Regulatory Capital Rules: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies, 90952-90955 [2016-29966]
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90952
Federal Register / Vol. 81, No. 242 / Friday, December 16, 2016 / Rules and Regulations
information collection unless it displays
a currently valid Office of Management
and Budget (OMB) control number.
Because the final rules do not create a
new, or revise an existing collection of
information, no information collection
submission needs to be made to OMB.
D. The Economic Growth and
Regulatory Paperwork Reduction Act
Under section 2222 of the Economic
Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPRA),27 the
agencies are required to conduct a
review at least once every 10 years to
identify any outdated or otherwise
unnecessary regulations. The agencies
completed the last comprehensive
review of their regulations under
EGRPRA in 2006 and are currently
conducting the next decennial review.
The burden reduction evidenced in
these final rules is consistent with the
objectives of the EGRPRA review
process.
Authority and Issuance
For the reasons set forth in the joint
preamble, the interim rule published on
February 29, 2016 at 81 FR 10063, is
adopted as final without change.
■
Dated: October 19, 2016.
Thomas J. Curry,
Comptroller of the Currency.
Board of Governors of the Federal Reserve
System, December 6, 2016.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 19th day of
October 2016.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016–30133 Filed 12–15–16; 8:45 am]
BILLING CODE 4810–33–P
6210–01–P
6714–01–P
FEDERAL RESERVE SYSTEM
12 CFR Part 217 Regulation Q
[Docket No. R–1535; RIN 7100 AE–49]
Regulatory Capital Rules:
Implementation of Capital
Requirements for Global Systemically
Important Bank Holding Companies
Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
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AGENCY:
The Board of Governors of the
Federal Reserve System (Board) is
adopting a final rule to make several
revisions to its rule regarding risk-based
SUMMARY:
27 Public
Law 104–208, 110 Stat. 3309 (1996).
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capital surcharges for U.S.-based global
systemically important bank holding
companies (GSIB surcharge rule). The
final rule modifies the GSIB surcharge
rule to provide that a bank holding
company subject to the rule should
continue to calculate its method 1 score
and method 2 score under the rule
annually using data reported on the
firm’s Banking Organization Systemic
Risk Report (FR Y–15) as of December
31 of the previous calendar year. In
addition, the final rule clarifies that a
bank holding company subject to the
GSIB surcharge rule must calculate its
method 2 score using systemic indicator
amounts expressed in billions of dollars.
DATES: The final rule is effective January
17, 2017.
FOR FURTHER INFORMATION CONTACT:
Anna Lee Hewko, Associate Director,
(202) 530–6260, Constance M. Horsley,
Assistant Director, (202) 452–5239,
Elizabeth MacDonald, Manager, (202)
475–6316, or Sean Healey, Supervisory
Financial Analyst, (202) 912–4611,
Division of Banking Supervision and
Regulation; or Benjamin McDonough,
Special Counsel, (202) 452–2036, Mark
Buresh, Senior Attorney, (202) 452–
5270, or Mary Watkins, Attorney, (202)
452–3722, Legal Division. Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunications
Device for the Deaf (TDD) users may
contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Description of the Final Rule
A. Revisions Related to FR Y–15 Reporting
Frequency
B. Revision To Clarify the Method 2 Score
Calculation
C. Comment Received on the Proposed
Rule
V. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Analysis
C. Riegle Community Development and
Regulatory Improvement Act of 1994
D. Plain Language
I. Introduction
Section 165 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (Dodd-Frank Act) authorizes the
Board of Governors of the Federal
Reserve System (Board) to establish
enhanced prudential standards for bank
holding companies with $50 billion or
more in total consolidated assets and for
nonbank financial companies that the
Financial Stability Oversight Council
has designated for supervision by the
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Board.1 These standards must include
risk-based capital requirements as well
as other enumerated standards.
Pursuant to section 165 of the DoddFrank Act, the Board adopted a rule
regarding risk-based capital surcharges
for U.S.-based global systemically
important bank holding companies
(GSIB surcharge rule) in July 2015 to
impose a risk-based-capital surcharge on
bank holding companies identified
under the rule as global systemically
important bank holding companies
(GSIBs).2 In April 2016, the Board
invited public comment on a notice of
proposed rulemaking (proposal or
proposed rule) to make clarifying
revisions to the Board’s GSIB surcharge
rule.3 The Board now is issuing a final
rule implementing the proposal without
change (final rule).
II. Background
The GSIB surcharge rule works to
mitigate the potential risk that the
material financial distress or failure of a
GSIB could pose to U.S. financial
stability by increasing the stringency of
capital standards for GSIBs, thereby
increasing the resiliency of these firms.
The GSIB surcharge rule establishes a
methodology to identify whether a U.S.
top-tier bank holding company is a GSIB
and imposes a risk-based capital
surcharge on such an institution. The
GSIB surcharge rule takes into
consideration the nature, scope, size,
scale, concentration,
interconnectedness, and mix of
activities of each company subject to the
rule in its methodology for determining
whether the company is a GSIB and the
size of the surcharge. These factors are
captured in the GSIB surcharge rule’s
method 1 and method 2 scores, which
use quantitative metrics reported on the
FR Y–15 reporting form to measure a
firm’s systemic footprint.
