Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB; Capital Plans; Final Agency Information Collection Activities, 73634-73640 [2011-30666]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Notices]
[Pages 73634-73640]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30666]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB; Capital 
Plans; Final Agency Information Collection Activities

SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board of Governors of the Federal Reserve System 
(Board) its approval authority under the Paperwork Reduction Act (PRA), 
pursuant to its regulations, to approve of and assign OMB control 
numbers to collection of information requests and requirements 
conducted or sponsored by the Board under conditions set forth in its 
regulations. Board-approved collections of information are incorporated 
into the official OMB inventory of currently approved collections of 
information. Copies of the PRA submission, supporting statements and 
approved collection of information instruments are placed into OMB's 
public docket files. The Federal Reserve may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection that has been extended, revised, or implemented on or after 
October 1, 1995, unless it displays a currently valid OMB control 
number.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Cynthia Ayouch--Division of Research and Statistics, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3829. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869. Board of Governors of the Federal Reserve 
System, Washington, DC 20551. OMB Desk Officer--Shagufta Ahmed--Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 10235, 725 17th Street NW., 
Washington, DC 20503.
    Final approval under OMB delegated authority for the implementation 
of the following report:
    Report title: Capital Assessments and Stress Testing.
    Agency form number: FR Y-14A and FR Y-14Q.
    OMB control number: 7100-0341.
    Frequency: Annual and Quarterly.
    Reporters: Large domestic bank holding companies (BHCs), that 
participated in the 2009 Supervisory Capital Assessment Program (SCAP) 
exercise.
    Estimated annual reporting hours: FR Y-14A: Summary, 15,580 hours; 
Macro scenario, 589 hours; Counterparty credit risk (CCR), 2,292 hours; 
Basel III, 380 hours; and Regulatory capital instruments, 380 hours. FR 
Y-14 Q: Securities risk, 760 hours; Retail risk, 431,908 hours; Pre-
provision net revenue (PPNR), 47,500 hours; Wholesale corporate loans, 
3,840 hours; Wholesale commercial real estate (CRE) loans, 4,560 hours; 
Trading, private equity, and other fair value assets (Trading risk), 
41,280 hours; Basel III, 1,520 hours; and Regulatory capital 
instruments, 3,040 hours.
    Estimated average hours per response: FR Y-14A: Summary, 820 hours; 
Macro scenario, 31 hours; CCR, 382 hours; Basel III, 20 hours; and 
Regulatory capital instruments, 20 hours. FR Y-14 Q: Securities risk, 
10 hours; Retail risk, 5,683 hours; PPNR, 625 hours; Wholesale 
corporate loans, 60 hours; Wholesale CRE loans, 60 hours; Trading risk, 
1,720 hours; Basel III, 20 hours; and Regulatory capital instruments, 
40 hours.
    Number of respondents: 19.
    General description of report: The FR Y-14A and Q are authorized by 
section 165 of the Dodd-Frank Act which requires the Federal Reserve to 
ensure that certain BHCs and nonbank financial companies supervised by 
the Federal Reserve are subject to enhanced risk-based and leverage 
standards in order to mitigate risks to the financial stability of the 
United States. 12 U.S.C 5365. Additionally, Section 5 of the BHC Act 
authorizes the Board to issue regulations and conduct information 
collections with regard to the supervision of BHCs. 12 U.S.C. 1844.
    As these data will be collected as part of the supervisory process, 
they are

[[Page 73635]]

