(ii) of this section.
    (ii) If an Enterprise has not yet received a stress capital buffer 
requirement, its stress capital buffer for purposes of this part is 
0.75 percent of the Enterprise's adjusted total assets, as of the last 
day of the previous calendar quarter.
* * * * *

0
3. Add subpart H, consisting of Sec. Sec.  1240.500 through 1240.502, 
to read as follows:

Subpart H--Capital Planning and Stress Capital Buffer Determination


Sec.  1240.500  Capital planning and stress capital buffer 
determination.

    (a) Purpose. This section establishes capital planning and prior 
notice and approval requirements for capital distributions by the 
Enterprises. This section also establishes FHFA's process for 
determining the stress capital buffer applicable to the Enterprises.
    (b) Scope and reservation of authority--(1) Applicability. This 
section applies to the Enterprises.
    (2) Reservation of authority. Nothing in this section shall limit 
the authority of FHFA 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.
    (c) Definitions. For purposes of this section, the following 
definitions apply:
    Adjusted total assets has the same meaning as under subpart A of 
this part.
    Advanced approaches means the risk-weighted assets calculation 
methodologies as set forth in subpart E of this part.
    Capital action means any issuance of a debt or equity capital 
instrument, any capital distribution, and any similar action that FHFA 
determines could impact an Enterprise's consolidated capital.
    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 FHFA determines to be in substance a distribution of 
capital.
    Capital plan means a written presentation of an Enterprise's 
capital planning strategies and capital adequacy process that includes 
the mandatory elements set forth in paragraph (d)(2) of this section.
    Capital plan cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
    Capital policy means an Enterprise's written principles and 
guidelines used for capital planning, capital issuance,

[[Page 33618]]

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.
    Common equity tier 1 capital has the same meaning as under subpart 
C of this part.
    Effective capital distribution limitations means any limitations on 
capital distributions established by FHFA by order or regulation, 
provided that, for any limitations based on risk-weighted assets, such 
limitations must be calculated using the standardized approach, as set 
forth in subpart D of this part.
    Final planned capital distributions means the planned capital 
distributions included in a capital plan that include the adjustments 
made pursuant to paragraph (g) of this section, if any.
    Internal baseline scenario means a scenario that reflects the 
Enterprise's expectation of the economic and financial outlook, 
including expectations related to the Enterprise's capital adequacy and 
financial condition.
    Internal stress scenario means a scenario designed by an Enterprise 
that stresses the specific vulnerabilities of the Enterprise's risk 
profile and operations, including those related to the Enterprise's 
capital adequacy and financial condition.
    Planning horizon means the period of at least nine consecutive 
quarters for the FHFA scenarios and at least five years for the 
Internal scenarios, beginning with the quarter preceding the quarter in 
which the Enterprise submits its capital plan, over which the relevant 
projections extend, unless otherwise directed by FHFA.
    Regulatory capital ratio means a capital ratio for which FHFA has 
established minimum requirements for the Enterprise by regulation or 
order, including, as applicable, the Enterprise's regulatory capital 
ratios calculated under subpart B of this part; except that the 
Enterprise shall not use the advanced approaches to calculate its 
regulatory capital ratios.
    Severely adverse scenario has the same meaning as under 12 CFR part 
1238.
    Stability capital buffer has the same meaning as under subpart G of 
this part.
