[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81176-81180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25744]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency


Agency Information Collection Activities: Revision of an Approved 
Information Collection; Comment Request; Capital Adequacy Standards

AGENCY:  Office of the Comptroller of the Currency (OCC), Treasury.

ACTION:  Notice and request for comment.

-----------------------------------------------------------------------

SUMMARY:  The OCC, as part of its continuing effort to reduce paperwork 
and respondent burden, invites comment on a continuing information 
collection, as required by the Paperwork Reduction Act of 1995 (PRA). 
In accordance with the requirements of the PRA, the OCC may not conduct 
or sponsor, and the 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 OCC is soliciting 
comment concerning a revision to its information collection titled, 
``Capital Adequacy Standards.''

DATES:  Comments must be received by January 22, 2024.

ADDRESSES:  Commenters are encouraged to submit comments by email, if 
possible. You may submit comments by any of the following methods:
     Email: [email protected].
     Mail: Chief Counsel's Office, Attention: Comment 
Processing, Office of the Comptroller of the Currency, Attention: 1557-
0318, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219.
     Fax: (571) 293-4835.
    Instructions:You must include ``OCC'' as the agency name and 
``1557-0318'' in your comment. In general, the OCC will publish 
comments on www.reginfo.gov without change, including any business or 
personal information provided, such as name and address information, 
email addresses, or phone numbers. Comments received, including 
attachments and other supporting materials, are part of the public 
record and subject to public disclosure. Do not include any information 
in your comment or supporting materials that you consider confidential 
or inappropriate for public disclosure.
    Following the close of this notice's 60-day comment period, the OCC 
will publish a second notice with a 30-day comment period. You may 
review comments and other related materials that pertain to this 
information collection beginning on the date of publication of the 
second notice for this collection by the method set forth in the next 
bullet.
     Viewing Comments Electronically: Go to www.reginfo.gov. 
Hover over the ``Information Collection Review'' drop down menu. Click 
on ``Information Collection Review.'' From the ``Currently under 
Review'' drop-down menu, select ``Department of Treasury'' and then 
click ``submit.'' This information collection can be located by 
searching OMB control number ``1557-0318'' or ``Capital Adequacy 
Standards.'' Upon finding the appropriate information collection, click 
on the related ``ICR Reference Number.'' On the next screen, select 
``View Supporting Statement and Other Documents'' and then click on the 
link to any comment listed at the bottom of the screen.
     For assistance in navigating www.reginfo.gov, please 
contact the Regulatory Information Service Center at (202) 482-7340.

[[Page 81177]]


FOR FURTHER INFORMATION CONTACT: Shaquita Merritt, Clearance Officer, 
(202) 649-5490, Chief Counsel's Office, Office of the Comptroller of 
the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf, 
hard of hearing, or have a speech disability, please dial 7-1-1 to 
access telecommunications relay services.

SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501 et seq.), 
Federal agencies must obtain approval from the OMB for each collection 
of information that they conduct or sponsor. ``Collection of 
information'' is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to 
include agency requests or requirements that members of the public 
submit reports, keep records, or provide information to a third party. 
Section 3506(c)(2)(A) of title 44 generally requires Federal agencies 
to provide a 60-day notice in the Federal Register concerning each 
proposed collection of information, including each proposed extension 
of an existing collection of information, before submitting the 
collection to OMB for approval. To comply with this requirement, the 
OCC is publishing notice of the revision to the collection of 
information set forth in this document. The OCC asks OMB to approve 
this revised collection.
    Title: Capital Adequacy Standards. OMB Control No.: 1557-0318.
    Type of Review: Regular.
    Abstract: The OCC is seeking renewal with revision of an 
information collection approval for the recordkeeping, reporting, and 
disclosure requirements associated with capital adequacy standards 
applicable to national banks and Federal savings associations. The OCC 
is proposing revisions in connection with this extension to reflect 
more granular detail for certain existing reporting and recordkeeping 
provisions, as well as improving prior estimates regarding the number 
of respondents and burden associated with these existing provisions. In 
addition, reporting burden associated with 12 CFR 3.304 is being 
removed as that portion of the rule is no longer in effect.

