Regulations Y and YY: Application of the Revised Capital Framework to the Capital Plan and Stress Test Rules, 59779-59791 [2013-23618]
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Federal Register / Vol. 78, No. 189 / Monday, September 30, 2013 / Rules and Regulations
administrative costs to 15 percent of a
fiscal year’s available income. In 2012,
the USHBC’s administrative costs were
7.46 percent of available income, much
lower than the Order’s threshold.
No changes have been made to the
proposed rule based on these opposing
comments.
Other Comments
Two comments were received that did
not take a position on the proposed
assessment rate increase. One
commenter stated that she supports
promoting blueberries. Another
commenter asked about the amount of
funds used for administration versus
promotion, hoping that at least 75
percent of the funds are used for
promotion, research and information
projects. As previously mentioned,
section 1218.50(i) limits the funds that
the USHBC can spend for
administration to 15 percent of available
income for the year. In 2012, the
USHBC’s administrative costs were 7.46
percent of available income, much
lower than the Order’s threshold.
USHBC 2012 actual program expenses
were almost 80 percent of its total
expenditures.
After consideration of all relevant
matters presented, including the
information and recommendation
submitted by the USHBC and other
available information, it is hereby found
that this rule, as hereinafter set forth, is
consistent with and would effectuate
the purposes of the 1996 Act.
List of Subjects in 7 CFR Part 1218
Administrative practice and
procedure, Advertising, Consumer
information, Marketing agreements,
Blueberry promotion, Reporting and
recordkeeping requirements.
For the reasons set forth in the
preamble, Part 1218, Chapter XI of Title
7 is amended as follows:
PART 1218—BLUEBERRY
PROMOTION, RESEARCH, AND
INFORMATION ORDER
modified with the approval of the
Secretary.
(d) * * *
(2) The import assessment shall be
uniformly applied to imported fresh and
frozen blueberries that are identified by
the numbers 0810.40.0029 and
0811.90.2028, respectively, in the
Harmonized Tariff Schedule of the
United States or any other numbers
used to identify fresh and frozen
blueberries. * * *
*
*
*
*
*
Dated: September 24, 2013.
Rex A. Barnes,
Associate Administrator.
[FR Doc. 2013–23695 Filed 9–27–13; 8:45 am]
BILLING CODE 3410–02–P
FEDERAL RESERVE SYSTEM
12 CFR Parts 225 and 252
[Docket No. R–1463; RIN 7100 AE–01]
Regulations Y and YY: Application of
the Revised Capital Framework to the
Capital Plan and Stress Test Rules
Board of Governors of the
Federal Reserve System (Board).
ACTION: Interim final rule with request
for comment.
AGENCY:
The Board invites comment
on an interim final rule that amends the
capital plan and stress test rules to
require a bank holding company with
total consolidated assets of $50 billion
or more to estimate its tier 1 common
ratio using the methodology currently in
effect in 2013 under the existing capital
guidelines (not the rules as revised on
July 2, 2013). The interim final rule also
clarifies when a banking organization
would estimate its minimum regulatory
capital ratios using the advanced
approaches for a given capital plan and
stress test cycle and makes minor,
technical changes to the capital plan
rule.
SUMMARY:
■
This rule is effective on
September 30, 2013. Comments must be
received on or before November 25,
2013.
Authority: 7 U.S.C. 7411–7425; 7 U.S.C.
7401.
ADDRESSES:
DATES:
1. The authority citation for 7 CFR
part 1218 continues to read as follows:
2. In § 1218.52, paragraph (c) and the
first sentence of paragraph (d)(2) are
revised to read as follows:
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■
§ 1218.52
Assessments.
*
*
*
*
*
(c) Such assessments shall be levied at
a rate of $18 per ton (or $0.01984 per
kg) on all blueberries. The assessment
rate will be reviewed, and may be
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You may submit comments,
identified by Docket R–1463 and RIN
No. 7100 AE 01, by any of the following
methods:
Agency Web site: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/apps/
foia/proposedregs.aspx.
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
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59779
Email: regs.comments@
federalreserve.gov. Include docket
number in the subject line of the
message.
Facsimile: (202) 452–3819 or (202)
452–3102.
Mail: Robert deV. Frierson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at https://
www.federalreserve.gov/apps/foia/
proposedregs.aspx as submitted, unless
modified for technical reasons.
Accordingly, your comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper form in Room MP–500 of the
Board’s Martin Building (20th and C
Streets NW.) between 9 a.m. and 5 p.m.
on weekdays.
FOR FURTHER INFORMATION CONTACT: Lisa
Ryu, Deputy Associate Director, (202)
263–4833, Constance Horsley, Manager,
(202) 452–5239, or Ann McKeehan,
Senior Supervisory Financial Analyst,
(202) 973–6903, Division of Banking
Supervision and Regulation; Laurie
Schaffer, Associate General Counsel,
(202) 452–2272, Ben McDonough,
Senior Counsel, (202) 452–2036, or
Christine Graham, Senior Attorney,
(202) 452–3005, Legal Division, Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW., Washington, DC 20551.
Users of Telecommunication Device for
Deaf (TDD) only, call (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
On July 2, 2013, the Board approved
revised risk-based and leverage capital
requirements for banking organizations
that implement the Basel III regulatory
capital reforms and certain changes
required by the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(revised capital framework).1 The
revised capital framework introduces a
new common equity tier 1 capital ratio
and supplementary leverage ratio, raises
the minimum tier 1 ratio and, for certain
banking organizations, leverage ratio,
implements strict eligibility criteria for
regulatory capital instruments, and
1 See, Regulatory Capital Rules: Regulatory
Capital, Implementation of Basel III, Capital
Adequacy, Transition Provisions, Prompt Corrective
Action, Standardized Approach for Risk-weighted
Assets, Market Discipline and Disclosure
Requirements, Advanced Approaches Risk-Based
Capital Rule, and Market Risk Capital Rule (July 2,
2013), available at: https://www.federalreserve.gov/
newsevents/press/bcreg/20130702a.htm (revised
capital framework).
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introduces a standardized methodology
for calculating risk-weighted assets. The
new minimum regulatory capital ratios
and the eligibility criteria for regulatory
capital instruments will begin to take
effect as of January 1, 2014, subject to
transition provisions, for banking
organizations that meet the criteria for
the advanced approaches rule
(advanced approaches banking
organizations).2 All other banking
organizations must begin to comply
with the revised capital framework
beginning on January 1, 2015.
As the revised regulatory capital
framework comes into effect, banking
organizations will be required to reflect
the new capital rules in their capital
plans submitted under the Board’s
capital plan rule and in their stress tests
conducted under the Board’s rules
implementing the stress test
requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act.
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II. Capital Plan Rule
Pursuant to the Board’s capital plan
rule and Board’s related supervisory
process, the Comprehensive Capital
Analysis and Review (CCAR), the Board
assesses the internal capital planning
process of a bank holding company with
total consolidated assets of $50 billion
or more (large bank holding company)
and its ability to maintain sufficient
capital to continue its operations under
expected and stressful conditions.3
Under the capital plan rule, a large bank
holding company is required to submit
an annual capital plan to the Board that
contains estimates of its minimum
regulatory capital ratios and its tier 1
common ratio under expected
conditions and under a range of stressed
scenarios over a nine-quarter planning
horizon (planning horizon).4 A capital
plan also must include a discussion of
how the large bank holding company
will maintain a pro forma tier 1
common ratio above 5 percent under
expected conditions and stressed
scenarios.5
The tier 1 common ratio is a measure
that the Federal Reserve has used for
supervisory purposes during and after
the financial crisis, including CCAR—it
is not a minimum capital requirement.6
The capital plan rule defines the tier 1
2 A banking organization is subject to the
advanced approaches rule if it has consolidated
assets greater than or equal to $250 billion, if it has
total consolidated on-balance sheet foreign
exposures of at least $10 billion, or if it elects to
apply the advanced approaches rule.
3 76 FR 74631 (Dec. 1, 2011) (codified at 12 CFR
225.8) (capital plan rule).
4 See generally 12 CFR 225.8.
5 Id. at § 225.8(d)(2)(i)(B).
6 76 FR 74631, 74636 (December 1, 2011).
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common ratio as the ratio of a bank
holding company’s tier 1 common
capital to its total risk-weighted assets.
Tier 1 common capital is defined as tier
1 capital less non-common elements in
tier 1 capital, including perpetual
preferred stock and related surplus,
minority interest in subsidiaries, trust
preferred securities and mandatory
convertible preferred securities.7 The 5
percent threshold reflected a
supervisory assessment of the minimum
capital needed to provide a high level of
confidence that a BHC can continue to
be a going concern throughout stressful
conditions and on a post-stress basis,
based on an analysis of the historical
distribution of earnings by large banking
organizations.8
The preamble to the capital plan rule
noted that the Basel III framework
proposed by the Basel Committee on
Bank Supervision includes a different
definition of tier 1 common capital and
that the Board and the other federal
banking agencies continued to work on
implementing Basel III in the United
States.9 The capital plan rule’s
definition of ‘‘tier 1 common ratio’’
states that the definition will remain in
effect until the Board adopts an
alternative tier 1 common ratio
definition as a minimum regulatory
capital ratio.10
III. Stress Test Rules
The Board’s stress test rules for large
bank holding companies and nonbank
financial companies supervised by the
Board establish a framework for the
Board to conduct annual supervisory
stress tests to evaluate whether these
companies have the capital necessary to
absorb losses as a result of adverse
economic conditions and require these
companies to conduct semi-annual
company-run stress tests.11 Under the
supervisory stress tests, the Board uses
data as of September 30 of each year to
assess a covered company’s capital
levels and regulatory capital ratios and
its tier 1 common ratio, over the ninequarter planning horizon of a given
stress test cycle.12 Similarly, the annual
and semi-annual stress tests conducted
by a covered company require it to
report, among other elements, its
8 Basel Committee on Banking Supervision,
Calibrating regulatory minimum capital
requirements and capital buffers: A top-down
approach (October 2010), available at https://
www.bis.org/publ/bcbs180.htm.
9 76 FR 74631, 74637 (December 1, 2011).
10 Id.at § 225.8(c)(9).
11 77 FR 62378 (Oct. 12, 2012) (codified at 12 CFR
part 252, subparts F and G). The changes in this
interim final rule will apply to nonbank financial
companies supervised by the Board after they
become subject to stress test requirements.
12 12 CFR 252.134(a).