Specifically, the GSIB surcharge rule
requires each U.S. bank holding
company that qualifies as an advanced
approaches institution under the
Board’s capital rules to calculate an
aggregate systemic indicator score based
on five indicators of systemic
importance (method 1 score).4 A bank
holding company whose method 1 score
exceeds a defined threshold is identified
as a GSIB. Advanced approaches
institutions must calculate their method
1 scores on an annual basis using data
1 See,
12 U.S.C. 5365.
FR 49082 (August 14, 2015).
3 81 FR 20579 (April 8, 2016).
4 See, 12 CFR 217.100(b)(1); 12 CFR part 217,
subpart H.
2 80
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reported on the FR Y–15 reporting form
as of December 31 of the prior year.5
A bank holding company identified as
a GSIB must also calculate a score under
method 2. Such a firm must calculate a
method 2 score each year using data
reported on the firm’s FR Y–15 as of
December 31 of the prior year. GSIB
surcharges are established using the
method 1 and method 2 scores, and
GSIBs with higher scores are subject to
higher GSIB surcharges.
Method 1 uses five equally-weighted
categories that are correlated with
systemic importance—size,
interconnectedness, cross-jurisdictional
activity, substitutability, and
complexity—as measured by twelve
systemic indicators.6 For each systemic
indicator, a firm divides its own
measure of the systemic indicator by an
aggregate global indicator amount. Each
resulting value is then weighted and put
onto a standard scale. The firm’s
method 1 score is the sum of its
weighted systemic indicator scores.
Method 2 uses similar inputs to those
used in method 1, but replaces the
substitutability category with a measure
of short-term wholesale funding.7 The
GSIB surcharge for the firm is the higher
of the two surcharges determined under
method 1 and method 2.8 Method 2 is
calibrated differently from method 1
and generally results in a higher GSIB
surcharge.
The FR Y–15 reporting form collects
systemic risk data from U.S. bank
holding companies and covered savings
and loan holding companies 9 with total
consolidated assets of $50 billion or
more. The information reported on the
FR Y–15 is used in part in the
calculation of a bank holding company’s
method 1 and method 2 scores under
the GSIB surcharge rule.10
In April 2016, the Board invited
comment on a proposed rule to clarify
certain aspects of the GSIB surcharge
5 The GSIB surcharge rule includes transition
provisions for the first years that it is effective. See
12 CFR 217.400(b)(2).
6 12 CFR 217.404.
7 12 CFR 217.405.
8 12 CFR 217.403.
9 Covered savings and loan holding companies
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.
10 The FR Y–15 requires reporting of the
components used in calculating the method 1 and
method 2 scores on the FR Y–15, but does not
require reporting of the scores themselves. As of
January 1, 2016, a bank holding company that is
subject to a GSIB surcharge is required to report its
applicable GSIB surcharge on line 67 of the Federal
Financial Institutions Examination Council 101
report, Regulatory Capital Reporting for Institutions
Subject to the Advanced Capital Adequacy
Framework.
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rule.11 Because the FR Y–15 had become
a quarterly, rather than an annual
report, the proposed rule would have
clarified that a bank holding company
subject to the rule should continue to
use the systemic indicator amount from
the FR Y–15 regulatory report as of
December 31 of the prior calendar year
to calculate its method 1 and method 2
scores. The proposal also would have
clarified the units used for purposes of
the method 2 score calculation under
the capital surcharge rule. In connection
with these proposed changes, the
preamble to the proposal provided
clarifying information on how a firm
identified as a GSIB should calculate its
short-term wholesale funding score for
purposes of calculating its method 2
score.
III. Description of the Final Rule
A. Revisions Related to FR Y–15
Reporting Frequency
The FR Y–15, as implemented on
December 31, 2012, was an annual
report.12 The Board recently revised the
FR Y–15 to require that the FR Y–15 to
be filed on a quarterly basis, beginning
with the report as of June 30, 2016.13
Under the GSIB surcharge rule, bank
holding companies calculate their
method 1 and method 2 scores using
data from their most recent FR Y–15.14
These calculations were intended to be
conducted annually using data as of
December 31 of the prior calendar year,
consistent with the frequency of the FR
Y–15 at the time.
The proposed rule sought comment
on revising the GSIB surcharge rule to
require continued use of a December 31
as-of date for purposes of a bank holding
company’s calculation of its method 1
and method 2 scores. The proposed
revisions to sections 217.404 and
217.405 of the GSIB surcharge rule
would provide that the systemic
indicator amount used in the
calculations would be drawn from a
firm’s FR Y–15 as of December 31 of the
previous calendar year even after the FR
Y–15 becomes a quarterly report.
The Board received no comments on
this aspect of the proposal and is
finalizing this portion of the rule as
proposed.
11 81
FR 20579 (April 8, 2016).