Section-by-Section Analysis

    Twelve CFR part 3 sets forth the OCC's minimum capital requirements 
and overall capital adequacy standards for national banks and Federal 
savings associations.

Minimum Regulatory Capital Ratios

Reporting Requirements

    Section 3.3(c) allows for the recognition of netting across 
multiple types of transactions or agreements if the national bank or 
Federal savings association obtains a written legal opinion verifying 
the validity and enforceability of the agreement under certain 
circumstances.
    Section 3.22(b)(2)(iv) permits, with prior notice to the OCC, a 
national bank or Federal savings association resulting from a merger, 
acquisition, or purchase transaction and that is not an advanced 
approaches national bank or Federal savings association to change its 
AOCI opt-out election.
    Section 3.22(c)(4) provides that, with the prior written approval 
of the OCC, a national bank or Federal savings association that 
underwrites a failed underwriting, is not required to deduct an 
investment in the capital of an unconsolidated financial institution to 
the extent the investment is related to the failed underwriting.
    Section 3.22(c)(5)(i) provides that, with the prior written 
approval of the OCC, an advanced approaches national bank or Federal 
savings association that underwrites a failed underwriting, for the 
period of time stipulated by the OCC is not required to deduct from 
capital a non-significant investment in the capital of an 
unconsolidated financial institution or an investment in a covered debt 
instrument to the extent the investment is related to the failed 
underwriting.
    Section 3.22(c)(6) provides that, with prior written approval of 
the OCC and for the period of time stipulated by the OCC, an advanced 
approaches national bank or Federal savings association that 
underwrites a failed underwriting is not required to deduct the 
significant investment in the capital of an unconsolidated financial 
institution or an investment in a covered debt instrument if such 
investment is related to such failed underwriting.
    Section 3.22(d)(2)(i)(C) provides that, with the prior written 
approval of the OCC and for the period of time stipulated by the OCC, 
an advanced approaches national bank or Federal savings association 
that underwrites a failed underwriting is not required to deduct a 
significant investment in the capital of an unconsolidated financial 
institution in the form of common stock if such investment is related 
to such failed underwriting.
    Section 3.22(d)(2)(iii) permits an advanced approaches national 
bank or Federal savings association to change its exclusion preference 
to exclude deferred tax assets (DTAs) and deferred tax liabilities 
(DTLs) relating to adjustments relating to common equity tier 1 capital 
after obtaining the prior approval of the OCC.
    Section 3.22(h)(2)(iii)(A) permits the use of a conservative 
estimate of the amount of an institution's investment in its own 
capital or the capital of unconsolidated financial institutions held 
through an index security with prior approval by the OCC.

Recordkeeping Requirements

    Section 3.3(d) allows for the recognition of an agreement as a 
qualifying master netting agreement if the national bank or Federal 
savings association conducts a sufficient legal review and maintains 
sufficient written documentation of that legal review to ensure that 
the agreement continues to satisfy the requirements of the definition 
of qualifying master netting agreement that a relevant court would find 
to be legal, valid, binding, and enforceable. Section 3.3(d) further 
requires s national banks and Federal savings associations to establish 
and maintain written procedures to monitor possible changes in relevant 
law and to ensure that the agreement continues to satisfy the 
requirements of the definition of qualifying master netting agreement.

Standardized Approach

Reporting Requirements

    Section 3.37(c)(4)(i)(E) requires that a bank or Federal savings 
association obtain the prior approval of the OCC for and notify the OCC 
if it makes any material changes to the policies and procedures 
describing how it determines the period of significant financial stress 
used to calculate its own internal estimates for haircuts and be able 
to provide empirical support for the period used.