subject to confidential treatment under exemption 8 of the Freedom of 
Information Act. 5 U.S.C. 552(b)(8). In addition, commercial and 
financial information contained in these information collections may be 
exempt from disclosure under Exemption 4. 5 U.S.C. 552(b)(4). 
Disclosure determinations would be made on a case-by-case basis.
    Abstract: During the years leading up to the recent financial 
crisis, many BHCs made significant distributions of capital, in the 
form of stock repurchases and dividends, without due consideration of 
the effects that a prolonged economic downturn could have on their 
capital adequacy and ability to continue to operate and remain credit 
intermediaries during times of economic and financial stress. In 2009, 
the Board conducted the SCAP, a ``stress test'' of 19 large, domestic 
BHCs. The SCAP was focused on identifying whether large BHCs had 
capital sufficient to weather a more-adverse-than-anticipated economic 
environment while maintaining their capacity to lend. In early 2011, 
the Federal Reserve continued its supervisory evaluation of the 
resiliency and capital adequacy processes of the same 19 BHCs through 
the Comprehensive Capital Analysis and Review (CCAR 2011). The CCAR 
2011 involved the Federal Reserve's forward-looking evaluation of the 
internal capital planning processes of the BHCs and their anticipated 
capital actions in 2011, such as increasing dividend payments or 
repurchasing or redeeming stock.
    On June 17, 2011, the Federal Reserve published the Capital Plan 
rulemaking (or proposed rule) in the Federal Register for public 
comment (76 FR 35351) that would revise the Board's Regulation Y to 
require large BHCs to submit capital plans to the Federal Reserve 
annually among other things. The public comment period for the capital 
plan rule ended on August 5, 2011. In connection with submissions of 
capital plans to the Federal Reserve, BHCs would be required, pursuant 
to proposed section 225.8(d)(3), to provide certain data to the Federal 
Reserve. At the time of the proposed rule, the Federal Reserve did not 
have sufficient detail about the data to be submitted by the BHCs under 
proposed section 225.8(d)(3). For this reason, the Federal Reserve put 
forth this proposal to collect the data to support the ongoing CCAR 
exercise, which would fulfill the data collection contemplated under 
proposed section 225.8(d)(3).
    As proposed, the FR Y-14A will collect annually BHCs' quantitative 
projections of balance sheet assets and liabilities, income, losses, 
and capital across a range of macroeconomic scenarios and qualitative 
information on methodologies used to develop internal projections of 
capital across scenarios. One or more of the scenarios would include a 
market shock that the BHCs would assume when making trading and 
counterparty loss projections. Also, as proposed, the FR Y-14Q will 
collect detailed data on BHCs' various asset classes and PPNR for the 
reporting period, which would be used to support supervisory stress 
test models and for continuous monitoring efforts, on a quarterly 
basis.\1\ These data will be used to assess the capital adequacy of 
large BHCs using forward-looking projections of revenue and losses. In 
addition, these data will be used to help inform the Federal Reserve's 
operational decision making as the agency moves ahead with implementing 
the capital plan rulemaking.
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    \1\ For some schedules, except as noted in the discussion of 
comments, BHCs will be required to submit both quarterly and annual 
schedules for third quarter data.
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    Under section 165 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 (Dodd-Frank Act), the Federal Reserve is 
required to issue regulations relating to stress testing (DFAST) for 
certain BHCs and nonbank financial companies supervised by the Board. 
It is expected that any reporting requirements associated with DFAST 
will be incorporated into the new FR Y-14A/Q information collection.
    Current Actions: On August 31, 2011, the Board granted initial 
approval of this proposal. Notice of the proposed action was published 
in the Federal Register on September 7, 2011 (76 FR 55288); the comment 
period expired on November 7, 2011.

General Summary of Public Comments

    The Board received comments from 11 BHCs, 5 trade associations, and 
a software vendor by letter, email, and orally through outreach calls 
conducted with prospective respondents. Most of the comments received 
requested clarification of the instructions for information to be 
reported, or were technical in nature. Response to these comments will 
be addressed in the final FR Y-14 reporting instructions. Substantive 
comments received either addressed the FR Y-14 collection in general, 
or addressed specific proposed reporting schedules. The final reporting 
schedules and instructions that incorporate the comments submitted by 
the public and that were approved by the Board have been provided to 
the respondent BHCs. The substantive comments are addressed below.

Detailed Discussion of Public Comments and Federal Reserve Responses

    The following is a detailed discussion of aspects of the proposed 
FR Y-14 collection for which the Federal Reserve received one or more 
substantive comments and the Federal Reserve's responses to the 
comments received.

A. General

    In their combined comments, four trade groups provided support for 
the publication of the proposed data schedules for comment and agreed 
with the relevance of much of the data sought to discern the capital 
distribution process. However, they expressed concerns with the 
substance of data requested on several components of the schedules and 
also sought further clarification. Their substantive comments are 
discussed below. Another trade group expressed support for the proposed 
data schedules as they apply to the 19 respondent BHCs, both in terms 
of the breadth and the depth of the data requested. However, they 
strongly cautioned against imposing similar reporting requirements on 
smaller community banks.
    The Federal Reserve proposed that respondents would submit a data 
schedule for any portfolio that meets certain materiality thresholds, 
which are generally defined as those portfolios with asset balances 
greater than $5 billion or asset balances relative to Tier 1 capital 
greater than 5 percent on average for the four quarters preceding the 
reporting quarter. A number of commenters requested an increase of 
these materiality thresholds and to allow the BHCs to exclude certain 
portfolios on a case-by-case basis.
    In selecting the materiality thresholds, the Federal Reserve 
weighed the benefit of minimizing burden to BHCs against obtaining 
comprehensive data, which will allow the Federal Reserve to 
consistently produce supervisory estimates of loss for each BHC under a 
given scenario. The Federal Reserve believes that the proposed 
materiality thresholds strike the right balance between the two 
considerations and, therefore, will implement the materiality 
thresholds as proposed.
    The proposal stated that the Federal Reserve expects to make the 
final data schedules available to respondents in late November and to 
receive completed FR Y-14Q data submissions by mid-December and FR Y-
14A data submissions by early January. Several