77 FR 76487 (December 28, 2012). The
Board subsequently revised the FR Y–15 in
December 2013. See 78 FR 77128 (December 20,
2013).
13 80 FR 77344 (December 14, 2015).
14 80 FR 49082 (August 14, 2015).
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B. Revision To Clarify the Method 2
Score Calculation
The proposed rule also sought to
revise section 217.405 of the Board’s
Regulation Q to clarify that, for
purposes of calculating its method 2
score, a GSIB should convert its
systemic indicator amounts as reported
on the FR Y–15 to billions of dollars.
The FR Y–15 requires these data to be
reported in thousands of dollars, while
the fixed coefficients used in the
calculation of a firm’s method 2 score
are determined using aggregate data
expressed in billions of dollars.15
Therefore, to properly use the fixed
coefficients in the method 2 score
methodology, a firm should reflect its
systemic indicator amounts used in the
method 2 score calculation in billions of
dollars.
The Board received no comments on
this aspect of the proposal and is
finalizing this portion of the rule as
proposed.
C. Comment Received on the Proposed
Rule
The Board received one public
comment on the proposed rule. The
commenter generally expressed support
for the proposed rule, but expressed
concerns regarding the interaction of the
timing of the FR Y–15 and the Federal
Reserve’s complex institution liquidity
monitoring report, the FR 2052a. The FR
Y–15, as noted above, collects data
regarding a firm’s systemic risk, while
the FR 2052a collects data on an
institution’s overall liquidity profile.16
The commenter expressed concern that
if the initial effective date of Schedule
G of the FR Y–15 preceded the initial
effective date of the FR 2052a this
difference would reduce the time that
certain firms have to fully implement
the FR 2052a. Specifically, the
commenter observed that, because data
from the FR 2052a will be used to
complete Schedule G of the FR Y–15, it
was inconsistent to require firms with
total assets of $50 billion or more to file
Schedule G of the FR Y–15 as of
December 31, 2016, but provide firms
with total assets equal to or greater than
$50 billion, but less than $250 billion
until July 31, 2017 to file the FR 2052a.
The commenter therefore argued that
firms should be given additional time to
complete Schedule G of the FR Y–15 in
order to allow them to make use of the
12 See
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15 See,
80 FR 49082, 49088.
77 FR 76487 (December 28, 2012). The
Board subsequently revised the FR Y–15 in
December 2013. See 78 FR 77128 (December 20,
2013). See 80 FR 71795 (November, 17, 2015).
16 See
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full implementation period for the FR
2052a.
In response to the comment, the
Board is issuing an interim final rule
concurrently with this final rule to
provide additional time for certain
smaller firms to complete Schedule G of
the FR Y–15 for the first time.
V. Regulatory Analysis
A. Paperwork Reduction Act (PRA)
There is no new collection of
information pursuant to the PRA (44
U.S.C. 3501 et seq.) contained in this
final rule.
B. Regulatory Flexibility Act Analysis
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The Board is providing a final
regulatory flexibility analysis with
respect to this final rule. The Regulatory
Flexibility Act, 5 U.S.C. 601 et seq.
(RFA), generally requires that an agency
provide a regulatory flexibility analysis
in connection with a final rulemaking.
This final rule amends the Board’s GSIB
surcharge rule, which only applies to
bank holding companies that are
advanced approaches Board-regulated
institutions for purposes of the Board’s
Regulation Q (advanced approaches
bank holding companies). Generally,
advanced approaches bank holding
companies are those that: Have total
consolidated assets of $250 billion or
more; have total consolidated onbalance sheet foreign exposures of $10
billion or more; have subsidiary
depository institutions that are
advanced approaches institutions; or
elect to use the advanced approaches
framework.17 Under regulations issued
by the Small Business Administration, a
small entity includes a depository
institution, bank holding company, or
savings and loan holding company with
assets of $550 million or less (small
banking organizations).18 As of June 30,
2016, there were approximately 3,203
top-tier small bank holding companies.
Bank holding companies that are subject
to the final rule therefore are expected
to substantially exceed the $550 million
asset threshold at which a banking
entity would qualify as a small bank
holding company. As a result, the final
rule is not expected to apply to any
small bank holding company for
purposes of the RFA.
17 See
12 CFR 217.100.
13 CFR 121.201. Effective July 14, 2014, the
Small Business Administration revised the size
standards for banking organizations to $550 million
in assets from $500 million in assets. 79 FR 33647
(June 12, 2014). The Small Business
Administration’s June 12, 2014, interim final rule
was adopted without change as a final rule by the
Small Business Administration on January 12, 2016.
81 FR 3949 (January 25, 2016).
18 See
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Therefore, there are no significant
alternatives to the final rule that would
have less economic impact on small
bank holding companies. As discussed
above, there are no projected reporting,
recordkeeping, and other compliance
requirements of the final rule. 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 does not
believe that the final rule would have a
significant economic impact on a
substantial number of small entities.