Recordkeeping Requirements

    Section 3.35(b)(3)(i)(A) requires for a cleared transaction with a 
qualified central counterparty (QCCP), that a client bank apply a risk 
weight of two percent, provided that the collateral posted by the 
national bank or Federal savings association to the QCCP is subject to 
certain arrangements and the client bank has conducted a sufficient 
legal review (and maintains sufficient written documentation of the 
legal review) to conclude with a well-founded basis that the 
arrangements, in the event of a legal challenge, would be found to be 
legal, valid, binding, and enforceable under the law of the relevant 
jurisdictions.
    Section 3.37(c)(4)(i)(E) requires that a national bank or Federal 
savings association have policies and procedures in place describing 
how it determines the period of significant

[[Page 81178]]

financial stress used to calculate its own internal estimates for 
haircuts and be able to provide empirical support for the period used.
    Section 3.41(b)(3), which sets forth operational requirements for 
securitization exposures, allows a national bank or Federal savings 
association to recognize for risk-based capital purposes, in the case 
of synthetic securitizations, a credit risk mitigant to hedge 
underlying exposures if certain conditions are met. Section 3.41(b)(3) 
includes a requirement that the national bank or Federal savings 
association obtain a well-reasoned opinion from legal counsel that 
confirms the enforceability of the credit risk mitigant in all relevant 
jurisdictions.
    Section 3.41(c)(2)(i) requires that a national bank or Federal 
savings association demonstrate its comprehensive understanding of a 
securitization exposure by conducting an analysis of the risk 
characteristics of each securitization exposure prior to its 
acquisition, taking into account a number of specified considerations 
and documenting the analysis within three business days after the 
acquisition.
    Section 3.41(c)(2)(ii) requires a national bank or Federal savings 
association, on an on-going basis (no less frequently than quarterly), 
to evaluate, review, and update as appropriate the analysis required 
under Sec.  3.41(c)(1) for each securitization exposure.

Disclosure Requirements

    In a case where a national bank or Federal savings association 
provides non-contractual support (i.e., implicit support) to a 
securitization, Sec.  3.42(e)(2) requires the national bank or Federal 
savings association to publicly disclose that it has provided implicit 
support to the securitization and the risk-based capital impact to the 
bank or savings association of providing such implicit support.
    Section 3.62 sets forth disclosure requirements related to the 
capital requirements of a national bank or Federal savings association. 
Section 3.61 provides that these requirements apply to an institution 
with total consolidated assets of $50 billion or more that is not a 
consolidated subsidiary of a bank holding company, savings and loan 
holding company, or a depository institution subject to the disclosure 
requirements of Sec.  3.62. For national banks or Federal savings 
associations subject to the disclosure requirements, Sec.  3.62(a) 
requires quarterly disclosure of information in the applicable tables 
in Sec.  3.63 and, if a significant change occurs, such that the most 
recent reported amounts are no longer reflective of the institution's 
capital adequacy and risk profile, Sec.  3.62(a) requires the national 
bank or Federal savings association to disclose as soon as practicable 
thereafter a brief discussion of the change and its likely impact. 
Section 3.62(a) also permits annual disclosure of qualitative 
information that typically does not change each quarter, provided that 
any significant changes are disclosed in the interim.
    Section 3.62(b) requires that a national bank or Federal savings 
association have a formal disclosure policy approved by the board of 
directors that addresses its approach for determining the disclosures 
it makes. The policy must address the associated internal controls and 
disclosure controls and procedures. Section 3.62(c) permits a national 
bank or Federal savings association to disclose more general 
information about certain subjects if the national bank or Federal 
savings association concludes that the specific commercial or financial 
information required to be disclosed under Sec.  3.62 is exempt from 
disclosure under the Freedom of Information Act (5 U.S.C. 552) and the 
national bank or Federal savings association provides the reason the 
specific items of information have not been disclosed.
    Currently, Sec.  3.63 sets forth the specific disclosure 
requirements for a non-advanced approaches national bank or Federal 
savings association with total consolidated assets of $50 billion or 
more that is not a consolidated subsidiary of a bank holding company, 
savings and loan holding company, or a depository institution subject 
to the disclosure requirements of Sec.  3.62. Section 3.63(a) requires 
those institutions to make the disclosures in Tables 1 through 10 in 
Sec.  3.63 and in Sec.  3.63(b) for each of the last three years 
beginning on the effective date of the rule. Section 3.63(b) requires 
quarterly disclosure of an institution's common equity tier 1 capital, 
additional tier 1 capital, tier 2 capital, tier 1 and total capital 
ratios, including the regulatory capital elements and all the 
regulatory adjustments and deductions needed to calculate the numerator 
of such ratios; total risk-weighted assets, including the different 
regulatory adjustments and deductions needed to calculate total risk-
weighted assets; regulatory capital ratios during any transition 
periods, including a description of all the regulatory capital elements 
and all regulatory adjustments and deductions needed to calculate the 
numerator and denominator of each capital ratio during any transition 
period; and a reconciliation of regulatory capital elements as they 
relate to its balance sheet in any audited consolidated financial 
statements. Tables 1 through 10 in Sec.  3.63 set forth qualitative 
and/or quantitative requirements for scope of application, capital 
structure, capital adequacy, capital conservation buffer, credit risk, 
counterparty credit risk-related exposures, credit risk mitigation, 
securitizations, equities not subject to Subpart F (Market Risk 
requirements) of the rule, and interest rate risk for non-trading 
activities.