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regulatory capital ratios, including its
tier 1 common ratio, for each quarter of
a nine-quarter planning horizon.13 The
stress test rule defines the tier 1
common ratio by cross-reference to the
capital plan rule, which, as previously
described, provides that the tier 1
common ratio is to remain in effect until
the Board adopts an alternative tier 1
common ratio definition.14
IV. Incorporating the Revised Capital
Framework Into Capital Plan and
Stress Tests
Because the revised capital framework
introduces a methodology for
computing a common equity tier 1
capital ratio and a new minimum
common equity tier 1 capital ratio, it is
necessary to clarify how bank holding
companies should calculate their tier 1
common ratio for the upcoming capital
plan and stress test cycle.
With respect to a bank holding
company’s estimates of its regulatory
capital ratios and the applicable
minimum capital requirements, the
bank holding company must project its
regulatory capital ratios and meet the
minimum capital requirements for each
quarter of the planning horizon in
accordance with the minimum capital
requirements that are in effect during
that quarter. Accordingly, under the
revised capital framework, a bank
holding company that is an advanced
approaches banking organization would
be required to calculate its common
equity tier 1 capital ratio beginning in
2014, in accordance with the transition
period arrangements, and meet a 4.0
percent minimum in 2014 and a 4.5
percent minimum in 2015. A bank
holding company that is not advanced
approaches banking organizations
would be required to calculate its
common equity tier 1 capital ratio
beginning in 2015, in accordance with
the transition period arrangements, and
meet a 4.5 percent minimum in 2015. A
state member bank that is a subsidiary
of a bank holding company with total
consolidated assets of $50 billion or
more will reflect the new capital rules
in the same manner as its bank holding
company parent in projecting its capital
for the upcoming stress test cycle.
With respect to a bank holding
company’s estimates of the tier 1
common ratio, the bank holding
company must use the definitions of tier
1 capital and total risk-weighted assets
currently in effect in 2013 under the
existing capital guidelines for each
quarter of the planning horizon, and not
incorporate the new definition of
13 Id.
14 Id.
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at 252.146(a).
at 252.132(q), 252.142(t).
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common equity tier 1 that is part of the
revised capital framework that will
become effective in 2014 and 2015.
Preserving the tier 1 common ratio
methodology maintains consistency
with previous capital plan cycles during
the phase-in of the new common equity
tier 1 capital minimum requirement.
Moreover, the new minimum common
equity tier 1 capital ratio will be phased
in over several years. Using the new
methodology with the lower first year
phase-in minimum ratio for the capital
plan and stress test cycle that begins
October 1, 2013, would likely result in
large bank holding companies being
subject to a common equity capital
standard in the first quarters of the
planning horizon that is less stringent
than the standard used in previous
capital plan and stress test cycles. Once
the new minimum common equity tier
1 capital ratio reaches its permanent
level of 4.5 percent in 2015, the Board
expects that the combination of changes
in the methodology for computing the
common equity tier 1 ratio and the
minimum level of 4.5 percent will be
more stringent than the current capital
plan tier 1 common ratio of 5.0 percent.
Under the new common equity tier 1
capital definition, most elements of
accumulated other comprehensive
income (AOCI), such as gains and losses
59781
on available-for-sale debt securities, will
flow through to common equity, except
in the case of non-advanced approaches
banking organizations that make an
AOCI opt-out election.15 In addition,
more assets will be subject to deduction,
including investments in
unconsolidated financial institutions
and all deferred tax assets that arise
from operating losses and tax credit
carry forwards.
Table 1 illustrates the minimum
common equity capital ratios to which
large bank holding companies will be
subject in the capital plan and stress test
cycles that begin October 1, 2013.
TABLE 1—COMMON EQUITY RATIOS APPLICABLE TO LARGE BANK HOLDING COMPANIES IN THE CAPITAL PLAN AND
STRESS TEST CYCLES THAT BEGIN OCTOBER 1, 2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Advanced approaches
bank holding companies.
Current T1C
ratio of
5.0%.
Non-advanced approaches bank holding companies.
Current T1C
ratio of
5.0%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.0%.
Current T1C
ratio of
5.0%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.0%.
Current T1C
ratio of
5.0%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.0%.
Current T1C
ratio of
5.0%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.0%.
Current T1C
ratio of
5.0%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%.
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%
CET1 ratio of
4.5%.
Current T1C
ratio of
5.0%
CET1 ratio of
4.5%.
Current T1C ratio: the ratio of a bank holding company’s tier 1 common capital calculated using the definitions in place as of the effective date of the interim final
rule (i.e., tier 1 capital as defined under Appendix A of 12 CFR part 225, less the non-common elements of tier 1 capital, over total risk-weighted assets as defined
under Appendices A, E, and G of 12 CFR part 225).
CET1 ratio: a bank holding company’s common equity tier 1 capital ratio as calculated under 12 CFR part 217, including the transition provisions of 12 CFR part
§ 217.300, as applicable within each quarter of the capital plan and stress test cycles that begin October 1, 2013.
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V. Parallel Run Notification Date
In light of the issuance of the revised
capital framework, the Board is also
providing clarity on when a banking
organization would be required to
estimate its minimum regulatory capital
ratios over the planning horizon using
the advanced approaches for a given
capital planning and stress testing cycle.
A bank holding company that is an
advanced approaches banking
organization is required to use the
advanced approaches to calculate its
minimum regulatory capital ratios if it
has conducted a satisfactory parallel
run, which is defined as a period of no
less than four consecutive calendar
quarters during which a banking
organization complies with certain
qualification requirements of the
advanced approaches.16 Currently, all
advanced approaches banking
organizations are in parallel run, but it
is possible that firms could complete a
satisfactory parallel run in the near term
and, as a result, be required to calculate
their regulatory capital ratios using the
advanced approaches Under the current
capital plan rule and stress test rule, an
15 See
Revised capital framework, § ___.22(b)(2).
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advanced approaches banking
organization would be required to
estimate its capital ratios over the
planning horizon using the advanced
approaches if the firm is notified any
time before January 5, which is the date
on which a banking organization must
submit its capital plan and its stress test
results to the Board.
In order to provide additional notice
to an advanced approaches banking
organization regarding when it must
begin to estimate its advanced
approaches regulatory capital ratios
under stressed conditions in a given
capital plan or stress test cycle, the
interim final rule provides that a bank
holding company must be notified that
it has completed its parallel run by
September 30 of a given year in order
to be required to estimate its capital
ratios using the advanced approaches
for the capital plan or stress test cycle
that begins on October 1 of that year.
VI. Technical Changes
The interim final rule makes minor
technical changes to the capital plan
rule. It clarifies that a covered company
that has not filed the FR Y–9C report for
16 12
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the four most recent consecutive
quarters will calculate its total
consolidated assets as reported on the
company’s available FR Y–9C reports
for the most recent quarter or
consecutive quarters. It clarifies that the
Board (or the Reserve Bank, with
concurrence of the Board) may extend
the resubmission period for a capital
plan beyond an initial 60 day extension
if the Board or Reserve Bank determines
that such longer period is appropriate.
The interim final rule modifies the
capital plan rule to reflect the Board’s
current practice of publicly disclosing
its decision to object or not object to a
bank holding company’s capital plan
along with a summary of the Board’s
analyses of that company. The rule
provides that any disclosure will occur
by March 31 of each calendar year,
unless the Board determines that
another date is appropriate. With regard
to the Board’s review of bank holding
companies’ capital plans, the Board
expects the summary results largely will
be similar to the results disclosed in
previous CCAR exercises, unless the
Board determines that different or
CFR part 225, Appendix G, section 21(c).
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additional disclosures would be
appropriate.
The interim final rule also corrects a
typographical numbering error and
removes the clarification of the start of
the stress test cycle for the stress test
cycle that began in 2012.
VII. Effective Date; Solicitation of
Comments
This interim final rule is effective
September 30, 2013. Pursuant to the
Administrative Procedure Act (APA), at
5 U.S.C. 553(b)(B), notice and comment
are not required prior to the issuance of
a final rule if an agency, for good cause,
finds that ‘‘notice and public procedure
thereon are impracticable, unnecessary,
or contrary to the public interest.’’ 17
Similarly, a final rule may be published
with an immediate effective date if an
agency finds good cause and publishes
such with the final rule.18
Consistent with section 553(b)(B) of
the APA, the Board finds that issuing
this rule as an interim final rule is
necessary to clarify how a large bank
holding company must incorporate the
revised capital framework adopted July
2, 2013, into its capital plan and stress
tests for purposes of the capital plan and
stress test cycles that begin October 1,
2013. This interim final rule also
clarifies when a bank holding company
would be required to calculate its
minimum regulatory capital ratios using
the advanced approaches for a given
capital plan and stress testing cycle.
Obtaining notice and comment prior to
issuing the interim final rule would be
impracticable and contrary to the public
interest. The capital rules were only
recently revised and the short effective
date of those revisions provide good
cause to publish the interim final rule
with an immediate effective date in
order to remove uncertainty about the
standards in the capital plan rule and
reduce the burden of requiring firms to
change their capital calculations in
advance of the effective date.
The approval by the Board of the
revised capital framework in July, 2013,
prompted a need to clarify how a large
bank holding company would
incorporate these rules into its capital
plan and stress tests for the capital plan
and stress test cycles that begin October
1, 2013. In addition, the definition of
‘‘tier 1 common ratio’’ used in the
capital plan rule, and incorporated by
cross reference in the stress test rules,
stated that the definition would remain
in effect until the Board had adopted an
alternative tier 1 common ratio
definition as a minimum regulatory
17 5
U.S.C. 553(b)(B).
18
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capital ratio.19 The approach taken in
the interim final rule is consistent with
the Board’s previous interpretations of
the capital plan and stress test rules.20
It also ensures that the tier 1 common
ratio is no less stringent than the ratio
used in previous cycles.
In addition, the interim final rule
provides that a bank holding company
must be notified that it has completed
its parallel run by September 30 of a
given year in order to be required to
estimate its capital ratios using the
advanced approaches for that year’s
capital plan or stress test cycle. This
change provides clearer notice to an
advanced approaches banking
organization so that it could anticipate
when it will be required to calculate its
regulatory capital ratios using the
advanced approaches in a given capital
plan or stress test cycle.
Moreover, the interim final rule
should not impose any incremental
burden on these firms. The interim final
rule relieves burden on them by
clarifying the process for their
upcoming capital plan submissions and
company-run stress tests and providing
additional time to build systems and
processes necessary to effectively
implement in a stress test the regulatory
capital requirements of the advanced
approaches rules.
Although notice and comment are not
required prior to the effective date of
this interim final rule, the Board invites
comment on all aspects of this
rulemaking and will revise this interim
final rule if necessary or appropriate in
light of the comments received. The
Board is seeking comments on all
aspects of the interim final rule. In
particular:
Question 1. What, if any, additional
transitional arrangements should the
Board consider for future capital plan
and stress test cycles? Should the Board
remove the capital plan’s tier 1 common
ratio of 5.0 percent, or conversely,
maintain the tier 1 common ratio of 5.0
percent, but require bank holding
companies to calculate the ratio using
the more stringent definition of capital?