    Stress capital buffer means the amount calculated under paragraph 
(e) of this section.
    Supervisory stress test means a stress test conducted by FHFA using 
a severely adverse scenario and the assumptions contained in 12 CFR 
part 1238.
    (d) Capital planning requirements and procedures--(1) Annual 
capital planning. (i) An Enterprise must develop and maintain a capital 
plan.
    (ii) An Enterprise must submit its complete capital plan to FHFA by 
May 20 of each calendar year, or such later date as directed by FHFA.
    (iii) The Enterprise's board of directors or a designated committee 
thereof must at least annually and prior to submission of the capital 
plan under paragraph (d)(1)(ii) of this section:
    (A) Review the robustness of the Enterprise's process for assessing 
capital adequacy;
    (B) Ensure that any deficiencies in the Enterprise's process for 
assessing capital adequacy are appropriately remedied; and
    (C) Approve the Enterprise'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 Enterprise's size, complexity, 
risk profile, and scope of operations, assuming both expected and 
stressful conditions, including:
    (A) Estimates of projected revenues, expenses, losses, reserves, 
and pro forma capital levels, including regulatory capital ratios, and 
any additional capital measures deemed relevant by the Enterprise, over 
the planning horizon under a range of scenarios, including the Internal 
baseline scenario and at least one Internal stress scenario, as well as 
any additional scenarios that FHFA may provide the Enterprise after 
giving notice to the Enterprise;
    (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 any effective 
capital distribution limitations, except as may be adjusted pursuant to 
paragraph (g) of this section. In determining whether an Enterprise's 
planned capital distributions are consistent with effective capital 
distribution limitations, an Enterprise must assume that:
    (1) Any countercyclical capital buffer amount currently applicable 
to the Enterprise remains at the same level, except that the Enterprise 
must reflect any increases or decreases in the countercyclical capital 
buffer amount that have been announced by FHFA at the times indicated 
by FHFA's announcement for when such increases or decreases will take 
effect; and
    (2) Any stability capital buffer currently applicable to the 
Enterprise when the capital plan is submitted remains at the same 
level, except that the Enterprise must reflect any increase in its 
stability capital buffer pursuant to Sec.  1240.400(c)(1), beginning in 
the fifth quarter of the planning horizon.
    (ii) A detailed description of the Enterprise's process for 
assessing capital adequacy, including:
    (A) A discussion of how the Enterprise will, under expected and 
stressful conditions, maintain capital commensurate with its risks, and 
maintain capital above the regulatory capital ratios;
    (B) A discussion of how the Enterprise 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 Enterprise's capital policy; and
    (iv) A discussion of any expected changes to the Enterprise's 
business plan that are likely to have a material impact on the 
Enterprise's capital adequacy or liquidity.
    (3) Data collection. Upon the request of FHFA, the Enterprise shall 
provide FHFA with information regarding:
    (i) The Enterprise's financial condition, including its capital;
    (ii) The Enterprise's structure;
    (iii) Amount and risk characteristics of the Enterprise's on- and 
off-balance sheet exposures, including exposures within the 
Enterprise's trading account, other 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 Enterprise's relevant policies and procedures, including 
risk management policies and procedures;
    (v) The Enterprise's liquidity profile and management;
    (vi) The loss, revenue, and expense estimation models used by the 
Enterprise 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 FHFA to facilitate review of the Enterprise's capital plan 
under this section.