Advanced Approaches

Reporting Requirements

    Section 3.121(b)(2) requires a national bank or Federal savings 
association to submit an implementation plan, together with a copy of 
the minutes of the board of director's approval, to the OCC at least 60 
days before the national bank or Federal savings association proposes 
to begin its parallel run, unless the OCC waives prior notice.
    Section 3.121(c) requires that during a parallel run, a national 
bank or Federal savings association report to the OCC on a calendar 
quarterly basis its risk-based capital ratios.
    Section 3.122(d)-(g) requires a national bank or Federal savings 
association to obtain the prior written approval of the OCC under Sec.  
3.132 to use the internal models methodology for counterparty credit 
risk and the advanced CVA approach for the CVA capital requirement, 
Sec.  3.135 to use the double default treatment, Sec.  3.153 to use the 
internal models approach for equity exposures, and Sec.  3.122(g)(3) to 
generate an estimate of its operational risk exposure using an 
alternative approach.
    Section 3.123 references ongoing qualification requirements that 
would require an institution to notify the OCC of any material change 
to an advance system and establish and submit to the OCC a plan for 
returning to compliance with the qualification requirements.
    Section 3.124 requires a national bank or Federal savings 
association to submit to the OCC, within 90 days of consummating a 
merger or acquisition, an implementation plan for using its advanced 
systems for the merged or acquired company.
    Section 3.132(b)(2)(iii)(A) addresses counterparty credit risk of 
repo-style transactions, eligible margin loans, and over-the-counter 
(OTC) derivative contracts, and internal estimates for haircuts. With 
the prior written approval of the OCC, a national bank or Federal 
savings association may calculate haircuts using its own internal 
estimates of the volatilities of market

[[Page 81179]]

prices and foreign exchange rates. The section requires national banks 
and Federal savings associations to satisfy certain minimum 
quantitative standards in order to receive OCC approval to use its own 
internal estimates.
    Section 3.132(b)(3) covers counterparty credit risk of repo-style 
transactions, eligible margin loans, OTC derivative contracts, and 
simple Value-at-Risk (VaR) methodology. With the prior written approval 
of the OCC, a national bank or Federal savings association may estimate 
exposure at default (EAD) for a netting set using a VaR model that 
meets certain requirements.
    Section 3.132(d)(1) permits the use of the internal models 
methodology (IMM) to determine EAD for counterparty credit risk for 
derivative contracts with prior written approval from the OCC.
    Section 3.132(d)(1)(iii) permits the use of the internal models 
methodology for derivative contracts, eligible margin loans, and repo-
style transactions subject to a qualifying cross-product netting 
agreement with prior written approval from the OCC.
    Section 3.132(d)(2)(iv) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts, and risk-weighted assets using IMM. Under the IMM, an 
institution uses an internal model to estimate the expected exposure 
(EE) for a netting set and then calculates EAD based on that EE. A 
national bank or Federal savings association must calculate two EEs and 
two EADs (one stressed and one unstressed) for each netting as outlined 
in this section. A national bank or Federal savings association may use 
a conservative measure of EAD subject to prior written approval of the 
OCC.
    Section 3.153(b), outlining the Internal Models Approach (IMA) for 
calculating risk-weighted assets for equity exposures, specifies that a 
national bank or Federal savings association must receive prior written 
approval from the OCC before it can use IMA by demonstrating to the OCC 
that the national bank or Federal savings association meets certain 
criteria.