The Board sought comment on
whether the proposed rule would
impose undue burdens on, or have
unintended consequences for, small
organizations, and received no
comments on this aspect of the
proposal. In light of the foregoing, the
Board does not believe that the final
rule will have a significant impact on
small entities.
C. Riegle Community Development and
Regulatory Improvement Act of 1994
In determining the effective date and
administrative compliance requirements
for new regulations that impose
additional reporting, disclosure, or other
requirements on state member banks,
the Board is required to consider,
consistent with the principles of safety
and soundness and the public interest,
any administrative burdens that such
regulations would place on depository
institutions, and the benefits of such
regulations.19 In addition, new
regulations that impose additional
reporting disclosures or other new
requirements on insured depository
institutions generally must take effect
on the first day of a calendar quarter
which begins on or after the date on
which the regulations are published in
final form.20
The final rule is only applicable to
advanced approaches bank holding
companies. Therefore, the requirements
of the Riegle Community Development
and Regulatory Improvement Act of
1994 are not applicable to this final rule.
D. Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Board 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 straightforward
manner. The Board did not receive any
comment on its use of plain language.
19 See Section 302 of the Riegle Community
Development and Regulatory Improvement Act of
1994 (‘‘RCDRIA’’), 12 U.S.C. 4802.
20 12 U.S.C. 4802(b).
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List of Subjects in 12 CFR Part 217
Administrative practice and
procedure, Banks, banking, Holding
companies, Reporting and
recordkeeping requirements, Securities.
Board of Governors of the Federal
Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the
preamble, the Board amends chapter II
of title 12 of the Code of Federal
Regulations as follows:
PART 217—CAPITAL ADEQUACY OF
BANK HOLDING COMPANIES,
SAVINGS AND LOAN HOLDING
COMPANIES, AND STATE MEMBER
BANKS (REGULATION Q)
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.
2. In § 217.404, paragraph (b)(1) is
revised to read as follows:
■
§ 217.404
Method 1 score.
*
*
*
*
*
(b) * * *
(1) Except as provided in paragraph
(b)(2) of this section, the systemic
indicator score in basis points for a
given systemic indicator is equal to:
(i) The ratio of:
(A) The amount of that systemic
indicator, as reported by the bank
holding company as of December 31 of
the previous calendar year; to
(B) The aggregate global indicator
amount for that systemic indicator
published by the Board in the fourth
quarter of that year;
(ii) Multiplied by 10,000; and
(iii) Multiplied by the indicator
weight corresponding to the systemic
indicator as set forth in Table 1 of this
section.
*
*
*
*
*
3. In § 217.405, paragraph (b)(1) is
revised to read as follows:
■
§ 217.405
Method 2 score.
*
*
*
*
*
(b) * * *
(1) The amount of the systemic
indicator, as reported by the bank
holding company as of December 31 of
the previous calendar year, expressed in
billions of dollars;
*
*
*
*
*
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By order of the Board of Governors of the
Federal Reserve System, December 9, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016–29966 Filed 12–14–16; 11:15 am]
BILLING CODE P
Examining the AD Docket
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2015–3142; Directorate
Identifier 2015–NM–003–AD; Amendment
39–18725; AD 2016–25–02]
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
We are adopting a new
airworthiness directive (AD) for certain
The Boeing Company Model 787–8
airplanes. This AD was prompted by
reports of the accumulation of very fine
particle deposits in the power control
unit (PCU) electro-hydraulic servo
valves (EHSVs) used in the flight control
system; this accumulation caused
degraded performance due to reduced
EHSV internal hydraulic supply
pressures, resulting in the display of
PCU fault status messages from the
engine indication and crew alerting
system (EICAS). This AD requires
installing markers to limit the hydraulic
system fluid used to a specific brand,
doing hydraulic fluid tests of the
hydraulic systems, replacing hydraulic
system fluid if necessary, and doing all
applicable related investigative and
corrective actions. We are issuing this
AD to address the unsafe condition on
these products.
DATES: This AD is effective January 20,
2017.
The Director of the Federal Register
approved the incorporation by reference
of a certain publication listed in this AD
as of January 20, 2017.
ADDRESSES: For service information
identified in this final rule, contact
Boeing Commercial Airplanes,
Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC
110–SK57, Seal Beach, CA 90740;
telephone 562–797–1717; Internet
https://www.myboeingfleet.com. You
may view this referenced service
information at the FAA, Transport
Airplane Directorate, 1601 Lind Avenue
SW., Renton, WA. For information on
the availability of this material at the
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SUMMARY:
VerDate Sep<11>2014
FAA, call 425–227–1221. It is also
available on the Internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2015–
3142.
17:15 Dec 15, 2016
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You may examine the AD docket on
the Internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2015–
3142; or in person at the Docket
Management Facility between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket
contains this AD, the regulatory
evaluation, any comments received, and
other information. The address for the
Docket Office (phone: 800–647–5527) is
Docket Management Facility, U.S.
Department of Transportation, Docket
Operations, M–30, West Building
Ground Floor, Room W12–140, 1200
New Jersey Avenue SE., Washington,
DC 20590.