[[Page 73636]]

commenters expressed concerns about the short turnaround time to submit 
the data once the data schedules are finalized, particularly given the 
granularity of the data requested.
    The timeline for the initial data submission largely reflects the 
timeline for implementation of the proposed capital plan rule. As 
stated in the initial Federal Register notice and in the proposed FR Y-
14Q instructions, the quarterly data will be used to produce 
supervisory model estimates, which will be a key input to the CCAR 
process. The Federal Reserve weighed the benefit of providing 
additional time to complete the data submission against the need to 
have sufficient time to validate the data and produce supervisory model 
estimates based on the submitted data in order to provide timely 
responses to BHCs to their Capital Plan. After further consideration, 
the Federal Reserve will implement the timeline as proposed. However, 
in response to other comments discussed below, the Federal Reserve will 
implement several changes to the data schedules to reduce burden.
    Two commenters further suggested that respondents should be exempt 
from submitting the fourth quarter 2011 data given a later filing 
deadline for the third quarter data. The quarterly data collection will 
help the Federal Reserve enhance its supervisory models and support 
ongoing supervisory activities. The BHCs will be required to submit the 
fourth quarter 2011 data 45 days after the quarter ends or 
approximately two months after the third quarter 2011 data are due. The 
Federal Reserve will implement a February 14, 2012, due date for the 
fourth quarter FR Y-14Q as proposed.
    Several commenters requested clarification on the reporting of 
particular data items when the BHCs do not maintain the data in their 
systems. The same commenters suggested either eliminating the 
particular data items or allowing BHCs to leave the data items blank. 
In response to other comments discussed below, the Federal Reserve will 
implement several changes to the data schedules to reduce burden and to 
ease the completion of the data schedules.
    A couple of commenters suggested a staggered approach to data 
collection where some data are collected for the initial submission, 
but other data, particularly historical data, are collected in future 
quarters. They suggested staggered due dates to lessen the burden for 
the initial submission, given the short turnaround time, while allowing 
the Federal Reserve to collect data in the future.
    The data reported on the FR Y-14Q schedules, which include, in some 
cases, a one-time request for historical data, are essential for 
supervisory models and allow the Federal Reserve to produce supervisory 
estimates consistently across all BHCs. However, in response to other 
comments discussed below, the Federal Reserve will implement several 
changes to the data schedules to reduce burden.
    Several commenters stated that there is a significant overlap 
between certain FR Y-14 data schedules and data currently provided by 
large national banks to their banking regulator. Other commenters noted 
an overlap between certain FR Y-14 data schedules (e.g. Securities) and 
other existing Federal Reserve supervisory data collections. Upon 
implementation, BHCs will be required to submit the FR Y-14 schedules. 
The Federal Reserve does not believe that other data collections 
overlap with the FR Y-14. Upon implementation, the FR Y-14 data 
schedules would replace the Federal Reserve's ongoing supervisory data 
collection of a similar nature for all 19 BHCs.
    Several commenters noted inconsistencies in the reporting 
requirements for loans classified as held for sale and held for 
investment accounted for under a fair value option. Recognizing the 
inconsistencies noted by the commenters, the Federal Reserve will add 
new data items to the Wholesale, Retail, and Summary schedules to 
ensure the consistent treatment of these assets across portfolios. 
Recommended changes to the affected schedules are described below.
    One commenter noted that BHCs should have the opportunity to 
review, provide feedback, and amend the market shocks, particularly as 
it applies to the CCAR 2012 exercise. The Federal Reserve does not 
agree that it would be beneficial to engage the BHCs in an iterative 
process to determine the market shocks provided. BHCs will have the 
opportunity to provide their own shocks in the BHC specified scenarios.
    The trade groups expressed concern about the delay in the Federal 
Reserve's responses to technical and clarifying questions and urged the 
Federal Reserve to clearly set forth a robust and transparent process 
for responding to future inquiries in a timely manner. The Federal 
Reserve will implement an enhanced and streamlined process for 
answering these types of questions in a timely manner during the CCAR 
2012 exercise.