Recordkeeping Requirements

    Section 3.121 requires a national bank or Federal savings 
association subject to the advanced approaches risk-based capital 
requirements to adopt a written implementation plan to address how it 
will comply with the advanced capital adequacy framework's 
qualification requirements and also develop and maintain a 
comprehensive and sound planning and governance process to oversee the 
implementation efforts described in the plan. Section 3.122 further 
requires these institutions to: develop processes for assessing capital 
adequacy in relation to an organization's risk profile; establish and 
maintain internal risk rating and segmentation systems for wholesale 
and retail risk exposures, including comprehensive risk parameter 
quantification processes and processes for annual reviews and analyses 
of reference data to determine their relevance; document their 
processes for identifying, measuring, monitoring, controlling, and 
internally reporting operational risk; verify the accurate and timely 
reporting of risk-based capital requirements; and monitor, validate, 
and refine their advanced systems.
    Section 3.132(d)(3)(vi) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts. To obtain OCC approval to calculate the distributions of 
exposures upon which the EAD calculation is based, a national bank or 
Federal savings association must demonstrate to the satisfaction of the 
OCC that it has been using for at least one year an internal model that 
broadly meets the minimum standards with which the national bank or 
Federal savings association must maintain compliance. The national bank 
or Federal savings association must have procedures to identify, 
monitor, and control wrong-way risk throughout the life of an exposure 
and they must include stress testing and scenario analysis.
    Section 3.132(d)(3)(viii) addresses counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts. When estimating model parameters based on a stress period, a 
national bank or Federal savings association must use at least three 
years of historical data that include a period of stress to the credit 
default spreads of its counterparties. The national bank or Federal 
savings association must review the data set and update the data as 
necessary, particularly for any material changes in its counterparties. 
The national bank or Federal savings association must demonstrate at 
least quarterly that the stress period coincides with increased credit 
default swap (CDS) or other credit spreads of the institution's 
counterparties. The national bank or Federal savings association must 
have procedures to evaluate the effectiveness of its stress calibration 
that include a process for using benchmark portfolios that are 
vulnerable to the same risk factors as the national bank's or Federal 
savings association's portfolio. The OCC may require the institution to 
modify its stress calibration to better reflect actual historic losses 
of the portfolio.
    Section 3.132(d)(3)(ix), regarding counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts, requires that a national bank or Federal savings association 
must subject its internal model to an initial validation and annual 
model review process that includes consideration of whether the inputs 
and risk factors, as well as the model outputs, are appropriate. The 
section requires national banks and Federal savings associations to 
have a backtesting program for its model that includes a process by 
which unacceptable model performance will be determined and remedied.
    Section 3.132(d)(3)(x), regarding counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts, provides that a national bank or Federal savings association 
must have policies for the measurement, management, and control of 
collateral and margin amounts.
    Section 3.132(d)(3)(xi), concerning counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts, states that a national bank or Federal savings association 
must have a comprehensive stress testing program that captures all 
credit exposures to counterparties and incorporates stress testing of 
principal market risk factors and creditworthiness of counterparties.
    Section 3.133(b)(3)(i)(A) permits a national bank or Federal 
savings association to assign a two percent risk weight to an exposure 
to a qualifying central counterparty (QCCP), if the institution 
conducts sufficient legal review, and maintains written documentation 
of that review.
    Section 3.141(b)(3) requires a national bank or Federal savings 
association to obtain a well-reasoned legal opinion confirming the 
enforceability of the credit risk mitigant in all relevant 
jurisdictions in order to recognize the transference of risk in 
connection with a synthetic securitization.
    Sections 3.141(c)(1) and 3.141(c)(2)(i) require a national bank or 
Federal savings association to demonstrate its comprehensive 
understanding of a securitization exposure for each securitization 
exposure by conducting an analysis of the risk characteristics of a 
securitization exposure prior to acquiring the exposure and document 
such analysis within three business days after acquiring the exposure.
    Section 3.141(c)(2)(ii) requires that institutions, on an on-going 
basis (at least quarterly), evaluate, review, and update as appropriate 
the analysis