[[Page 33619]]

    (4) Resubmission of a capital plan. (i) An Enterprise must update 
and resubmit its capital plan to FHFA within 30 calendar days of the 
occurrence of one of the following events:
    (A) The Enterprise determines there has been or will be a material 
change in the Enterprise's risk profile, financial condition, or 
corporate structure since the Enterprise last submitted the capital 
plan to FHFA; or
    (B) FHFA instructs the Enterprise in writing to revise and resubmit 
its capital plan, as necessary to monitor risks to capital adequacy, 
for reasons including, but not limited to:
    (1) The capital plan is incomplete or the capital plan, or the 
Enterprise's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been, or will likely be, a material change in the 
Enterprise'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 
Enterprise's business model and portfolios, or changes in financial 
markets or the macro-economic outlook that could have a material impact 
on an Enterprise's risk profile and financial condition require the use 
of updated scenarios; or
    (ii) FHFA may extend the 30-day period in paragraph (d)(4)(i) of 
this section for up to an additional 60 calendar days, or such longer 
period as FHFA determines appropriate.
    (iii) Any updated capital plan must satisfy all the requirements of 
this section; however, an Enterprise 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 FHFA 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 
FHFA's rule in 12 CFR part 1214--Availability of Non-Public 
Information.
    (e) Calculation of the stress capital buffer--(1) General. FHFA 
will determine the stress capital buffer that applies under Sec.  
1240.11 pursuant to this paragraph (e). FHFA will calculate the 
Enterprise's stress capital buffer requirement annually.
    (2) Stress capital buffer calculation. An Enterprise's stress 
capital buffer is equal to the Enterprise's adjusted total assets, as 
of the last day of the previous calendar quarter, multiplied by the 
greater of:
    (i) The following calculation:
    (A) The ratio of an Enterprise's common equity tier 1 capital to 
adjusted total assets, as of the final quarter of the previous capital 
plan cycle, unless otherwise determined by FHFA; minus
    (B) The lowest projected ratio of the Enterprise's common equity 
tier 1 capital to adjusted total assets, in any quarter of the planning 
horizon under a supervisory stress test; plus
    (C) The ratio of:
    (1) The sum of the Enterprise'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 adjusted total assets of the Enterprise in the quarter in 
which the Enterprise had its lowest projected ratio of common equity 
tier 1 capital to adjusted total assets, in any quarter of the planning 
horizon under a supervisory stress test; and (ii) 0.75 percent.
    (3) Recalculation of stress capital buffer. If an Enterprise 
resubmits its capital plan pursuant to paragraph (d)(4) of this 
section, FHFA may recalculate the Enterprise's stress capital buffer. 
FHFA will provide notice of whether the Enterprise's stress capital 
buffer will be recalculated within 75 calendar days after the date on 
which the capital plan is resubmitted, unless FHFA provides notice to 
the Enterprise that it is extending the time period.
    (f) Review of capital plans by FHFA. FHFA will consider the 
following factors in reviewing an Enterprise'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 
Enterprise and the Enterprise's capital policy;
    (2) The reasonableness of the Enterprise'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 Enterprise and its 
subsidiaries;
    (4) The Enterprise's regulatory and financial reports, as well as 
supporting data that would allow for an analysis of the Enterprise's 
loss, revenue, and reserve projections;
    (5) The results of any stress tests conducted by the Enterprise or 
FHFA; and
    (6) Other information requested or required by FHFA, as well as any 
other information relevant, or related, to the Enterprise's capital 
adequacy.
    (g) FHFA notice of stress capital buffer; final planned capital 
distributions--(1) Notice. FHFA will provide an Enterprise with notice 
of its stress capital buffer and an explanation of the results of the 
supervisory stress test. Unless otherwise determined by FHFA, notice 
will be provided by August 15 of the calendar year in which the capital 
plan was submitted pursuant to paragraph (d)(1)(ii) of this section or 
within 90 calendar days of receiving notice that FHFA will recalculate 
the Enterprise's stress capital buffer pursuant to paragraph (e)(3) of 
this section.
    (2) Response to notice--(i) Request for reconsideration of stress 
capital buffer. An Enterprise may request reconsideration of a stress 
capital buffer provided under paragraph (g)(1) of this section. To 
request reconsideration of a stress capital buffer, an Enterprise must 
submit to FHFA a request pursuant to paragraph (h) of this section.
    (ii) Adjustments to planned capital distributions. Within two 
business days of receipt of notice of a stress capital buffer under 
paragraph (g)(1) or (h)(5) of this section, as applicable, an 
Enterprise 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 provided by 
FHFA under paragraph (g)(1) or (h)(5) of this section, as applicable, 
in place of any stress capital buffer 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 provided by FHFA under 
paragraph (g)(1) or (h)(5) of this section, as applicable, in place of 
any stress capital buffer in effect, the Enterprise 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 provided by FHFA under 
paragraph (g)(1) or (h)(5) of this section, as applicable, in place of 
any stress capital buffer 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

[[Page 33620]]