B. Trading Risk Schedule

    One commenter suggested, citing a potentially heavy reporting 
burden, allowing BHCs to interpolate the data for the Trading Risk 
schedule using the data produced on a regular basis for internal risk 
reports, where appropriate. The Federal Reserve recognizes the 
potential significant reporting burden and will allow BHCs to 
interpolate the data to map into the Trading Risk schedule.
    Several commenters noted structural problems with the equities and 
commodities spot/volatility grids in the proposed schedule and urged 
the Federal Reserve to make modifications to the schedule. 
Specifically, they argued that the range of shocks defining the grid go 
beyond those that would reasonably be expected given historical 
volatility and that some of the spot/volatility combinations were not 
reflective of the historical relationship between prices and 
volatility. The Federal Reserve recognizes the commenters' concern and 
will adjust the range of shocks to be consistent with the range of 
historical volatility across the term structure. Further, the Federal 
Reserve will remove the reporting requirements for the combinations of 
spots and volatility points that would be inconsistent with the 
historical distribution of combinations.
    Two commenters suggested that the commingling of directional risk 
and basis risk in the DV01 worksheet of the Trading Risk schedule 
obfuscates the interest rate exposure, and that it would be more 
appropriate to distinguish between the risks. The Federal Reserve 
agrees with the comment, and will separate the base curves and basis 
risk in the tables so that they are clearly differentiated.
    Several commenters suggested changes to the Trading Risk schedule, 
including increasing granularity or adding risk metrics in the Trading 
Risk schedule. The Federal Reserve will not make such changes at this 
time but will consider those comments for potential future revisions to 
the schedule.
    One commenter suggested adding business line materiality 
thresholds, in addition to the BHC-level materiality thresholds 
described above, because it is operationally difficult to capture small 
amounts of risk in business lines where risk is not the main risk 
factor. The commenter further proposed not completing the exposures 
portion of the worksheets for immaterial risk (e.g. less than 5 percent 
of total for a given risk exposure metric). The Federal Reserve 
believes that the exposure should be aggregated at a firm-level, not by

[[Page 73637]]

business line, and therefore, recommends using existing minimum 
thresholds in the proposed worksheets. The estimated aggregate exposure 
of positions not included should be less than the stated minimum 
threshold for each table.
    The initial Federal Register notice indicated that the as-of date 
for the Trading Risk schedule for the third quarter, the annual CCR 
schedule, and the Trading Risk worksheet in the Summary schedule would 
be communicated to the BHCs sometime in the third or fourth quarter of 
each year. Two commenters noted that the BHCs should be permitted to 
submit data using the BHCs regular weekly report as long as this date 
falls during the week of the official as-of date. Another commenter 
suggested that the Federal Reserve should shorten the time period from 
which the as-of date would be selected.
    The Federal Reserve agrees with both comments and will allow BHCs 
to submit the trading data as of the most recent date that corresponds 
to the regular reporting cycle that falls prior to the official trading 
as-of date. In addition, the Federal Reserve will communicate the as-of 
date in the fourth quarter of each year.

C. CCR Schedule

    Several commenters indicated that there is significant burden 
associated with the requirement to run multiple scenarios and 
specifications to capture Expected Exposure (EE) profiles (i.e. running 
two separate specifications for each of the unstressed EE profile, 
stressed EE profile using the BHC shock scenario, and stressed EE 
profile using the Federal Reserve shock scenario) to complete the CCR 
schedule. The Federal Reserve acknowledges the burden placed on BHCs of 
running all six combinations of scenarios and specifications and the 
resulting effects on data quality. Therefore, the Federal Reserve will 
remove two of the three specified EE profiles under the Federal Reserve 
specification, namely, the unstressed EE profile and stressed EE 
profile using the BHC shock scenario. Unstressed EE profiles as well as 
EE profiles using both the BHC and Federal Reserve shock scenarios are 
required for the BHC specification. In addition, the stressed EE 
profile using the Federal Reserve shock scenarios and the Federal 
Reserve specification is also required.
    One commenter stated that the ``Trading IDR losses from securitized 
products'' data item should not include losses from asset-backed 
securitized (ABS) products which typically have multiple-name 
underlying reference obligations (such as residential mortgage-backed 
securities (RMBS) or commercial mortgage-backed securities (CMBS)). The 
dominant part of the risk in these products (when held in the trading 
book and marked to market) is general market risk, and is therefore 
fully captured as mark-to market losses in the trading book loss 
calculation. The commenter noted that this view is also reflected in 
the proposed rule on the Capital Adequacy Guidelines for Bank Holding 
Companies: Market Risk Measure (Appendix E of 12 CFR part 225), which 
does not propose calculating an incremental default risk measure for 
these products.
    The Federal Reserve disagrees with the comment and believes that in 
order to fully capture all default and impairment risk for assets under 
a given scenario, all securitization structure types, including ABS, 
CMBS, and RMBS, should be included in the calculation. The underlying 
assets incur additional default, which translates into impairment to 
the bonds. The additional incremental loss above and beyond the market 
risk shock should be included in the calculation.
    One commenter noted that in a prior CCR submission, the BHC 
provided additional columns and rows of data in order to better explain 
the portfolio. The commenter asked if they could continue to 
voluntarily provide this additional explanatory data, and if so, 
whether the FR Y-14 reporting format would allow the submission of such 
additional data. The Federal Reserve agrees and appreciates BHCs 
providing any additional data to give clarity to the portfolio 
analysis. The Federal Reserve will create a separate tab and add a 
separate column on the existing schedule for BHCs to provide additional 
explanatory data at their option.