Question 2. What, if any,
modifications should be made to the
advanced approaches notification date
to better facilitate the timely notification
of advanced approaches banking
organizations of their need to use the
advanced approaches in estimating their
regulatory capital ratios for the capital
plan and stress test purposes?
19 Id.at
§ 225.8(c)(9).
Federal Reserve System Comprehensive
Capital Analysis and Review: Summary Instructions
and Guidance (November 22, 2011), available at:
https://www.federalreserve.gov/newsevents/press/
bcreg/bcreg20111122d1.pdf.
20 See
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VIII. Regulatory Analysis
A. Regulatory Flexibility Act Analysis
The Board has considered the
potential impact of the interim final rule
on small companies in accordance with
the Regulatory Flexibility Act (5 U.S.C.
603(b)). Based on its analysis and for the
reasons stated below, the Board believes
that the interim final rule will not have
a significant economic impact on a
substantial number of small entities.
Nevertheless, the Board is publishing a
regulatory flexibility analysis.
For the reason discussed in the
Supplementary Information above, the
agencies are issuing this interim final
rule to clarify the requirements for
certain companies required to submit
capital plans to the Board on January 5,
2014, and conduct Dodd-Frank Act
company run stress tests in the stress
test cycle that commences on October 1,
2013. Under regulations issued by the
Small Business Administration
(‘‘SBA’’), a small entity includes a
depository institution, bank holding
company, or savings and loan holding
company with total assets of $500
million or less (a small banking
organization). The interim final rule
would apply to bank holding companies
with total consolidated asset of $50
billion or more and nonbank financial
companies supervised by the Board.
Companies that would be subject to the
interim finale rule therefore
substantially exceed the $500 million
total asset threshold at which a
company is considered a small company
under SBA regulations. In light of the
foregoing, the Board does not believe
that the interim final rule would have a
significant economic impact on a
substantial number of small entities.
B. Solicitation of Comments on Use of
Plain Language
Section 722 of the Gramm-LeachBliley Act required the Federal banking
agencies to use plain language in all
proposed and final rules published after
January 1, 2000. The Board invites
comment on how to make this interim
final rule easier to understand. For
example:
• Has the Board organized the
material to suit your needs? If not, how
could the rule be more clearly stated?
• Are the requirements in the rule
clearly stated? If not, how could the rule
be more clearly stated?
• Do the regulations contain technical
language or jargon that is not clear? If
so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
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easier to understand? If so, what
changes would make the regulation
easier to understand?
• Would more, but shorter, sections
be better? If so, which sections should
be changed?
• What else could the Board do to
make the regulation easier to
understand?
C. Paperwork Reduction Act
This interim final rule references
currently approved collections of
information under the Paperwork
Reduction Act (44 U.S.C. 3501–3520)
provided for in the capital plan rules.
This interim final rule does not
introduce any new collections of
information nor does it substantively
modify the collections of information
that Office of Management and Budget
(OMB) has approved. Therefore, no
Paperwork Reduction Act submissions
to OMB are required.
List of Subjects
12 CFR Part 225
Administrative practice and
procedure; Banks, banking; Capital
Planning; Holding companies; Reporting
and recordkeeping requirements;
Securities, Stress Testing.
12 CFR Part 252
Administrative practice and
procedure, Banks, Banking, Capital
Planning; Federal Reserve System,
Holding companies, Reporting and
recordkeeping requirements, Securities,
Stress Testing.
Authority and Issuance
For the reasons stated in the
Supplementary Information, the Board
of Governors of the Federal Reserve
System amends 12 CFR chapter II as
follows:
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)
1. The authority citation for part 225
continues to read as follows:
■
Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),
1972(1), 3106, 3108, 3310, 3331–3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w,
6801 and 6805.
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Subpart A—General Provisions
■
2. Revise § 225.8 to read as follows:
§ 225.8
Capital planning.
(a) Purpose. This section establishes
capital planning and prior notice and
approval requirements for capital
distributions by certain bank holding
companies.
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(b) Scope and effective date. (1) This
section applies to every top-tier bank
holding company domiciled in the
United States:
(i) With average total consolidated
assets of $50 billion or more. Average
total consolidated assets means the
average of the total consolidated assets
as reported by a bank holding company
on its Consolidated Financial
Statements for Bank Holding Companies
(FR Y–9C) for the four most recent
consecutive quarters. If the bank
holding company has not filed the FR
Y–9C for each of the four most recent
consecutive quarters, average total
consolidated assets means the average of
the company’s total consolidated assets,
as reported on the company’s FR Y–9C,
for the most recent quarter or
consecutive quarters. Average total
consolidated assets are measured on the
as-of date of the most recent FR Y–9C
used in the calculation of the average;
or
(ii) That is subject to this section, in
whole or in part, by order of the Board
based on the institution’s size, level of
complexity, risk profile, scope of
operations, or financial condition.
(2) Beginning on December 23, 2011,
the provisions of this section shall apply
to any bank holding company that is
subject to this section pursuant to
paragraph (b)(1), provided that:
(i) Until July 21, 2015, this section
will not apply to any bank holding
company subsidiary of a foreign banking
organization that is currently relying on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010, available at https://
www.federalreserve.gov/boarddocs/
srletters/2001/sr0101.htm); and
(ii) A bank holding company that
becomes subject to this section pursuant
to paragraph (b)(1)(i) after the 5th of
January of a calendar year shall not be
subject to the requirements of
paragraphs (d)(1)(ii), (d)(4), and (f)(1)(iii)
of this section until January 1 of the
next calendar year.
(3) Notwithstanding any other
requirement in this section, for a given
capital plan cycle (including the January
5 submission of a capital plan under
paragraph (d)(1) of this section and any
resubmission of the capital plan under
paragraph (d)(4) of this section during
the capital plan cycle), a bank holding
company’s estimates of its pro forma
regulatory capital ratios and its pro
forma tier 1 common ratio over the
planning horizon shall not include
estimates using the advanced
approaches if the bank holding
company is notified on or after the first
day of that capital plan cycle (October
1) that the bank holding company is
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59783
required to calculate its risk-based
capital requirements using the advanced
approaches.
(4) Nothing in this section shall limit
the authority of the Federal Reserve to
issue a capital directive or take any
other supervisory or enforcement action,
including action to address unsafe or
unsound practices or conditions or
violations of law.
(c) Definitions. For purposes of this
section, the following definitions apply:
(1) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 225,
appendix G, and 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(2) Capital action means any issuance
of a debt or equity capital instrument,
any capital distribution, and any similar
action that the Federal Reserve
determines could impact a bank holding
company’s consolidated capital.
(3) Capital distribution means a
redemption or repurchase of any debt or
equity capital instrument, a payment of
common or preferred stock dividends, a
payment that may be temporarily or
permanently suspended by the issuer on
any instrument that is eligible for
inclusion in the numerator of any
minimum regulatory capital ratio, and
any similar transaction that the Federal
Reserve determines to be in substance a
distribution of capital.
(4) Capital plan means a written
presentation of a bank holding
company’s capital planning strategies
and capital adequacy process that
includes the mandatory elements set
forth in paragraph (d)(2) of this section.
(5) Capital plan cycle means the
period beginning on October 1 of a
calendar year and ending on September
30 of the following calendar year.
(6) Capital policy means a bank
holding company’s written assessment
of the principles and guidelines used for
capital planning, capital issuance, usage
and distributions, including internal
capital goals; the quantitative or
qualitative guidelines for dividend and
stock repurchases; the strategies for
addressing potential capital shortfalls;
and the internal governance procedures
around capital policy principles and
guidelines.
(7) Minimum regulatory capital ratio
means any minimum regulatory capital
ratio that the Federal Reserve may
require of a bank holding company, by
regulation or order, including, as
applicable, the bank holding company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, E,
and G to this part (12 CFR part 225) and
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12 CFR part 217, as applicable,
including the transition provisions at 12
CFR 217.1(f)(4) and 12 CFR 217.300, or
any successor regulation.
(8) Planning horizon means the period
of at least nine quarters, beginning with
the quarter preceding the quarter in
which the bank holding company
submits its capital plan, over which the
relevant projections extend.
(9) Tier 1 capital has the same
meaning as under appendix A to this
part or under 12 CFR part 217, as
applicable, or any successor regulation.
(10) Tier 1 common capital means tier
1 capital as defined under appendix A
to this part less the non-common
elements of tier 1 capital, including
perpetual preferred stock and related
surplus, minority interest in
subsidiaries, trust preferred securities
and mandatory convertible preferred
securities.
(11) Tier 1 common ratio means the
ratio of a bank holding company’s tier
1 common capital to total risk-weighted
assets as defined under appendices A
and E to this part.
(d) General requirements—(1) Annual
capital planning. (i) A bank holding
company must develop and maintain a
capital plan.
(ii) A bank holding company must
submit its complete capital plan to the
appropriate Reserve Bank and the Board
each year by the 5th of January, or such
later date as directed by the Board or the
appropriate Reserve Bank, with
concurrence of the Board.
(iii) The bank holding company’s
board of directors or a designated
committee thereof must at least
annually and prior to submission of the
capital plan under paragraph (d)(1)(ii) of
this section:
(A) Review the robustness of the bank
holding company’s process for assessing
capital adequacy,
(B) Ensure that any deficiencies in the
bank holding company’s process for
assessing capital adequacy are
appropriately remedied; and
(C) Approve the bank holding
company’s capital plan.
(2) Mandatory elements of capital
plan. A capital plan must contain at
least the following elements:
(i) An assessment of the expected uses
and sources of capital over the planning
horizon that reflects the bank holding
company’s size, complexity, risk profile,
and scope of operations, assuming both
expected and stressful conditions,
including:
(A) Estimates of projected revenues,
losses, reserves, and pro forma capital
levels, including any minimum
regulatory capital ratios (for example,
leverage, tier 1 risk-based, and total risk-
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based capital ratios) and any additional
capital measures deemed relevant by the
bank holding company, over the
planning horizon under expected
conditions and under a range of stressed
scenarios, including any scenarios
provided by the Federal Reserve and at
least one stressed scenario developed by
the bank holding company appropriate
to its business model and portfolios;
(B) A calculation of the pro forma tier
1 common ratio over the planning
horizon under expected conditions and
under a range of stressed scenarios and
discussion of how the company will
maintain a pro forma tier 1 common
ratio above 5 percent under expected
conditions and the stressed scenarios
required under paragraphs (d)(2)(i)(A)
and (ii) of this section;
(C) A discussion of the results of any
stress test required by law or regulation,
and an explanation of how the capital
plan takes these results into account;
and
(D) A description of all planned
capital actions over the planning
horizon.