FOR FURTHER INFORMATION CONTACT: Fnu
Winarto, Aerospace Engineer, Systems
and Equipment Branch, ANM–130S,
FAA, Seattle Aircraft Certification
Office (ACO), 1601 Lind Avenue SW.,
Renton, WA 98057–3356; phone: 425–
917–6659; fax: 425–917–6590; email:
fnu.winarto@faa.gov.
SUPPLEMENTARY INFORMATION:
Discussion
We issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would
apply to certain The Boeing Company
Model 787–8 airplanes. The NPRM
published in the Federal Register on
August 19, 2015 (80 FR 50233) (‘‘the
NPRM’’). The NPRM was prompted by
reports of the accumulation of very fine
particle deposits in the PCU EHSVs
used in the flight control system; this
accumulation caused degraded
performance due to reduced EHSV
internal hydraulic supply pressures,
resulting in the display of PCU fault
status messages from the EICAS. The
NPRM proposed to require installing
markers to limit the hydraulic system
fluid used to a specific brand, doing
hydraulic fluid tests of the hydraulic
systems, replacing hydraulic system
fluid if necessary, and doing all
applicable related investigative and
corrective actions. We are issuing this
AD to prevent the failure of flight
control hydraulic PCUs, which could
lead to reduced controllability of the
airplane.
Comments
We gave the public the opportunity to
participate in developing this AD. The
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90955
following presents the comments
received on the NPRM and the FAA’s
response to each comment.
Request To Refer to Revised Service
Information
United Airlines (UAL) stated that
there are many errors, omissions, and
inconsistencies in Boeing Alert Service
Bulletin B787–81205–SB270026–00,
Issue 001, dated November 25, 2014,
and provided examples of those
mistakes. UAL asked that this service
information be revised to correct these
problems.
Boeing has issued Boeing Alert
Service Bulletin B787–81205–
SB270026–00, Issue 002, dated June 13,
2016. The revised service information
corrects typographical errors and makes
clarifications to the Accomplishment
Instructions in Boeing Alert Service
Bulletin B787–81205–SB270026–00,
Issue 001, dated November 25, 2014. We
have included Boeing Alert Service
Bulletin B787–81205–SB270026–00,
Issue 002, dated June 13, 2016, in
paragraphs (c) and (h) of this AD. We
have also included a new paragraph (i)
in this AD to provide credit for actions
done prior to the effective date of this
AD using Boeing Alert Service Bulletin
B787–81205–SB270026–00, Issue 001,
dated November 25, 2014. The
subsequent paragraphs have been
redesignated accordingly.
Request To Clarify the Reason for the
Unsafe Condition
Boeing asked that we remove all
references to hydraulic fluid
contamination causing EHSV
restriction, in the SUMMARY, the
Discussion section of the NPRM, and
paragraph (e) of the proposed AD.
Boeing stated that the issue is not
hydraulic fluid contamination causing
EHSV restriction, but the accumulation
of very fine particle deposits within the
EHSV causing degraded performance
due to reduced EHSV internal hydraulic
supply pressures. Boeing added that the
solution is to change the hydraulic fluid
to a specific brand, considering that it
has been verified to significantly reduce
the rate of accumulation of particles in
the EHSVs. Boeing concluded that this
would clarify the cause of the EICAS
messages.
We agree that the reason for the
unsafe condition should be clarified, for
the reasons provided. Therefore, we
have removed the references to
hydraulic fluid contamination causing
EHSV restriction and replaced that
language with a more accurate reason
for the unsafe condition in the SUMMARY,
the Discussion section of the final rule,
and paragraph (e) of this AD.
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]]>Agencies
[Federal Register Volume 81, Number 242 (Friday, December 16, 2016)]
[Rules and Regulations]
[Pages 90952-90955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29966]
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FEDERAL RESERVE SYSTEM
12 CFR Part 217 Regulation Q
[Docket No. R-1535; RIN 7100 AE-49]
Regulatory Capital Rules: Implementation of Capital Requirements
for Global Systemically Important Bank Holding Companies
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is adopting a final rule to make several revisions to its rule
regarding risk-based capital surcharges for U.S.-based global
systemically important bank holding companies (GSIB surcharge rule).
The final rule modifies the GSIB surcharge rule to provide that a bank
holding company subject to the rule should continue to calculate its
method 1 score and method 2 score under the rule annually using data
reported on the firm's Banking Organization Systemic Risk Report (FR Y-
15) as of December 31 of the previous calendar year. In addition, the
final rule clarifies that a bank holding company subject to the GSIB
surcharge rule must calculate its method 2 score using systemic
indicator amounts expressed in billions of dollars.
DATES: The final rule is effective January 17, 2017.