D. Retail Risk Schedule

    One commenter suggested that non-purpose securities-based lending 
should be excluded from the Other Consumer Loans worksheet, given that 
the risk characteristics of this lending type are markedly different 
from other loans reported in the worksheet. In referencing the relevant 
corresponding data item collected on the FR Y-9C\2\, the proposed 
worksheet indicates that securities-based lending is included in the 
definition of other consumer loans. The Federal Reserve agrees with the 
comment and will exclude non-purpose securities-based lending from the 
definition of other consumer loans.
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    \2\ The Consolidated Financial Statements for Bank Holding 
Companies (FR Y-9C; OMB No. 7100-0128).
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    One commenter indicated that the difference in segment breaks 
across retail schedules presents a logistical challenge, and 
recommended creating consistent segmentations across portfolios. The 
Federal Reserve carefully weighed the need for consistency against 
potential added burden and the need to capture risk characteristics of 
each portfolio in selecting segment breaks, and will maintain the 
segment breaks as proposed.
    In response to the comments noted above related to inconsistent 
treatment of held for sale and held for investment loans accounted for 
under the fair value option, the Federal Reserve will replace a segment 
variable, ``SOP 03-3'' with a variable for ``Accounting Treatment'' to 
the domestic mortgage schedule. The segment will have an option for 
Held for Investment--ASC 310-30\3\ Purchase Impaired, Held for Sale/
Held for Investment under a Fair Value Option or Other.\4\
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    \3\ ASC 310-30 is the new FASB codification for SOP 03-3.
    \4\ Other includes all mortgage loans that are not reported 
under fair value accounting or under ASC 310-30.
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    One commenter suggested that an additional segment should be added 
in the Small and Medium Enterprise schedules to separate lines of 
credit from loans. The Federal Reserve will not make a change at this 
time as a full assessment of the effect of such a change on burden has 
not been completed. However, the Federal Reserve will consider this 
comment for potential future updates to the schedules.

E. Wholesale Schedule (CRE data)

    Several commenters indicated that reporting data on cross-
collateralized loans as requested for the CRE collection would present 
a significant challenge. Some commenters suggested that the due date 
for the initial submission of CRE data should be moved to December 31 
in order to allow the BHCs to make necessary changes. The commenters 
also suggested that the definition for the data item that captures the 
loan numbers of cross collateralized loans should be changed from 
``cross collateralized and/or cross defaulted'' to ``cross 
collateralized and cross defaulted.'' Finally, they commented that 
loans that have less than $1 million committed should be excluded for 
the purpose of cross-collateralization, given its statistical 
irrelevance and the significant operational challenges.
    The Federal Reserve will retain the initial CRE submission deadline 
of December 15, consistent with the

[[Page 73638]]

deadline for all other quarterly schedules. However, in response to 
comments, the Federal Reserve will revise the CRE collection so that 
BHCs will only report the loan numbers of other cross collateralized 
loans, not other cross defaulted loans. In addition, for loans less 
than $1 million that are cross collateralized with loans that have 
commitments greater than $1 million, the Federal Reserve will require 
BHCs to report only three data items--Loan Number, Outstanding Balance, 
and Committed Balance. All other data items will be optional. However, 
as proposed, BHCs will report all loans greater than $1 million based 
on committed balance.
    One commenter suggested that by not capturing non-CRE collateral, 
the data resulting from the proposed CRE schedule would overstate loan-
to-value ratios. The Federal Reserve agrees with the comment, and will 
add an optional data item for BHCs to report cash and marketable 
securities where a BHC has a first perfected security interest.
    In response to the comments noted above related to inconsistent 
treatment of held for sale and held for investment loans accounted for 
under a fair value option, the Federal Reserve will add mandatory data 
items to capture the reserve applied to the loan subject to ASC 310-10, 
the ASC 310-30 related adjustment for debt securities acquired in a 
transfer and the fair value adjustment on loans classified as held for 
sale and held for investment at fair value.