(ii) A detailed description of the bank
holding company’s process for assessing
capital adequacy, including:
(A) A discussion of how the bank
holding company will, under expected
and stressful conditions, maintain
capital commensurate with its risks,
maintain capital above the minimum
regulatory capital ratios and above a tier
1 common ratio of 5 percent, and serve
as a source of strength to its subsidiary
depository institutions;
(B) A discussion of how the bank
holding company will, under expected
and stressful conditions, maintain
sufficient capital to continue its
operations by maintaining ready access
to funding, meeting its obligations to
creditors and other counterparties, and
continuing to serve as a credit
intermediary;
(iii) The bank holding company’s
capital policy; and
(iv) A discussion of any expected
changes to the bank holding company’s
business plan that are likely to have a
material impact on the firm’s capital
adequacy or liquidity.
(3) Data collection. Upon the request
of the Board or appropriate Reserve
Bank, the bank holding company shall
provide the Federal Reserve with
information regarding—
(i) The bank holding company’s
financial condition, including its
capital;
(ii) The bank holding company’s
structure;
(iii) Amount and risk characteristics
of the bank holding company’s on- and
off-balance sheet exposures, including
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exposures within the bank holding
company’s trading account, other
trading-related exposures (such as
counterparty-credit risk exposures) or
other items sensitive to changes in
market factors, including, as
appropriate, information about the
sensitivity of positions to changes in
market rates and prices;
(iv) The bank holding company’s
relevant policies and procedures,
including risk management policies and
procedures;
(v) The bank holding company’s
liquidity profile and management; and
(vi) Any other relevant qualitative or
quantitative information requested by
the Board or the appropriate Reserve
Bank to facilitate review of the bank
holding company’s capital plan under
this section.
(4) Re-submission of a capital plan. (i)
A bank holding company must update
and re-submit its capital plan to the
appropriate Reserve Bank within 30
calendar days of the occurrence of one
of the following events:
(A) The bank holding company
determines there has been or will be a
material change in the bank holding
company’s risk profile, financial
condition, or corporate structure since
the bank holding company adopted the
capital plan;
(B) The Board or the appropriate
Reserve Bank objects to the capital plan;
or
(C) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, directs the bank holding
company in writing to revise and
resubmit its capital plan for any of the
following reasons:
(1) The capital plan is incomplete or
the capital plan, or the bank holding
company’s internal capital adequacy
process, contains material weaknesses;
(2) There has been or will likely be a
material change in the bank holding
company’s risk profile (including a
material change in its business strategy
or any risk exposure), financial
condition, or corporate structure;
(3) The stressed scenario(s) developed
by the bank holding company is not
appropriate to its business model and
portfolios, or changes in financial
markets or the macro-economic outlook
that could have a material impact on a
bank holding company’s risk profile and
financial condition require the use of
updated scenarios; or
(4) The capital plan or the condition
of the bank holding company raise any
of the issues described in paragraph
(e)(2)(ii) of this section.
(ii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, may, at its discretion, extend the
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30-day period in paragraph (d)(4)(i) of
this section for up to an additional 60
calendar days, or such longer period as
the Board or the appropriate Reserve
Bank, with concurrence of the Board,
determines appropriate.
(iii) Any updated capital plan must
satisfy all the requirements of this
section; however, a bank holding
company may continue to rely on
information submitted as part of a
previously submitted capital plan to the
extent that the information remains
accurate and appropriate.
(e) Review of capital plans by the
Federal Reserve; publication of
summary results—(1) Considerations
and inputs. (i) The Board or the
appropriate Reserve Bank, with
concurrence of the Board, will consider
the following factors in reviewing a
bank holding company’s capital plan:
(A) The comprehensiveness of the
capital plan, including the extent to
which the analysis underlying the
capital plan captures and addresses
potential risks stemming from activities
across the firm and the company’s
capital policy;
(B) The reasonableness of the bank
holding company’s assumptions and
analysis underlying the capital plan and
its methodologies for reviewing the
robustness of its capital adequacy
process; and
(C) The bank holding company’s
ability to maintain capital above each
minimum regulatory capital ratio and
above a tier 1 common ratio of 5 percent
on a pro forma basis under expected and
stressful conditions throughout the
planning horizon, including but not
limited to any stressed scenarios
required under paragraph (d)(2)(i)(A)
and (ii) of this section.
(ii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, will also consider the following
information in reviewing a bank holding
company’s capital plan:
(A) Relevant supervisory information
about the bank holding company and its
subsidiaries;
(B) The bank holding company’s
regulatory and financial reports, as well
as supporting data that would allow for
an analysis of the bank holding
company’s loss, revenue, and reserve
projections;
(C) As applicable, the Federal
Reserve’s own pro forma estimates of
the firm’s potential losses, revenues,
reserves, and resulting capital adequacy
under expected and stressful conditions,
including but not limited to any stressed
scenarios required under paragraph
(d)(2)(i)(A) and (ii) of this section, as
well as the results of any stress tests
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conducted by the bank holding
company or the Federal Reserve; and
(D) Other information requested or
required by the appropriate Reserve
Bank or the Board, as well as any other
information relevant, or related, to the
bank holding company’s capital
adequacy.
(2) Federal Reserve action on a capital
plan. (i) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, will object, in whole or in part,
to the capital plan or provide the bank
holding company with a notice of nonobjection to the capital plan:
(A) By March 31 of the calendar year
in which a capital plan was submitted
pursuant to paragraph (d)(1)(ii) of this
section, and
(B) By the date that is 75 calendar
days after the date on which a capital
plan was resubmitted pursuant to
paragraph (d)(4) of this section.
(ii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, may object to a capital plan if it
determines that:
(A) The bank holding company has
material unresolved supervisory issues,
including but not limited to issues
associated with its capital adequacy
process;
(B) The assumptions and analysis
underlying the bank holding company’s
capital plan, or the bank holding
company’s methodologies for reviewing
the robustness of its capital adequacy
process, are not reasonable or
appropriate;
(C) The bank holding company has
not demonstrated an ability to maintain
capital above each minimum regulatory
capital ratio and above a tier 1 common
ratio of 5 percent, on a pro forma basis
under expected and stressful conditions
throughout the planning horizon; or
(D) The bank holding company’s
capital planning process or proposed
capital distributions otherwise
constitute an unsafe or unsound
practice, or would violate any law,
regulation, Board order, directive, or
any condition imposed by, or written
agreement with, the Board. In
determining whether a capital plan or
any proposed capital distribution would
constitute an unsafe or unsound
practice, the appropriate Reserve Bank
would consider whether the bank
holding company is and would remain
in sound financial condition after giving
effect to the capital plan and all
proposed capital distributions.
(iii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, will notify the bank holding
company in writing of the reasons for a
decision to object to a capital plan.
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59785
(iv) If the Board or the appropriate
Reserve Bank, with concurrence of the
Board, objects to a capital plan and until
such time as the Board or the
appropriate Reserve Bank, with
concurrence of the Board, issues a nonobjection to the bank holding company’s
capital plan, the bank holding company
may not make any capital distribution,
other than those capital distributions
with respect to which the Board or the
appropriate Reserve Bank has indicated
in writing its non-objection.
(v) The Board may disclose publicly
its decision to object or not object to a
bank holding company’s capital plan
under this section, along with a
summary of the Board’s analyses of that
company. Any disclosure under this
paragraph (e)(2)(v) will occur by March
31, unless the Board determines that a
later disclosure date is appropriate.
(3) Request for reconsideration or
hearing. Within 10 calendar days of
receipt of a notice of objection to a
capital plan by the Board or the
appropriate Reserve Bank:
(i) A bank holding company may
submit a written request to the Board
requesting reconsideration of the
objection, including an explanation of
why reconsideration should be granted.
Within 10 calendar days of receipt of
the bank holding company’s request, the
Board will notify the company of its
decision to affirm or withdraw the
objection to the bank holding company’s
capital plan or a specific capital
distribution; or
(ii) As an alternative to paragraph
(e)(3)(i) of this section, a bank holding
company may submit a written request
to the Board for a hearing. Any hearing
shall follow the procedures described in
paragraph (f)(5)(ii) through (iii) of this
section.
(f) Approval requirements for certain
capital actions—(1) Circumstances
requiring approval. Notwithstanding a
notice of non-objection under paragraph
(e)(2)(i) of this section a bank holding
company may not make a capital
distribution under the following
circumstances, unless it receives
approval from the Board or appropriate
Reserve Bank pursuant to paragraph
(f)(4) of this section:
(i) After giving effect to the capital
distribution, the bank holding company
would not meet a minimum regulatory
capital ratio or a tier 1 common ratio of
at least 5 percent;
(ii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, notifies the company in writing
that the Federal Reserve has determined
that the capital distribution would
result in a material adverse change to
the organization’s capital or liquidity
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structure or that the company’s earnings
were materially underperforming
projections;
(iii) Except as provided in paragraph
(f)(2) of this section, the dollar amount
of the capital distribution will exceed
the amount described in the capital plan
for which a non-objection was issued
under this section; or
(iv) The capital distribution would
occur after the occurrence of an event
requiring resubmission under
paragraphs (d)(4)(i)(A) and (C) of this
section and before the Federal Reserve
acted on the resubmitted capital plan.
(2) Exception for well capitalized
bank holding companies. (i) A bank
holding company may make a capital
distribution for which the dollar amount
exceeds the amount described in the
capital plan for which a non-objection
was issued under this section if the
following conditions are satisfied:
(A) The bank holding company is, and
after the capital distribution would
remain, well capitalized as defined in
§ 225.2(r) of Regulation Y (12 CFR
225.2(r));
(B) The bank holding company’s
performance and capital levels are, and
after the capital distribution would
remain, consistent with its projections
under expected conditions as set forth
in its capital plan under this paragraph
(d)(2)(i);
(C) The annual aggregate dollar
amount of all capital distributions
(beginning on April 1 of a calendar year
and ending on March 31 of the
following calendar year) would not
exceed the total amounts described in
the company’s capital plan for which
the bank holding company received a
notice of non-objection by more than
1.00 percent multiplied by the bank
holding company’s tier 1 capital, as
reported to the Federal Reserve on the
bank holding company’s first quarter FR
Y–9C;
(D) The bank holding company
provides the appropriate Reserve Bank
with notice 15 calendar days prior to a
capital distribution that includes the
elements described in paragraph (f)(3) of
this section; and
(E) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, does not object to the transaction
proposed in the notice. In determining
whether to object to the proposed
transaction, the Board or the appropriate
Reserve Bank, with concurrence of the
Board, shall apply the criteria described
in paragraph (f)(4)(iv) of this section.
(ii) The exception in this paragraph
(f)(2) shall not apply if the Board or the
appropriate Reserve Bank notifies the
bank holding company in writing that it
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may not take advantage of this
exception.