FOR FURTHER INFORMATION CONTACT: Anna Lee Hewko, Associate Director,
(202) 530-6260, Constance M. Horsley, Assistant Director, (202) 452-
5239, Elizabeth MacDonald, Manager, (202) 475-6316, or Sean Healey,
Supervisory Financial Analyst, (202) 912-4611, Division of Banking
Supervision and Regulation; or Benjamin McDonough, Special Counsel,
(202) 452-2036, Mark Buresh, Senior Attorney, (202) 452-5270, or Mary
Watkins, Attorney, (202) 452-3722, Legal Division. Board of Governors
of the Federal Reserve System, 20th and C Streets NW., Washington, DC
20551. For the hearing impaired only, Telecommunications Device for the
Deaf (TDD) users may contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Description of the Final Rule
A. Revisions Related to FR Y-15 Reporting Frequency
B. Revision To Clarify the Method 2 Score Calculation
C. Comment Received on the Proposed Rule
V. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Analysis
C. Riegle Community Development and Regulatory Improvement Act
of 1994
D. Plain Language
I. Introduction
Section 165 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) authorizes the Board of Governors of
the Federal Reserve System (Board) to establish enhanced prudential
standards for bank holding companies with $50 billion or more in total
consolidated assets and for nonbank financial companies that the
Financial Stability Oversight Council has designated for supervision by
the Board.\1\ These standards must include risk-based capital
requirements as well as other enumerated standards. Pursuant to section
165 of the Dodd-Frank Act, the Board adopted a rule regarding risk-
based capital surcharges for U.S.-based global systemically important
bank holding companies (GSIB surcharge rule) in July 2015 to impose a
risk-based-capital surcharge on bank holding companies identified under
the rule as global systemically important bank holding companies
(GSIBs).\2\ In April 2016, the Board invited public comment on a notice
of proposed rulemaking (proposal or proposed rule) to make clarifying
revisions to the Board's GSIB surcharge rule.\3\ The Board now is
issuing a final rule implementing the proposal without change (final
rule).
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\1\ See, 12 U.S.C. 5365.
\2\ 80 FR 49082 (August 14, 2015).
\3\ 81 FR 20579 (April 8, 2016).
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II. Background
The GSIB surcharge rule works to mitigate the potential risk that
the material financial distress or failure of a GSIB could pose to U.S.
financial stability by increasing the stringency of capital standards
for GSIBs, thereby increasing the resiliency of these firms. The GSIB
surcharge rule establishes a methodology to identify whether a U.S.
top-tier bank holding company is a GSIB and imposes a risk-based
capital surcharge on such an institution. The GSIB surcharge rule takes
into consideration the nature, scope, size, scale, concentration,
interconnectedness, and mix of activities of each company subject to
the rule in its methodology for determining whether the company is a
GSIB and the size of the surcharge. These factors are captured in the
GSIB surcharge rule's method 1 and method 2 scores, which use
quantitative metrics reported on the FR Y-15 reporting form to measure
a firm's systemic footprint.
Specifically, the GSIB surcharge rule requires each U.S. bank
holding company that qualifies as an advanced approaches institution
under the Board's capital rules to calculate an aggregate systemic
indicator score based on five indicators of systemic importance (method
1 score).\4\ A bank holding company whose method 1 score exceeds a
defined threshold is identified as a GSIB. Advanced approaches
institutions must calculate their method 1 scores on an annual basis
using data
[[Page 90953]]
reported on the FR Y-15 reporting form as of December 31 of the prior
year.\5\
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\4\ See, 12 CFR 217.100(b)(1); 12 CFR part 217, subpart H.
\5\ The GSIB surcharge rule includes transition provisions for
the first years that it is effective. See 12 CFR 217.400(b)(2).
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A bank holding company identified as a GSIB must also calculate a
score under method 2. Such a firm must calculate a method 2 score each
year using data reported on the firm's FR Y-15 as of December 31 of the
prior year. GSIB surcharges are established using the method 1 and
method 2 scores, and GSIBs with higher scores are subject to higher
GSIB surcharges.
Method 1 uses five equally-weighted categories that are correlated
with systemic importance--size, interconnectedness, cross-
jurisdictional activity, substitutability, and complexity--as measured
by twelve systemic indicators.\6\ For each systemic indicator, a firm
divides its own measure of the systemic indicator by an aggregate
global indicator amount. Each resulting value is then weighted and put
onto a standard scale. The firm's method 1 score is the sum of its
weighted systemic indicator scores. Method 2 uses similar inputs to
those used in method 1, but replaces the substitutability category with
a measure of short-term wholesale funding.\7\ The GSIB surcharge for
the firm is the higher of the two surcharges determined under method 1
and method 2.\8\ Method 2 is calibrated differently from method 1 and
generally results in a higher GSIB surcharge.
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\6\ 12 CFR 217.404.
\7\ 12 CFR 217.405.
\8\ 12 CFR 217.403.
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The FR Y-15 reporting form collects systemic risk data from U.S.
bank holding companies and covered savings and loan holding companies
\9\ with total consolidated assets of $50 billion or more. The
information reported on the FR Y-15 is used in part in the calculation
of a bank holding company's method 1 and method 2 scores under the GSIB
surcharge rule.\10\
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\9\ Covered savings and loan holding companies 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.