[[Page 81180]]

required under this section for each securitization exposure.

Disclosure Requirements

    Section 3.142, which outlines the capital treatment for 
securitization exposures, requires a national bank or Federal savings 
association to disclose publicly that it has provided implicit support 
to a securitization and the regulatory capital impact to the 
institution of providing such implicit support. Specifically, Sec.  
3.124(a) requires a national bank or Federal savings association that 
merges with or acquires a company that does not calculate its risk-
based capital requirements using advanced systems and uses subpart D to 
determine the risk-weighted asset amounts for the merged or acquired 
company's exposures, the national bank or Federal savings association 
must disclose publicly the amounts of risk-weighted assets and 
qualifying capital calculated under this subpart for the bank or 
savings association and under subpart D for the acquired company.
    Section 3.172 specifies that each national bank or Federal savings 
association that is an advanced approaches national bank or Federal 
savings association, that has completed the parallel run process, must 
publicly disclose its total and tier 1 risk-based capital ratios and 
their components.
    Section 3.173 addresses disclosures by an advanced approaches 
national bank or Federal savings association that is not a consolidated 
subsidiary of a bank holding company, savings and loan holding company, 
or a depository institution subject to the disclosure requirements of 
Sec.  3.172. An advanced approaches institution that is subject to the 
disclosure requirements must make the disclosures described in Sec.  
3.173, Tables 1 through 12. The national bank or Federal savings 
association must make these disclosures publicly available for each of 
the last three years (that is, twelve quarters) or such shorter period 
beginning on the effective date of this subpart E. The tables in Sec.  
3.173 require qualitative and quantitative public disclosures for 
capital structure, capital adequacy, capital conservation and 
countercyclical buffers, general disclosures related to credit risk, 
credit risk disclosures for portfolios subject to IRB risk-based 
capital formulas, general disclosures related to counterparty credit 
risk of OTC derivative contracts, repo-style transactions, and eligible 
margin loans, credit risk mitigation, securitization, operational risk, 
equities not subject to the market risk capital requirements, and 
interest rate risk for non-trading activities.

Burden Estimates

    Estimated Number of Respondents: 1,014 national banks and Federal 
savings associations.\1\
---------------------------------------------------------------------------

    \1\ Respondents represent all active national banks and Federal 
savings associations as of September 30, 2023.
---------------------------------------------------------------------------

    Estimated Total Annual Burden Hours: 87,087.
    Comments submitted in response to this notice will be summarized 
and included in the request for OMB approval. All comments will become 
a matter of public record. Comments are invited on:
    (a) Whether the collection of information is necessary for the 
proper performance of the functions of the OCC, including whether the 
information has practical utility;
    (b) The accuracy of the OCC's estimate of the burden of the 
collection of information;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the collection on respondents, 
including through the use of automated collection techniques or other 
forms of information technology; and
    (e) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.

Theodore J. Dowd,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
[FR Doc. 2023-25744 Filed 11-20-23; 8:45 am]
BILLING CODE 4810-33-P