F. Wholesale Schedule (Corporate Loan Data)

    Many commenters expressed a concern that the significant amount of 
detail (44 data items) proposed for collection of corporate loan 
facilities in the Corporate Loan schedule will represent a significant 
burden for BHCs. In response to these comments, the Federal Reserve 
will modify the Corporate Loan collection to implement a $1 million 
threshold for certain ``other'' loan categories and to exclude 
unplanned overdraft and loans for purchasing and carrying securities 
(secured or unsecured).
    In response to the comments noted above related to inconsistent 
treatment of held for sale and held for investment loans accounted for 
under a fair value option, the Federal Reserve will replace the 
proposed mandatory field ``Other Than Temporary Impairment (OTTI)'' 
which captured only credit impairment charges with a mandatory data 
item, ``Fair Value Adjustments (FVA)'' to capture any fair value 
adjustments on held for sale and held for investment loans accounted 
for under a fair value option.

G. PPNR Schedule

    Several commenters expressed concerns about the level of 
granularity requested in the PPNR schedule and their ability to provide 
the data within the timeframe for the initial submission. The 
commenters expressed concerns about the PPNR Submission/Projections 
worksheet, particularly related to the section on net interest income 
by business segment, noting that historical and projected periods would 
be challenging to map to existing internal management reporting 
systems. Commenters noted that any estimates would have significant 
data quality concerns. In addition, they noted that data on the PPNR 
Metrics worksheet would be difficult to provide on a forward looking 
and historical basis. The commenters also expressed concerns about 
their ability to provide data as requested on the Net Interest Income 
(NII) worksheet, and requested that BHCs should have an option to 
submit either the PPNR Submission worksheet or the NII worksheet, not 
both. Further, several commenters suggested that materiality thresholds 
should be considered for data items collected in the PPNR schedule as 
they are for balance sheet items.
    In response to these comments, the Federal Reserve will implement 
several revisions to the PPNR worksheets. First, the instructions will 
be modified to underscore that BHCs for which deposits comprise less 
than one third of total liabilities for any reported period need only 
complete the PPNR Submission/Projections worksheets and the related 
portion of the PPNR Metrics worksheets. Such BHCs would designate the 
PPNR Submission/Projections worksheets as ``Primary Net Interest 
Income'' and the NII worksheet as ``Not Applicable.'' Second, all other 
BHCs will specify either the PPNR Submission/Projections or the NII 
worksheet as ``Primary Net Interest Income'' and the other as 
``Supplementary Net Interest Income'' through a pull down menu at the 
top of each worksheet. Note that this designation will refer only to 
the NII portion of the worksheets; all other items on the PPNR 
Submission worksheet and the related portion of the PPNR Metrics 
worksheet must be completed.
    The schedule designated as ``Primary Net Interest Income'' and the 
related portions of the PPNR Metrics worksheet will be the main sources 
of analysis and assessment by the Federal Reserve. Therefore, the 
Federal Reserve will require that BHCs continue to complete all data 
items in the primary schedule and the related portion of the PPNR 
Metrics worksheet. The Federal Reserve will require that BHCs also 
provide additional information in the supporting documentation for the 
PPNR schedule, including the discussion of consistency of a given 
schedule with the BHC's external reporting and internal reporting and 
forecasting; a description of broadly-defined types of business models 
they currently use (e.g. Asset/Liability, Relationship, Business 
Product/Services/Activity and others); high-level descriptions of 
motivations for their choices of models for conducting business, 
reporting (internal/external) and forecasting profit and loss result; 
benefits/challenges associated with those models; and methodologies 
employed. For purposes of the FR Y-14 schedules, once a BHC makes a 
``primary'' designation, it will continue to treat a given schedule as 
``primary'' for all historical and forecast periods.
    The ``Supplementary Net Interest Income'' worksheet and the related 
portion of the PPNR Metrics worksheet will be used as supplementary 
sources of analysis and assessment by the Federal Reserve. BHCs will 
provide the data for the ``supplementary'' worksheet on a ``best 
efforts'' basis and complete this worksheet to the fullest extent 
possible. It is expected that all data items identified with a number 
(e.g. 6), but not a number and letter (e.g. 6A) will be completed. In 
the supporting documentation, the BHCs will provide information on 
which data items or areas were particularly challenging to complete and 
reasons for the challenge.
    Third, the Federal Reserve will add a materiality threshold for the 
business segments within the PPNR Submissions/Projections worksheets. 
For each of the 10 major segments, BHCs will be required to report the 
PPNR Submission/Projections and PPNR Actual/Projection data only if 
revenues for that segment relative to total revenues exceeded 5 percent 
in any of the last four quarters preceding the first projection period 
requested on the PPNR schedule. BHCs will report all immaterial 
business segment revenue in a separate catch-all data item on the PPNR 
Submission/Projections worksheet and report no data for those 
immaterial segments on the PPNR Metrics worksheet. Additionally, if the 
total immaterial business segment revenue relative to total revenue is 
greater than 10 percent in any of the last four quarters preceding the 
first projection period requested on the PPNR schedule, the BHCs must 
report

[[Page 73639]]

actuals/projections for the largest business segment among the 
immaterial business segments for all quarters in the PPNR Submissions/
Projections and PPNR Metrics worksheets. Note that for purposes of the 
PPNR schedule, revenue is defined as the sum of NII and non-interest 
income adjusted for selected exclusions.
    Finally, the Federal Reserve will add materiality thresholds for 
international breakouts by region based on whether international 
revenue exceeded 5 percent of total revenue for a given BHC in any of 
the last four quarters preceding the first projection period requested 
on the PPNR schedule. Changes implemented for the PPNR schedule will 
also apply to the relevant PPNR worksheets in the Summary schedule.