(3) Contents of request. (i) A request
for a capital distribution under this
section shall be filed with the
appropriate Reserve Bank and the Board
and shall contain the following
information:
(A) The bank holding company’s
current capital plan or an attestation
that there have been no changes to the
capital plan since it was last submitted
to the Federal Reserve;
(B) The purpose of the transaction;
(C) A description of the capital
distribution, including for redemptions
or repurchases of securities, the gross
consideration to be paid and the terms
and sources of funding for the
transaction, and for dividends, the
amount of the dividend(s); and
(D) Any additional information
requested by the Board or the
appropriate Reserve Bank (which may
include, among other things, an
assessment of the bank holding
company’s capital adequacy under a
revised stress scenario provided by the
Federal Reserve, a revised capital plan,
and supporting data).
(ii) Any request submitted with
respect to a capital distribution
described in paragraph (f)(1)(i) of this
section shall also include a plan for
restoring the bank holding company’s
capital to an amount above a minimum
level within 30 days and a rationale for
why the capital distribution would be
appropriate.
(4) Approval of certain capital
distributions. (i) A bank holding
company must obtain approval from the
Board or the appropriate Reserve Bank,
with concurrence of the Board, before
making a capital distribution described
in paragraph (f)(1) of this section.
(ii) A request for a capital distribution
under this section must be filed with the
appropriate Reserve Bank and contain
all the information set forth in
paragraph (f)(3) of this section.
(iii) The Board or the appropriate
Reserve Bank, with concurrence of the
Board, will act on a request under this
paragraph (f)(4) within 30 calendar days
after the receipt of a complete request
under paragraph (f)(4)(ii) of this section.
The Board or the appropriate Reserve
Bank may, at any time, request
additional information that it believes is
necessary for its decision.
(iv) In acting on a request under this
paragraph, the Board or appropriate
Reserve Bank will apply the
considerations and principles in
paragraph (e) of this section. In
addition, the Board or the appropriate
Reserve Bank may disapprove the
transaction if the bank holding company
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does not provide all of the information
required to be submitted under
paragraphs (f)(3) and (f)(5)(iii) of this
section.
(5) Disapproval and hearing. (i) The
Board or the appropriate Reserve Bank
will notify the bank holding company in
writing of the reasons for a decision to
disapprove any proposed capital
distribution. Within 10 calendar days
after receipt of a disapproval by the
Board, the bank holding company may
submit a written request for a hearing.
(ii) The Board will order a hearing
within 10 calendar days of receipt of the
request if it finds that material facts are
in dispute, or if it otherwise appears
appropriate. Any hearing conducted
under this paragraph shall be held in
accordance with the Board’s Rules of
Practice for Formal Hearings (12 CFR
part 263).
(iii) At the conclusion of the hearing,
the Board will by order approve or
disapprove the proposed capital
distribution on the basis of the record of
the hearing.
PART 252—ENHANCED PRUDENTIAL
STANDARDS (Regulation YY).
3. The authority citation for part 252
continues to read as follows:
■
Authority: 12 U.S.C. 321–338a, 1467a(g),
1818, 1831p-1, 1844(b), 1844(c), 5361, 5365,
5366.
4. Subpart F to part 252 is revised to
read as follows:
■
Subpart F—Supervisory Stress Test
Requirements for Covered Companies
Sec.
252.131 Authority and purpose.
252.132 Definitions.
252.133 Applicability
252.134 Annual analysis conducted by the
Board.
252.135 Data and information required to
be submitted in support of the Board’s
analyses.
252.136 Review of the Board’s analysis;
publication of summary results.
252.137 Use requirement.
§ 252.131
Authority and purpose.
(a) Authority. 12 U.S.C. 321–338a,
1467a(g), 1818, 1831p-1, 1844(b),
1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements
section 165(i)(1) of the Dodd-Frank Act
(12 U.S.C. 5365(i)(1)), which requires
the Board to conduct annual analyses of
nonbank financial companies
supervised by the Board and bank
holding companies with $50 billion or
more in total consolidated assets to
evaluate whether such companies have
the capital, on a total consolidated basis,
necessary to absorb losses as a result of
adverse economic conditions.
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§ 252.132
Definitions.
For purposes of this subpart F, the
following definitions apply:
(a) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 225,
appendix G, and 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(b) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company that are more adverse than
those associated with the baseline
scenario and may include trading or
other additional components.
(c) Average total consolidated assets
means the average of the total
consolidated assets as reported by a
bank holding company on its
Consolidated Financial Statements for
Bank Holding Companies (FR Y–9C) for
the four most recent consecutive
quarters. If the bank holding company
has not filed the FR Y–9C for each of the
four most recent consecutive quarters,
average total consolidated assets means
the average of the company’s total
consolidated assets, as reported on the
company’s FR Y–9C, for the most recent
quarter or consecutive quarters. Average
total consolidated assets are measured
on the as-of date of the most recent FR
Y–9C used in the calculation of the
average.
(d) Bank holding company has the
same meaning as in § 225.2(c) of the
Board’s Regulation Y (12 CFR 225.2(c)).
(e) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company and that reflect the consensus
views of the economic and financial
outlook.
(f) Covered company means:
(1) A bank holding company (other
than a foreign banking organization)
with average total consolidated assets of
$50 billion or more; and
(2) A nonbank financial company
supervised by the Board.
(g) Depository institution has the same
meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C.
1813(c)).
(h) Foreign banking organization has
the same meaning as in § 211.21(o) of
the Board’s Regulation K (12 CFR
211.21(o)).
(i) Nonbank financial company
supervised by the Board means a
nonbank financial company that the
Financial Stability Oversight Council
has determined under section 113 of the
Dodd-Frank Act (12 U.S.C. 5323) shall
be supervised by the Board and for
which such determination is still in
effect.
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(j) Planning horizon means the period
of at least nine quarters, beginning on
the first day of a stress test cycle (on
October 1) over which the relevant
projections extend.
(k) Pre-provision net revenue means
the sum of net interest income and noninterest income less expenses before
adjusting for loss provisions.
(l) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the covered
company on the FR Y–9C.
(m) Regulatory capital ratio means a
capital ratio for which the Board
established minimum requirements for
the company by regulation or order,
including, as applicable, the company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, E,
and G to this part (12 CFR part 225) and
12 CFR part 217, as applicable,
including the transition provisions at 12
CFR 217.1(f)(4) and 12 CFR 217.300, or
any successor regulation.
(n) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a covered
company that the Board annually
determines are appropriate for use in
the supervisory stress tests, including,
but not limited to, baseline, adverse,
and severely adverse scenarios.
(o) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered company and that overall are
more severe than those associated with
the adverse scenario and may include
trading or other additional components.
(p) Stress test cycle means the period
between October 1 of a calendar year
and September 30 of the following
calendar year.
(q) Subsidiary has the same meaning
as in § 225.2(o) the Board’s Regulation Y
(12 CFR 225.2).
(r) Tier 1 common ratio has the same
meaning as in the Board’s Regulation Y
(12 CFR 225.8).
§ 252.133
Applicability.
(a) Compliance date for bank holding
companies that are covered companies
as of November 15, 2012—(1) In general.
Except as provided in paragraph (a)(2)
or (3) of this section, a bank holding
company that is a covered company as
of November 15, 2012, must comply
with the requirements of this subpart
beginning with the stress test cycle that
commences on October 1, 2013, unless
that time is extended by the Board in
writing.
(2) 2009 Supervisory Capital
Assessment Program. A bank holding
company that participated in the 2009
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Supervisory Capital Assessment
Program, or a successor to such a bank
holding company, must comply with
the requirements of this subpart
beginning with the stress test cycle that
commences on November 15, 2012,
unless that time is extended by the
Board in writing.
(3) SR Letter 01–01. A U.S.-domiciled
bank holding company that is a covered
company as of November 15, 2012, and
is a subsidiary of a foreign banking
organization that is currently relying on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010) must comply with the
requirements of this subpart beginning
with the stress test cycle that
commences on October 1, 2015, unless
that time is extended by the Board in
writing.
(b) Compliance date for institutions
that become covered companies after
November 15, 2012—(1) Bank holding
companies. A bank holding company
that becomes a covered company after
November 15, 2012, must comply with
the requirements of this subpart
beginning with the stress test cycle that
commences in the calendar year after
the year in which the bank holding
company becomes a covered company,
unless that time is extended by the
Board in writing.
(2) Nonbank financial companies
supervised by the Board. A company
that becomes a nonbank financial
company supervised by the Board must
comply with the requirements of this
subpart beginning with the stress test
cycle that commences in the calendar
year after the year in which the
company first becomes subject to the
Board’s minimum regulatory capital
requirements, unless the Board
accelerates or extends the compliance
date.
(c) Ongoing application. A bank
holding company that is a covered
company will remain subject to the
requirements of this subpart unless and
until its total consolidated assets fall
below $50 billion for each of four
consecutive quarters, as reported on the
FR Y–9C. The calculation will be
effective on the as-of date of the fourth
consecutive FR Y–9C.
(d) Advanced approaches.
Notwithstanding any other requirement
in this section, the Board’s analysis of
a covered company’s capital in a given
stress test cycle will not include
estimates using the advanced
approaches if the covered company is
notified on or after the first day of that
stress test cycle (October 1) that the
covered company is required to
calculate its risk-based capital
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requirements using the advanced
approaches.
§ 252.134 Annual analysis conducted by
the Board.
(a) In general. (1) On an annual basis,
the Board will conduct an analysis of
each covered company’s capital, on a
total consolidated basis, taking into
account all relevant exposures and
activities of that covered company, to
evaluate the ability of the covered
company to absorb losses in specified
economic and financial conditions.
(2) The analysis will include an
assessment of the projected losses, net
income, and pro forma capital levels
and regulatory capital ratios, tier 1
common ratio, and other capital ratios
for the covered company and use such
analytical techniques that the Board
determines are appropriate to identify,
measure, and monitor risks of the
covered company that may affect the
financial stability of the United States.
(3) In conducting the analyses, the
Board will coordinate with the
appropriate primary financial regulatory
agencies and the Federal Insurance
Office, as appropriate.
(b) Economic and financial scenarios
related to the Board’s analysis. The
Board will conduct its analysis under
this section using a minimum of three
different scenarios, including a baseline
scenario, adverse scenario, and severely
adverse scenario. The Board will notify
covered companies of the scenarios that
the Board will apply to conduct the
analysis for each stress test cycle by no
later than November 15 of each year,
except with respect to trading or any
other components of the scenarios and
any additional scenarios that the Board
will apply to conduct the analysis,
which will be communicated by no later
than December 1.
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§ 252.135 Data and information required to
be submitted in support of the Board’s
analyses.