stress capital buffer provided by FHFA under paragraph (g)(1) or (h)(5) 
of this section, as applicable, in place of any stress capital buffer 
in effect, the Enterprise may adjust its planned capital distributions. 
An Enterprise may not adjust its planned capital distributions to be 
inconsistent with the effective capital distribution limitations 
assuming the stress capital buffer provided by FHFA under paragraph 
(g)(1) or (h)(5) of this section, as applicable; and
    (B) Notify FHFA 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. FHFA will consider the 
planned capital distributions, including any adjustments made pursuant 
to paragraph (g)(2)(ii) of this section, to be the Enterprise'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 (g)(2)(ii) of this section.
    (4) Effective date of final stress capital buffer. (i) FHFA will 
provide an Enterprise with its final stress capital buffer and 
confirmation of the Enterprise's final planned capital distributions by 
August 31 of the calendar year that a capital plan was submitted 
pursuant to paragraph (d)(1)(ii) of this section, unless otherwise 
determined by FHFA. A stress capital buffer 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 (h) of this section or before the time for 
requesting reconsideration has expired.
    (ii) Unless otherwise determined by FHFA, an Enterprise's final 
planned capital distributions and final stress capital buffer shall:
    (A) Be effective on October 1 of the calendar year in which a 
capital plan was submitted pursuant to paragraph (d)(1)(ii) of this 
section; and
    (B) Remain in effect until superseded.
    (5) Publication. With respect to an Enterprise subject to this 
section, FHFA may disclose publicly any or all of the following:
    (i) The stress capital buffer provided to an Enterprise under 
paragraph (g)(1) or (h)(5) of this section;
    (ii) Adjustments made pursuant to paragraph (g)(2)(ii) of this 
section;
    (iii) A summary of the results of the supervisory stress test; and
    (iv) Other information.
    (h) Administrative remedies; request for reconsideration. The 
following requirements and procedures apply to any request under this 
paragraph (h):
    (1) General. To request reconsideration of a stress capital buffer, 
provided under paragraph (g) of this section, an Enterprise must submit 
a written request for reconsideration.
    (2) Timing of request. A request for reconsideration of a stress 
capital buffer, provided under paragraph (g) of this section, must be 
received within 15 calendar days of receipt of a notice of an 
Enterprise's stress capital buffer.
    (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 should be reconsidered). With 
respect to any information that was not previously provided to FHFA in 
the Enterprise'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 Enterprise's request for reconsideration.
    (4) Hearing. (i) FHFA may, in its sole discretion, order an 
informal hearing if FHFA 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 FHFA may extend this period upon 
notice to the requesting party.
    (5) Response to request. Within 30 calendar days of receipt of the 
Enterprise's request for reconsideration of its stress capital buffer 
submitted under paragraph (h)(2) of this section or within 30 days of 
the conclusion of an informal hearing conducted under paragraph (h)(4) 
of this section, FHFA will notify the Enterprise of its decision to 
affirm or modify the Enterprise's stress capital buffer, provided that 
FHFA may extend this period upon notice to the Enterprise.
    (6) Distributions during the pendency of a request for 
reconsideration.
    During the pendency of FHFA's decision under paragraph (h)(5) of 
this section, the Enterprise may make capital distributions that are 
consistent with effective distribution limitations, unless prior 
approval is required under paragraph (i)(1) of this section.
    (i) Approval requirements for certain capital actions--(1) 
Circumstances requiring approval--resubmission of a capital plan. 
Unless it receives prior approval pursuant to paragraph (i)(3) of this 
section, an Enterprise 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 
(d)(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 Enterprise's capital plan or a discussion of changes to the 
Enterprise's capital plan since it was last submitted to FHFA;
    (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 FHFA (which may 
include, among other things, an assessment of the Enterprise's capital 
adequacy under a severely adverse scenario, a revised capital plan, and 
supporting data).
    (3) Approval of certain capital distributions. (i) FHFA 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 (i)(2) of this section.
    (ii) In acting on a request for prior approval of a capital 
distribution, FHFA will apply the considerations and principles in 
paragraph (f) of this section, as appropriate. In addition, FHFA may 
disapprove the transaction if the Enterprise does not provide all of 
the information required to be submitted under paragraph (i)(2) of this 
section.
    (4) Disapproval and hearing. (i) FHFA will notify the Enterprise in 
writing of the reasons for a decision to disapprove any proposed 
capital distribution. Within 15 calendar days after receipt of a 
disapproval by FHFA, the Enterprise may submit a written request for a 
hearing.
    (ii) FHFA may, in its sole discretion, order an informal hearing if 
FHFA 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 
FHFA may extend this period upon notice to the requesting party.
    (iii) Written notice of the final decision of FHFA shall be given 
to the Enterprise within 60 calendar days of

[[Page 33621]]

the conclusion of any informal hearing ordered by FHFA, provided that 
FHFA may extend this period upon notice to the requesting party.
    (iv) While FHFA's decision is pending and until such time as FHFA 
approves the capital distribution at issue, the Enterprise may not make 
such capital distribution.
    (j) Post notice requirement. An Enterprise must notify FHFA within 
15 days of making a capital distribution if:
    (1) The capital distribution was approved pursuant to paragraph 
(i)(3) of this section; or
    (2) The dollar amount of the capital distribution will exceed the 
dollar amount of the Enterprise'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.


Sec.  Sec.  1240.501-1240.502   [Reserved]

Sandra L. Thompson,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2022-11928 Filed 6-2-22; 8:45 am]
BILLING CODE 8070-01-P