H. Regulatory Capital Instruments and Basel III Schedules

    Two commenters raised concerns about potential duplicative data 
requests related to Basel III with a potential overlap with the recent 
Basel Committee's Basel III Implementation Monitoring Quantitative 
Impact Study (QIS) data collection request. There are key differences 
between FR Y-14 Basel III annual and quarterly schedules and the 
template used for the QIS (the most recent submission of which was due 
in October 2011). Whereas the Basel Committee intends to collect actual 
point-in-time data twice a year as of the second and fourth quarters, 
the annual FR Y-14 Basel III schedule will collect each year actual 
balances as of the third quarter in addition to forecasted fourth 
quarter balances for all future periods through year-end 2016. In 
addition, the Basel III schedule will collect data and supplemental 
information on material planned actions that the BHC intends to pursue 
over that same forecasted period to address the impact of Basel III on 
the BHC's capital, risk-weighted assets, and/or leverage exposures.
    The quarterly Basel III schedule will be used to conduct quarterly 
monitoring of each BHC's progress against the forecasted data provided 
on the annual Basel III schedule. The data for the quarterly schedule 
will not be as granular as the data collected in the annual schedule, 
and will only be collected in quarters in which the annual schedule is 
not collected.\5\ Specifically, the quarterly schedule collects 
quarterly point-in-time total balances only for Tier 1 Common, Tier 1 
Capital, Risk-weighted Assets and Leverage Exposures, including a few 
select components of those balances.
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    \5\ Likewise, the data for the Regulatory Capital Instruments 
quarterly schedule will only be collected in quarters in which the 
annual schedule is not collected.
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    One commenter requested the collection of additional information on 
the annual and quarterly Basel III schedules. The commenter stated that 
fully understanding the Basel treatment for regulatory capital 
instruments is crucial in order to assess the quality of each 
instrument within a BHC's capital inventory (and the totality of the 
capital instrument inventory), under the Basel I and Basel III capital 
frameworks. Since Basel treatment is dependent on instrument-specific 
characteristics, they suggested modification of the annual and 
quarterly worksheets such that the BHC may specify the relevant Basel 
treatment, especially in cases where no CUSIP \6\ number or other 
internal identification number is provided.
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    \6\ CUSIP refers to the Committee on Uniform Security 
Identification Procedures. This 9-character alphanumeric code 
identifies any North American security for the purposes of 
facilitating clearing and settlement of trades.
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    Specifically they suggested adding a column for Basel III treatment 
to the Redemptions Q3 20YY worksheet and two columns for Basel I and 
Basel III treatments, respectively, to the Redemptions 4QYY-4QZZ 
worksheet in the FR Y-14A schedule. The commenter also suggested adding 
two columns for Basel I and Basel III Treatments, respectively, to the 
Planned Action Detail from the CCAR Submission section and also to the 
Planned Redemption Details from the CCAR Submission and/or Report 
Missing Planned Redemption section of the Confirm Proposed Redemption 
worksheet. The commenter stated that they believe these data are 
necessary to analyze the specific instrument that the BHC has redeemed 
or plans to redeem (depending on whether the worksheet collects actual 
or projected data).
    In addition, in order to fully analyze and assess the composition 
of Tier 1 and Tier 2 capital, the commenter recommended adding a column 
titled ``Capital amount redeemed'' (between proposed columns R and S) 
to the Confirm Proposed Redemptions worksheet of the quarterly 
Regulatory Capital Instruments schedule. The commenter believes this 
change is necessary in order to collect information on the amount of 
the instrument actually redeemed. Although column L collects 
information on the amount planned to be redeemed, this additional field 
is necessary in the event the actual amount executed differs from the 
amount that was originally planned.
    The Federal Reserve agrees with these comments, and will implement 
the suggested changes to the Regulatory Capital Instruments and Basel 
III annual and quarterly schedules.