(a) Regular submissions. Each covered
company must submit to the Board such
data, on a consolidated basis, that the
Board determines is necessary in order
for the Board to derive the relevant pro
forma estimates of the covered company
over the planning horizon under the
scenarios described in section
252.134(b).
(b) Additional submissions required
by the Board. The Board may require a
covered company to submit any other
information on a consolidated basis that
the Board deems necessary in order to:
(1) Ensure that the Board has
sufficient information to conduct its
analysis under this subpart; and
(2) Project a company’s pre-provision
net revenue, losses, provision for loan
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and lease losses, and net income; and,
pro forma capital levels, regulatory
capital ratios, tier 1 common ratio, and
any other capital ratio specified by the
Board under the scenarios described in
§ 252.134(b).
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this subpart and
related materials shall be determined in
accordance with the Freedom of
Information Act (5 U.S.C. 552(b)) and
the Board’s Rules Regarding Availability
of Information (12 CFR part 261).
■
§ 252.136 Review of the Board’s analysis;
publication of summary results.
(a) Authority. 12 U.S.C. 321–338a,
1467a(g), 1818, 1831p-1, 1844(b),
1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements
section 165(i)(2) of the Dodd-Frank Act
(12 U.S.C. 5365(i)(2)), which requires a
covered company to conduct annual
and semi-annual stress tests. This
subpart also establishes definitions of
stress test and related terms,
methodologies for conducting stress
tests, and reporting and disclosure
requirements.
(a) Review of results. Based on the
results of the analysis conducted under
this subpart, the Board will conduct an
evaluation to determine whether the
covered company has the capital, on a
total consolidated basis, necessary to
absorb losses and continue its operation
by maintaining ready access to funding,
meeting its obligations to creditors and
other counterparties, and continuing to
serve as a credit intermediary under
baseline, adverse and severely adverse
scenarios, and any additional scenarios.
(b) Communication of results to
covered companies. The Board will
convey to a covered company a
summary of the results of the Board’s
analyses of such covered company
within a reasonable period of time, but
no later than March 31.
(c) Publication of results by the Board.
By March 31 of each calendar year, the
Board will disclose a summary of the
results of the Board’s analyses of a
covered company.
§ 252.137
Use requirement.
(a) In general. The board of directors
and senior management of each covered
company must consider the results of
the analysis conducted by the Board
under this subpart, as appropriate:
(1) As part of the covered company’s
capital plan and capital planning
process, including when making
changes to the covered company’s
capital structure (including the level
and composition of capital);
(2) When assessing the covered
company’s exposures, concentrations,
and risk positions; and
(3) In the development or
implementation of any plans of the
covered company for recovery or
resolution.
(b) Resolution plan updates. Each
covered company must update its
resolution plan as the Board determines
appropriate, based on the results of the
Board’s analyses of the covered
company under this subpart.
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3. Subpart G to part 252 is revised to
read as follows:
Subpart G—Company-Run Stress Test
Requirements for Covered Companies
Sec.
252.141
252.142
252.143
252.144
252.145
252.146
252.147
252.148
§ 252.141
§ 252.142
Authority and purpose.
Definitions.
Applicability.
Annual stress test.
Mid-cycle stress test.
Methodologies and practices.
Reports of stress test results.
Disclosure of stress test results.
Authority and purpose.
Definitions.
For purposes of this subpart, the
following definitions apply:
(a) Advanced approaches means the
risk-weighted assets calculation
methodologies at 12 CFR part 225,
appendix G, and 12 CFR part 217,
subpart E, as applicable, and any
successor regulation.
(b) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company that are more adverse than
those associated with the baseline
scenario and may include trading or
other additional components.
(c) Average total consolidated assets
means the average of the total
consolidated assets as reported by a
bank holding company on its
Consolidated Financial Statements for
Bank Holding Companies (FR Y–9C) for
the four most recent consecutive
quarters. If the bank holding company
has not filed the FR Y–9C for each of the
four most recent consecutive quarters,
average total consolidated assets means
the average of the company’s total
consolidated assets, as reported on the
company’s FR Y–9C, for the most recent
quarter or consecutive quarters. Average
total consolidated assets are measured
on the as-of date of the most recent FR
Y–9C used in the calculation of the
average.
(d) Bank holding company has the
same meaning as in section 225.2(c) of
the Board’s Regulation Y (12 CFR
225.2(c)).
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(e) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
company and that reflect the consensus
views of the economic and financial
outlook.
(f) Capital action has the same
meaning as in section 225.8(c)(2) of the
Board’s Regulation Y (12 CFR
225.8(c)(2)).
(g) Covered company means:
(1) A bank holding company (other
than a foreign banking organization)
with average total consolidated assets of
$50 billion or more; and
(2) A nonbank financial company
supervised by the Board.
(h) Depository institution has the
same meaning as in section 3 of the
Federal Deposit Insurance Act (12
U.S.C. 1813(c)).
(i) Foreign banking organization has
the same meaning as in section
211.21(o) of the Board’s Regulation K
(12 CFR 211.21(o)).
(j) Nonbank financial company
supervised by the Board means a
nonbank financial company that the
Financial Stability Oversight Council
has determined under section 113 of the
Dodd-Frank Act (12 U.S.C. 5323) shall
be supervised by the Board and for
which such determination is still in
effect.
(k) Planning horizon means the period
of at least nine quarters, beginning on
the first day of a stress test cycle (on
October 1 or April 1, as appropriate)
over which the relevant projections
extend.
(l) Pre-provision net revenue means
the sum of net interest income and noninterest income less expenses before
adjusting for loss provisions.
(m) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the covered
company on the FR Y–9C.
(n) Regulatory capital ratio means a
capital ratio for which the Board
established minimum requirements for
the company by regulation or order,
including, as applicable, the company’s
tier 1 and supplementary leverage ratios
and common equity tier 1, tier 1, and
total risk-based capital ratios as
calculated under appendices A, D, E,
and G to this part (12 CFR part 225) and
12 CFR part 217, as applicable,
including the transition provisions at 12
CFR 217.1(f)(4) and 12 CFR 217.300, or
any successor regulation.
(o) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a covered
company that the Board, or with respect
to the mid-cycle stress test required
under section 252.145 of this subpart,
the covered company, annually
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determines are appropriate for use in
the company-run stress tests, including,
but not limited to, baseline, adverse,
and severely adverse scenarios.
(p) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered company and that overall are
more severe than those associated with
the adverse scenario and may include
trading or other additional components.
(q) Stress test means a process to
assess the potential impact of scenarios
on the consolidated earnings, losses,
and capital of a covered company over
the planning horizon, taking into
account its current condition, risks,
exposures, strategies, and activities.
(r) Stress test cycle means the period
between October 1 of a calendar year
and September 30 of the following
calendar year.
(s) Subsidiary has the same meaning
as in section 225.2(o) the Board’s
Regulation Y (12 CFR 225.2).
(t) Tier 1 common ratio has the same
meaning as in section 225.8 of the
Board’s Regulation Y (12 CFR 225.8).
§ 252.143
Applicability.
(a) Compliance date for bank holding
companies that are covered companies
as of November 15, 2012—(1) In general.
Except as provided in paragraph (a)(2)
or (3) of this section, a bank holding
company that is a covered company as
of November 15, 2012, must comply
with the requirements of this subpart
beginning with the stress test cycle
commencing on October 1, 2013, unless
that time is extended by the Board in
writing.
(2) 2009 Supervisory Capital
Assessment Program. A bank holding
company that participated in the 2009
Supervisory Capital Assessment
Program, or a successor to such a bank
holding company, must comply with
the requirements of this subpart
beginning with the stress test cycle
commencing on November 15, 2012,
unless that time is extended by the
Board in writing.
(3) SR Letter 01–01. A U.S.-domiciled
bank holding company that is a covered
company as of November 15, 2012, and
is a subsidiary of a foreign banking
organization that is currently relying on
Supervision and Regulation Letter SR
01–01 issued by the Board (as in effect
on May 19, 2010) must comply with the
requirements of this subpart beginning
with the stress test cycle commencing
on October 1, 2015, unless that time is
extended by the Board in writing.
(b) Compliance date for institutions
that become covered companies after
November 15, 2012—(1) Bank holding
companies. A bank holding company
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that becomes a covered company after
November 15, 2012, must comply with
the requirements of this subpart
beginning with the stress test cycle that
commences in the calendar year after
the year in which the bank holding
company becomes a covered company,
unless that time is extended by the
Board in writing.
(2) Nonbank financial companies
supervised by the Board. A company
that becomes a nonbank financial
company supervised by the Board must
comply with the requirements of this
subpart beginning with the stress test
cycle that commences in the calendar
year after the year in which company
first becomes subject to the Board’s
minimum regulatory capital
requirements, unless the Board
accelerates or extends the compliance
date.
(c) Ongoing application. A bank
holding company that is a covered
company will remain subject to the
requirements of this subpart unless and
until its total consolidated assets fall
below $50 billion for each of four
consecutive quarters, as reported on the
FR Y–9C. The calculation will be
effective on the as-of date of the fourth
consecutive FR Y–9C.
(d) Advanced approaches.
Notwithstanding any other requirement
in this section, for a given stress test
cycle, a covered company’s estimates of
its pro forma regulatory capital ratios
and the estimate of its pro forma tier 1
common ratio over the planning horizon
shall not include estimates using the
advanced approaches if the company is
notified on or after the first day of that
stress test cycle (October 1) that it is
required to calculate its risk-based
capital requirements using the advanced
approaches.
§ 252.144
Annual stress test.
(a) In general. A covered company
must conduct an annual stress test by
January 5 during each stress test cycle
based on data as of September 30 of the
preceding calendar year, unless the time
or the as of date is extended by the
Board in writing.
(b) Scenarios provided by the Board—
(1) In general. In conducting a stress test
under this section, a covered company
must use the scenarios provided by the
Board. Except as provided in paragraphs
(b)(2) and (3) of this section, the Board
will provide a description of the
scenarios to each covered company no
later than November 15 of that calendar
year.
(2) Additional components. (i) The
Board may require a covered company
with significant trading activity, as
determined by the Board and specified
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in the Capital Assessments and Stress
Testing report (FR Y–14), to include a
trading and counterparty component in
its adverse and severely adverse
scenarios in the stress test required by
this section. The data used in this
component will be as of a date between
October 1 and December 1 of that
calendar year selected by the Board, and
the Board will communicate the as-of
date and a description of the component
to the company no later than December
1 of the calendar year.
(ii) The Board may require a covered
company to include one or more
additional components in its adverse
and severely adverse scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(3) Additional scenarios. The Board
may require a covered company to use
one or more additional scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(4) Notice and response. If the Board
requires a covered company to include
one or more additional components in
its adverse and severely adverse
scenarios under paragraph (b)(2)(ii) of
this section or to use one or more
additional scenarios under paragraph
(b)(3) of this section, the Board will
notify the company in writing no later
than September 30. The notification will
include a general description of the
additional component(s) or additional
scenario(s) and the basis for requiring
the company to include the additional
component(s) or additional scenario(s).