\10\ The FR Y-15 requires reporting of the components used in
calculating the method 1 and method 2 scores on the FR Y-15, but
does not require reporting of the scores themselves. As of January
1, 2016, a bank holding company that is subject to a GSIB surcharge
is required to report its applicable GSIB surcharge on line 67 of
the Federal Financial Institutions Examination Council 101 report,
Regulatory Capital Reporting for Institutions Subject to the
Advanced Capital Adequacy Framework.
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In April 2016, the Board invited comment on a proposed rule to
clarify certain aspects of the GSIB surcharge rule.\11\ Because the FR
Y-15 had become a quarterly, rather than an annual report, the proposed
rule would have clarified that a bank holding company subject to the
rule should continue to use the systemic indicator amount from the FR
Y-15 regulatory report as of December 31 of the prior calendar year to
calculate its method 1 and method 2 scores. The proposal also would
have clarified the units used for purposes of the method 2 score
calculation under the capital surcharge rule. In connection with these
proposed changes, the preamble to the proposal provided clarifying
information on how a firm identified as a GSIB should calculate its
short-term wholesale funding score for purposes of calculating its
method 2 score.
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\11\ 81 FR 20579 (April 8, 2016).
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III. Description of the Final Rule
A. Revisions Related to FR Y-15 Reporting Frequency
The FR Y-15, as implemented on December 31, 2012, was an annual
report.\12\ The Board recently revised the FR Y-15 to require that the
FR Y-15 to be filed on a quarterly basis, beginning with the report as
of June 30, 2016.\13\ Under the GSIB surcharge rule, bank holding
companies calculate their method 1 and method 2 scores using data from
their most recent FR Y-15.\14\ These calculations were intended to be
conducted annually using data as of December 31 of the prior calendar
year, consistent with the frequency of the FR Y-15 at the time.
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\12\ See 77 FR 76487 (December 28, 2012). The Board subsequently
revised the FR Y-15 in December 2013. See 78 FR 77128 (December 20,
2013).
\13\ 80 FR 77344 (December 14, 2015).
\14\ 80 FR 49082 (August 14, 2015).
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The proposed rule sought comment on revising the GSIB surcharge
rule to require continued use of a December 31 as-of date for purposes
of a bank holding company's calculation of its method 1 and method 2
scores. The proposed revisions to sections 217.404 and 217.405 of the
GSIB surcharge rule would provide that the systemic indicator amount
used in the calculations would be drawn from a firm's FR Y-15 as of
December 31 of the previous calendar year even after the FR Y-15
becomes a quarterly report.
The Board received no comments on this aspect of the proposal and
is finalizing this portion of the rule as proposed.
B. Revision To Clarify the Method 2 Score Calculation
The proposed rule also sought to revise section 217.405 of the
Board's Regulation Q to clarify that, for purposes of calculating its
method 2 score, a GSIB should convert its systemic indicator amounts as
reported on the FR Y-15 to billions of dollars. The FR Y-15 requires
these data to be reported in thousands of dollars, while the fixed
coefficients used in the calculation of a firm's method 2 score are
determined using aggregate data expressed in billions of dollars.\15\
Therefore, to properly use the fixed coefficients in the method 2 score
methodology, a firm should reflect its systemic indicator amounts used
in the method 2 score calculation in billions of dollars.
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\15\ See, 80 FR 49082, 49088.
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The Board received no comments on this aspect of the proposal and
is finalizing this portion of the rule as proposed.
C. Comment Received on the Proposed Rule
The Board received one public comment on the proposed rule. The
commenter generally expressed support for the proposed rule, but
expressed concerns regarding the interaction of the timing of the FR Y-
15 and the Federal Reserve's complex institution liquidity monitoring
report, the FR 2052a. The FR Y-15, as noted above, collects data
regarding a firm's systemic risk, while the FR 2052a collects data on
an institution's overall liquidity profile.\16\ The commenter expressed
concern that if the initial effective date of Schedule G of the FR Y-15
preceded the initial effective date of the FR 2052a this difference
would reduce the time that certain firms have to fully implement the FR
2052a. Specifically, the commenter observed that, because data from the
FR 2052a will be used to complete Schedule G of the FR Y-15, it was
inconsistent to require firms with total assets of $50 billion or more
to file Schedule G of the FR Y-15 as of December 31, 2016, but provide
firms with total assets equal to or greater than $50 billion, but less
than $250 billion until July 31, 2017 to file the FR 2052a. The
commenter therefore argued that firms should be given additional time
to complete Schedule G of the FR Y-15 in order to allow them to make
use of the
[[Page 90954]]
full implementation period for the FR 2052a.
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\16\ See 77 FR 76487 (December 28, 2012). The Board subsequently
revised the FR Y-15 in December 2013. See 78 FR 77128 (December 20,
2013). See 80 FR 71795 (November, 17, 2015).
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In response to the comment, the Board is issuing an interim final
rule concurrently with this final rule to provide additional time for
certain smaller firms to complete Schedule G of the FR Y-15 for the
first time.