I. Summary Schedule

    One commenter requested the addition of new data items related to 
repurchase reserve/liability for representations and warranties to the 
Income Statement worksheet in the Summary schedule. Specifically they 
requested the collection of the following data items (4 reported data 
items and 1 data item calculated by an imbedded formula):
     New data item 59, ``Reserve, prior quarter''
     New data item 60, ``Provisions during the quarter''
     New data item 61, ``Net charges during the quarter''
     New data item 62, ``Reserve, current quarter'' (This data 
item would be calculated and not reported by the BHC: sum of items 59 
and 60 less item 61.)
     New data item 63, ``Line item of PPNR Submission/
Projections worksheet where repurchase provision is recorded''
The commenter noted that these data items would allow supervisors to 
view the evolution of BHCs' projections of repurchase reserve/liability 
for representations and warranties.
    The Federal Reserve recognizes that while BHCs have taken steps to 
reduce the risk associated with representations and warranties, this 
issue has not been fully resolved since CCAR 2011. The Federal Reserve 
agrees with these comments and will implement the suggested changes to 
the Income Statement worksheet in the Summary schedule. Note that these 
data items were also reported by BHCs in their CCAR 2011 submission and 
do not duplicate other data reported on this or any other information 
collection.
    One commenter noted that because information on settlements related 
to representation and warranty breaches in both the Retail Repurchase 
and Historical Operational Risk worksheets of the Summary schedule is 
being collected that this may result in double counting related 
exposures. The Federal Reserve agrees with this comment and will 
clarify the instructions for the Summary schedule to ensure the 
representation and warranty breaches captured in the Retail Repurchase 
worksheet are not captured in the Historical Operational Risk 
worksheet.
    One commenter requested clarification of the difference between the 
C&I Small Business (Graded) and Small Business (Scored/Delinquency 
Managed) data items on the Income Statement and Balance Sheet 
worksheets of the Summary schedule.

[[Page 73640]]

The Federal Reserve will better align these worksheets with other 
regulatory report loan classification schemes, thereby ensuring no 
overlap in reporting requirements across FR Y-14 schedules.
    Two commenters requested a change to the allowance for loan and 
lease losses (ALLL) referenced in the Income Statement worksheet of the 
Summary schedule to an allowance for credit loss (ACL) reference, as 
that would be in line with their practice of provisioning for ALLL and 
for an allowance for unfunded credit commitments. In order to provide 
greater distinction between the ALLL and that for off-balance sheet 
credit exposures, the Federal Reserve will add a memorandum item to the 
Balance Sheet worksheet and adjust the Income Statement worksheet to 
capture a breakout of this component. These adjustments will allow BHCs 
to provide both pieces of the total allowance.
    One commenter noted that, in addition to net charge-offs, they 
provision for neutral items and that the allowance roll-forward doesn't 
allow the BHC to record these provision-neutral impacts. The Federal 
Reserve agrees with this comment and will add a data item to the ALLL 
section to capture non-provision or charge-off related changes to the 
ALLL, making the section more consistent with Schedule HI-B, Part II of 
the FR Y-9C.
    One commenter raised concerns about the legal implications of 
disclosing estimated litigation losses on a granular basis on the 
Operations Risk worksheet in the Summary schedule. The Federal Reserve 
notes that a number of data items collected on the FR Y-14A and Q, 
including respondents' projections, may be considered trade secrets or 
confidential supervisory information. As such, respondents' estimates 
of litigation losses are expected to remain confidential.\7\
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    \7\ The confidentiality of information submitted to the Board 
under the data schedules and related materials shall be determined 
in accordance with applicable exemptions under the Freedom of 
Information Act (5 U.S.C. 552) and the Board's Rules Regarding 
Availability of Information (12 CFR part 261).
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    In response to the comments noted above related to the inconsistent 
treatment of held for sale and held for investment loans accounted for 
under a fair value option, the Federal Reserve will add a Fair Value 
Loan worksheet, and a change to the income statement instructions to 
capture the marks taken on fair value loans. The Fair Value Loan 
worksheet will capture the aggregate fair values and unpaid principal 
balances of loans classified as held for sale or held for investment 
measured at fair value in the following asset classes: first lien 
mortgage, home equity line of credit, credit card, auto loans and 
leases, student loans, small business loans, and other consumer loans. 
In addition, the instructions for the Summary schedule will be 
clarified to indicate that any losses related to loans held for sale or 
held for investment with the fair value option should be reported on 
the Income Statement worksheet of the Summary schedule under ``Other 
Losses.''
    Finally, the Federal Reserve will remove data items related to 
mortgage servicing rights (MSRs) from the Trading worksheet of the 
Summary schedule to further reduce burden on respondents. All MSR-
related earnings, including those captured in the trading book, will be 
reported on the PPNR worksheet of the Summary schedule.

    Board of Governors of the Federal Reserve System.
    November 21, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-30666 Filed 11-28-11; 8:45 am]
BILLING CODE 6210-01-P