Within 14 calendar days of receipt of a
notification under this paragraph, the
covered company may request in
writing that the Board reconsider the
requirement that the company include
the additional component(s) or
additional scenario(s), including an
explanation as to why the
reconsideration should be granted. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request. The Board will
provide the covered company with a
description of any additional
component(s) or additional scenario(s)
by December 1.
that calendar year, unless the time or
the as-of date is extended by the Board
in writing.
(b) Scenarios related to mid-cycle
stress tests—(1) In general. A covered
company must develop and employ a
minimum of three scenarios, including
a baseline scenario, adverse scenario,
and severely adverse scenario, that are
appropriate for its own risk profile and
operations, in conducting the stress test
required by this section.
(2) Additional components. The
Board may require a covered company
to include one or more additional
components in its adverse and severely
adverse scenarios in the stress test
required by this section based on the
company’s financial condition, size,
complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(3) Additional scenarios. The Board
may require a covered company to use
one or more additional scenarios in the
stress test required by this section based
on the company’s financial condition,
size, complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(4) Notice and response. If the Board
requires a covered company to include
one or more additional components in
its adverse and severely adverse
scenarios under paragraph (b)(2) of this
section or one or more additional
scenarios under paragraph (b)(3) of this
section, the Board will notify the
company in writing no later than March
31. The notification will include a
general description of the additional
component(s) or additional scenario(s)
and the basis for requiring the company
to include the additional component(s)
or additional scenario(s). Within 14
calendar days of receipt of a notification
under this paragraph, the covered
company may request in writing that the
Board reconsider the requirement that
the company include the additional
component(s) or additional scenario(s),
including an explanation as to why the
reconsideration should be granted. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request. The Board will
provide the covered company with a
description of any additional
component(s) or additional scenario(s)
by June 1.
§ 252.145
§ 252.146
Mid-cycle stress test.
(a) Mid-cycle stress test requirement.
In addition to the stress test required
under section 252.144 of this subpart, a
covered company must conduct a stress
test by July 5 during each stress test
cycle based on data as of March 31 of
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Methodologies and practices.
(a) Potential impact on capital. In
conducting a stress test under sections
252.144 and 252.145, for each quarter of
the planning horizon, a covered
company must estimate the following
for each scenario required to be used:
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(1) Losses, pre-provision net revenue,
provision for loan and lease losses, and
net income; and
(2) The potential impact on pro forma
regulatory capital levels and pro forma
capital ratios (including regulatory
capital ratios, the tier 1 common ratio,
and any other capital ratios specified by
the Board), incorporating the effects of
any capital actions over the planning
horizon and maintenance of an
allowance for loan losses appropriate for
credit exposures throughout the
planning horizon.
(b) Assumptions regarding capital
actions. In conducting a stress test
under §§ 252.144 and 252.145, a
covered company is required to make
the following assumptions regarding its
capital actions over the planning
horizon—
(1) For the first quarter of the
planning horizon, the covered company
must take into account its actual capital
actions as of the end of that quarter; and
(2) For each of the second through
ninth quarters of the planning horizon,
the covered company must include in
the projections of capital:
(i) Common stock dividends equal to
the quarterly average dollar amount of
common stock dividends that the
company paid in the previous year (that
is, the first quarter of the planning
horizon and the preceding three
calendar quarters);
(ii) Payments on any other instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio
equal to the stated dividend, interest, or
principal due on such instrument
during the quarter; and
(iii) An assumption of no redemption
or repurchase of any capital instrument
that is eligible for inclusion in the
numerator of a regulatory capital ratio.
(c) Controls and oversight of stress
testing processes—(1) In general. The
senior management of a covered
company must establish and maintain a
system of controls, oversight, and
documentation, including policies and
procedures, that are designed to ensure
that its stress testing processes are
effective in meeting the requirements in
this subpart. These policies and
procedures must, at a minimum,
describe the covered company’s stress
testing practices and methodologies,
and processes for validating and
updating the company’s stress test
practices and methodologies consistent
with applicable laws, regulations, and
supervisory guidance. Policies of
covered companies must also describe
processes for scenario development for
the mid-cycle stress test required under
§ 252.145.
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Federal Register / Vol. 78, No. 189 / Monday, September 30, 2013 / Rules and Regulations
(2) Oversight of stress testing
processes. The board of directors, or a
committee thereof, of a covered
company must approve and review the
policies and procedures of the stress
testing processes as frequently as
economic conditions or the condition of
the covered company may warrant, but
no less than annually. The board of
directors and senior management of the
covered company must receive a
summary of the results of any stress test
conducted under this subpart.
(3) Role of stress testing results. The
board of directors and senior
management of each covered company
must consider the results of the analysis
it conducts under this subpart, as
appropriate:
(i) As part of the covered company’s
capital plan and capital planning
process, including when making
changes to the covered company’s
capital structure (including the level
and composition of capital);
(ii) When assessing the covered
company’s exposures, concentrations,
and risk positions; and
(iii) In the development or
implementation of any plans of the
covered company for recovery or
resolution.
§ 252.147
Reports of stress test results.
(a) Reports to the Board of stress test
results. (1) A covered company must
report the results of the stress test
required under § 252.144 to the Board
by January 5 of each calendar year in the
manner and form prescribed by the
Board, unless that time is extended by
the Board in writing.
(2) A covered company must report
the results of the stress test required
under § 252.145 to the Board by July 5
of each calendar year in the manner and
form prescribed by the Board, unless
that time is extended by the Board in
writing.
(b) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Board under this subpart and
related materials shall be determined in
accordance with applicable exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the Board’s Rules
Regarding Availability of Information
(12 CFR part 261).
mstockstill on DSK4VPTVN1PROD with RULES
§ 252.148
Disclosure of stress test results.
(a) Public disclosure of results—(1) In
general. (i) A covered company must
disclose a summary of the results of the
stress test required under section
252.144 in the period beginning on
March 15 and ending on March 31,
unless that time is extended by the
Board in writing.
VerDate Mar<15>2010
16:39 Sep 27, 2013
Jkt 229001
(ii) A covered company must disclose
a summary of the results of the stress
test required under § 252.145 in the
period beginning on September 15 and
ending on September 30, unless that
time is extended by the Board in
writing.
(2) Disclosure method. The summary
required under this section may be
disclosed on the Web site of a covered
company, or in any other forum that is
reasonably accessible to the public.
(b) Summary of results. A covered
company must disclose, at a minimum,
the following information regarding the
severely adverse scenario:
(1) A description of the types of risks
included in the stress test;
(2) A general description of the
methodologies used in the stress test,
including those employed to estimate
losses, revenues, provision for loan and
lease losses, and changes in capital
positions over the planning horizon;
(3) Estimates of—
(i) Pre-provision net revenue and
other revenue;
(ii) Provision for loan and lease losses,
realized losses or gains on available-forsale and held-to-maturity securities,
trading and counterparty losses, and
other losses or gains;
(iii) Net income before taxes;
(iv) Loan losses (dollar amount and as
a percentage of average portfolio
balance) in the aggregate and by
subportfolio, including: domestic
closed-end first-lien mortgages;
domestic junior lien mortgages and
home equity lines of credit; commercial
and industrial loans; commercial real
estate loans; credit card exposures; other
consumer loans; and all other loans; and
(v) Pro forma regulatory capital ratios
and the tier 1 common ratio and any
other capital ratios specified by the
Board;
(4) An explanation of the most
significant causes for the changes in
regulatory capital ratios and the tier 1
common ratio; and
(5) With respect to a stress test
conducted pursuant to section 165(i)(2)
of the Dodd-Frank Act by an insured
depository institution that is a
subsidiary of the covered company and
that is required to disclose a summary
of its stress tests results under
applicable regulations, changes in
regulatory capital ratios and any other
capital ratios specified by the Board of
the depository institution subsidiary
over the planning horizon, including an
explanation of the most significant
causes for the changes in regulatory
capital ratios.
(c) Content of results. (1) The
following disclosures required under
paragraph (b) of this section must be on
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
59791
a cumulative basis over the planning
horizon:
(i) Pre-provision net revenue and
other revenue;
(ii) Provision for loan and lease losses,
realized losses/gains on available-forsale and held-to-maturity securities,
trading and counterparty losses, and
other losses or gains;
(iii) Net income before taxes; and
(iv) Loan losses in the aggregate and
by subportfolio.
(2) The disclosure of pro forma
regulatory capital ratios, the tier 1
common ratio, and any other capital
ratios specified by the Board that is
required under paragraph (b) of this
section must include the beginning
value, ending value, and minimum
value of each ratio over the planning
horizon.
By order of the Board of Governors of the
Federal Reserve System, September 24, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013–23618 Filed 9–27–13; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
12 CFR Part 252
[Docket No. R–1464; RIN 7100 AE 02]
Annual Company-Run Stress Tests at
Banking Organizations With Total
Consolidated Assets of More Than $10
Billion But Less Than $50 Billion; OneYear Transition Period to Revised
Regulatory Capital Framework for
2013–2014 Stress Test Cycle
Board of Governors of the
Federal Reserve System (Board).
ACTION: Interim final rule with request
for comment.
AGENCY:
The Board invites comment
on an interim final rule that provides a
one-year transition period during which
bank holding companies and most state
member banks with more than $10
billion but less than $50 billion in total
consolidated assets would not be
required to reflect the revised regulatory
capital framework that the Board
approved on July 2, 2013 (revised
capital framework) in their stress tests
for the stress test cycle that begins
October 1, 2013. For this stress test
cycle, these companies will be required
to estimate their pro forma capital levels
and ratios over the full nine-quarter
planning horizon using the Board’s
current regulatory capital rules. The
interim final rule also clarifies when a
banking organization would estimate its
minimum regulatory capital ratios using
SUMMARY:
E:\FR\FM\30SER1.SGM
30SER1
]]>Agencies
[Federal Register Volume 78, Number 189 (Monday, September 30, 2013)]
[Rules and Regulations]
[Pages 59779-59791]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23618]
=======================================================================
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FEDERAL RESERVE SYSTEM
12 CFR Parts 225 and 252
[Docket No. R-1463; RIN 7100 AE-01]
Regulations Y and YY: Application of the Revised Capital
Framework to the Capital Plan and Stress Test Rules
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Interim final rule with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board invites comment on an interim final rule that amends
the capital plan and stress test rules to require a bank holding
company with total consolidated assets of $50 billion or more to
estimate its tier 1 common ratio using the methodology currently in
effect in 2013 under the existing capital guidelines (not the rules as
revised on July 2, 2013). The interim final rule also clarifies when a
banking organization would estimate its minimum regulatory capital
ratios using the advanced approaches for a given capital plan and
stress test cycle and makes minor, technical changes to the capital
plan rule.