V. Regulatory Analysis
A. Paperwork Reduction Act (PRA)
There is no new collection of information pursuant to the PRA (44
U.S.C. 3501 et seq.) contained in this final rule.
B. Regulatory Flexibility Act Analysis
The Board is providing a final regulatory flexibility analysis with
respect to this final rule. The Regulatory Flexibility Act, 5 U.S.C.
601 et seq. (RFA), generally requires that an agency provide a
regulatory flexibility analysis in connection with a final rulemaking.
This final rule amends the Board's GSIB surcharge rule, which only
applies to bank holding companies that are advanced approaches Board-
regulated institutions for purposes of the Board's Regulation Q
(advanced approaches bank holding companies). Generally, advanced
approaches bank holding companies are those that: Have total
consolidated assets of $250 billion or more; have total consolidated
on-balance sheet foreign exposures of $10 billion or more; have
subsidiary depository institutions that are advanced approaches
institutions; or elect to use the advanced approaches framework.\17\
Under regulations issued by the Small Business Administration, a small
entity includes a depository institution, bank holding company, or
savings and loan holding company with assets of $550 million or less
(small banking organizations).\18\ As of June 30, 2016, there were
approximately 3,203 top-tier small bank holding companies. Bank holding
companies that are subject to the final rule therefore are expected to
substantially exceed the $550 million asset threshold at which a
banking entity would qualify as a small bank holding company. As a
result, the final rule is not expected to apply to any small bank
holding company for purposes of the RFA.
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\17\ See 12 CFR 217.100.
\18\ See 13 CFR 121.201. Effective July 14, 2014, the Small
Business Administration revised the size standards for banking
organizations to $550 million in assets from $500 million in assets.
79 FR 33647 (June 12, 2014). The Small Business Administration's
June 12, 2014, interim final rule was adopted without change as a
final rule by the Small Business Administration on January 12, 2016.
81 FR 3949 (January 25, 2016).
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Therefore, there are no significant alternatives to the final rule
that would have less economic impact on small bank holding companies.
As discussed above, there are no projected reporting, recordkeeping,
and other compliance requirements of the final rule. 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 does not
believe that the final rule would have a significant economic impact on
a substantial number of small entities.
The Board sought comment on whether the proposed rule would impose
undue burdens on, or have unintended consequences for, small
organizations, and received no comments on this aspect of the proposal.
In light of the foregoing, the Board does not believe that the final
rule will have a significant impact on small entities.
C. Riegle Community Development and Regulatory Improvement Act of 1994
In determining the effective date and administrative compliance
requirements for new regulations that impose additional reporting,
disclosure, or other requirements on state member banks, the Board is
required to consider, consistent with the principles of safety and
soundness and the public interest, any administrative burdens that such
regulations would place on depository institutions, and the benefits of
such regulations.\19\ In addition, new regulations that impose
additional reporting disclosures or other new requirements on insured
depository institutions generally must take effect on the first day of
a calendar quarter which begins on or after the date on which the
regulations are published in final form.\20\
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\19\ See Section 302 of the Riegle Community Development and
Regulatory Improvement Act of 1994 (``RCDRIA''), 12 U.S.C. 4802.
\20\ 12 U.S.C. 4802(b).
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The final rule is only applicable to advanced approaches bank
holding companies. Therefore, the requirements of the Riegle Community
Development and Regulatory Improvement Act of 1994 are not applicable
to this final rule.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Board 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
straightforward manner. The Board did not receive any comment on its
use of plain language.
List of Subjects in 12 CFR Part 217
Administrative practice and procedure, Banks, banking, Holding
companies, Reporting and recordkeeping requirements, Securities.
Board of Governors of the Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the preamble, the Board amends chapter
II of title 12 of the Code of Federal Regulations as follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
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.
0
2. In Sec. 217.404, paragraph (b)(1) is revised to read as follows:
Sec. 217.404 Method 1 score.
* * * * *
(b) * * *
(1) Except as provided in paragraph (b)(2) of this section, the
systemic indicator score in basis points for a given systemic indicator
is equal to:
(i) The ratio of:
(A) The amount of that systemic indicator, as reported by the bank
holding company as of December 31 of the previous calendar year; to
(B) The aggregate global indicator amount for that systemic
indicator published by the Board in the fourth quarter of that year;
(ii) Multiplied by 10,000; and
(iii) Multiplied by the indicator weight corresponding to the
systemic indicator as set forth in Table 1 of this section.
* * * * *
0
3. In Sec. 217.405, paragraph (b)(1) is revised to read as follows:
Sec. 217.405 Method 2 score.
* * * * *
(b) * * *
(1) The amount of the systemic indicator, as reported by the bank
holding company as of December 31 of the previous calendar year,
expressed in billions of dollars;
* * * * *
[[Page 90955]]
By order of the Board of Governors of the Federal Reserve
System, December 9, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-29966 Filed 12-14-16; 11:15 am]
BILLING CODE P