DATES: This rule is effective on September 30, 2013. Comments must be
received on or before November 25, 2013.
ADDRESSES: You may submit comments, identified by Docket R-1463 and RIN
No. 7100 AE 01, by any of the following methods:
Agency Web site: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/apps/foia/proposedregs.aspx.
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
Email: regs.comments@federalreserve.gov. Include docket number in
the subject line of the message.
Facsimile: (202) 452-3819 or (202) 452-3102.
Mail: Robert deV. Frierson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
https://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper form in Room MP-
500 of the Board's Martin Building (20th and C Streets NW.) between 9
a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Deputy Associate Director,
(202) 263-4833, Constance Horsley, Manager, (202) 452-5239, or Ann
McKeehan, Senior Supervisory Financial Analyst, (202) 973-6903,
Division of Banking Supervision and Regulation; Laurie Schaffer,
Associate General Counsel, (202) 452-2272, Ben McDonough, Senior
Counsel, (202) 452-2036, or Christine Graham, Senior Attorney, (202)
452-3005, Legal Division, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue NW., Washington, DC 20551.
Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-
4869.
SUPPLEMENTARY INFORMATION:
I. Background
On July 2, 2013, the Board approved revised risk-based and leverage
capital requirements for banking organizations that implement the Basel
III regulatory capital reforms and certain changes required by the
Dodd-Frank Wall Street Reform and Consumer Protection Act (revised
capital framework).\1\ The revised capital framework introduces a new
common equity tier 1 capital ratio and supplementary leverage ratio,
raises the minimum tier 1 ratio and, for certain banking organizations,
leverage ratio, implements strict eligibility criteria for regulatory
capital instruments, and
[[Page 59780]]
introduces a standardized methodology for calculating risk-weighted
assets. The new minimum regulatory capital ratios and the eligibility
criteria for regulatory capital instruments will begin to take effect
as of January 1, 2014, subject to transition provisions, for banking
organizations that meet the criteria for the advanced approaches rule
(advanced approaches banking organizations).\2\ All other banking
organizations must begin to comply with the revised capital framework
beginning on January 1, 2015.
---------------------------------------------------------------------------
\1\ See, Regulatory Capital Rules: Regulatory Capital,
Implementation of Basel III, Capital Adequacy, Transition
Provisions, Prompt Corrective Action, Standardized Approach for
Risk-weighted Assets, Market Discipline and Disclosure Requirements,
Advanced Approaches Risk-Based Capital Rule, and Market Risk Capital
Rule (July 2, 2013), available at: https://www.federalreserve.gov/newsevents/press/bcreg/20130702a.htm (revised capital framework).
\2\ A banking organization is subject to the advanced approaches
rule if it has consolidated assets greater than or equal to $250
billion, if it has total consolidated on-balance sheet foreign
exposures of at least $10 billion, or if it elects to apply the
advanced approaches rule.
---------------------------------------------------------------------------
As the revised regulatory capital framework comes into effect,
banking organizations will be required to reflect the new capital rules
in their capital plans submitted under the Board's capital plan rule
and in their stress tests conducted under the Board's rules
implementing the stress test requirements of the Dodd-Frank Wall Street
Reform and Consumer Protection Act.
II. Capital Plan Rule
Pursuant to the Board's capital plan rule and Board's related
supervisory process, the Comprehensive Capital Analysis and Review
(CCAR), the Board assesses the internal capital planning process of a
bank holding company with total consolidated assets of $50 billion or
more (large bank holding company) and its ability to maintain
sufficient capital to continue its operations under expected and
stressful conditions.\3\ Under the capital plan rule, a large bank
holding company is required to submit an annual capital plan to the
Board that contains estimates of its minimum regulatory capital ratios
and its tier 1 common ratio under expected conditions and under a range
of stressed scenarios over a nine-quarter planning horizon (planning
horizon).\4\ A capital plan also must include a discussion of how the
large bank holding company will maintain a pro forma tier 1 common
ratio above 5 percent under expected conditions and stressed
scenarios.\5\
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\3\ 76 FR 74631 (Dec. 1, 2011) (codified at 12 CFR 225.8)
(capital plan rule).
\4\ See generally 12 CFR 225.8.
\5\ Id. at Sec. 225.8(d)(2)(i)(B).
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The tier 1 common ratio is a measure that the Federal Reserve has
used for supervisory purposes during and after the financial crisis,
including CCAR--it is not a minimum capital requirement.\6\ The capital
plan rule defines the tier 1 common ratio as the ratio of a bank
holding company's tier 1 common capital to its total risk-weighted
assets. Tier 1 common capital is defined as tier 1 capital less non-
common elements in tier 1 capital, including perpetual preferred stock
and related surplus, minority interest in subsidiaries, trust preferred
securities and mandatory convertible preferred securities.\7\ The 5
percent threshold reflected a supervisory assessment of the minimum
capital needed to provide a high level of confidence that a BHC can
continue to be a going concern throughout stressful conditions and on a
post-stress basis, based on an analysis of the historical distribution
of earnings by large banking organizations.\8\
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\6\ 76 FR 74631, 74636 (December 1, 2011).
\8\ Basel Committee on Banking Supervision, Calibrating
regulatory minimum capital requirements and capital buffers: A top-
down approach (October 2010), available at https://www.bis.org/publ/bcbs180.htm.
---------------------------------------------------------------------------
The preamble to the capital plan rule noted that the Basel III
framework proposed by the Basel Committee on Bank Supervision includes
a different definition of tier 1 common capital and that the Board and
the other federal banking agencies continued to work on implementing
Basel III in the United States.\9\ The capital plan rule's definition
of ``tier 1 common ratio'' states that the definition will remain in
effect until the Board adopts an alternative tier 1 common ratio
definition as a minimum regulatory capital ratio.\10\
---------------------------------------------------------------------------
\9\ 76 FR 74631, 74637 (December 1, 2011).
\10\ Id.at Sec. 225.8(c)(9).
---------------------------------------------------------------------------
III. Stress Test Rules
The Board's stress test rules for large bank holding companies and
nonbank financial companies supervised by the Board establish a
framework for the Board to conduct annual supervisory stress tests to
evaluate whether these companies have the capital necessary to absorb
losses as a result of adverse economic conditions and require these
companies to conduct semi-annual company-run stress tests.\11\ Under
the supervisory stress tests, the Board uses data as of September 30 of
each year to assess a covered company's capital levels and regulatory
capital ratios and its tier 1 common ratio, over the nine-quarter
planning horizon of a given stress test cycle.\12\ Similarly, the
annual and semi-annual stress tests conducted by a covered company
require it to report, among other elements, its regulatory capital
ratios, including its tier 1 common ratio, for each quarter of a nine-
quarter planning horizon.\13\ The stress test rule defines the tier 1
common ratio by cross-reference to the capital plan rule, which, as
previously described, provides that the tier 1 common ratio is to
remain in effect until the Board adopts an alternative tier 1 common
ratio definition.\14\
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\11\ 77 FR 62378 (Oct. 12, 2012) (codified at 12 CFR part 252,
subparts F and G). The changes in this interim final rule will apply
to nonbank financial companies supervised by the Board after they
become subject to stress test requirements.
\12\ 12 CFR 252.134(a).
\13\ Id. at 252.146(a).
\14\ Id. at 252.132(q), 252.142(t).
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IV. Incorporating the Revised Capital Framework Into Capital Plan and
Stress Tests
Because the revised capital framework introduces a methodology for
computing a common equity tier 1 capital ratio and a new minimum common
equity tier 1 capital ratio, it is necessary to clarify how bank
holding companies should calculate their tier 1 common ratio for the
upcoming capital plan and stress test cycle.
With respect to a bank holding company's estimates of its
regulatory capital ratios and the applicable minimum capital
requirements, the bank holding company must project its regulatory
capital ratios and meet the minimum capital requirements for each
quarter of the planning horizon in accordance with the minimum capital
requirements that are in effect during that quarter. Accordingly, under
the revised capital framework, a bank holding company that is an
advanced approaches banking organization would be required to calculate
its common equity tier 1 capital ratio beginning in 2014, in accordance
with the transition period arrangements, and meet a 4.0 percent minimum
in 2014 and a 4.5 percent minimum in 2015. A bank holding company that
is not advanced approaches banking organizations would be required to
calculate its common equity tier 1 capital ratio beginning in 2015, in
accordance with the transition period arrangements, and meet a 4.5
percent minimum in 2015. A state member bank that is a subsidiary of a
bank holding company with total consolidated assets of $50 billion or
more will reflect the new capital rules in the same manner as its bank
holding company parent in projecting its capital for the upcoming
stress test cycle.
With respect to a bank holding company's estimates of the tier 1
common ratio, the bank holding company must use the definitions of tier
1 capital and total risk-weighted assets currently in effect in 2013
under the existing capital guidelines for each quarter of the planning
horizon, and not incorporate the new definition of
[[Page 59781]]
common equity tier 1 that is part of the revised capital framework that
will become effective in 2014 and 2015. Preserving the tier 1 common
ratio methodology maintains consistency with previous capital plan
cycles during the phase-in of the new common equity tier 1 capital
minimum requirement. Moreover, the new minimum common equity tier 1
capital ratio will be phased in over several years. Using the new
methodology with the lower first year phase-in minimum ratio for the
capital plan and stress test cycle that begins October 1, 2013, would
likely result in large bank holding companies being subject to a common
equity capital standard in the first quarters of the planning horizon
that is less stringent than the standard used in previous capital plan
and stress test cycles. Once the new minimum common equity tier 1
capital ratio reaches its permanent level of 4.5 percent in 2015, the
Board expects that the combination of changes in the methodology for
computing the common equity tier 1 ratio and the minimum level of 4.5
percent will be more stringent than the current capital plan tier 1
common ratio of 5.0 percent. Under the new common equity tier 1 capital
definition, most elements of accumulated other comprehensive income
(AOCI), such as gains and losses on available-for-sale debt securities,
will flow through to common equity, except in the case of non-advanced
approaches banking organizations that make an AOCI opt-out
election.\15\ In addition, more assets will be subject to deduction,
including investments in unconsolidated financial institutions and all
deferred tax assets that arise from operating losses and tax credit
carry forwards.
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\15\ See Revised capital framework, Sec. ------.22(b)(2).
---------------------------------------------------------------------------
Table 1 illustrates the minimum common equity capital ratios to
which large bank holding companies will be subject in the capital plan
and stress test cycles that begin October 1, 2013.
Table 1--Common Equity Ratios Applicable to Large Bank Holding Companies in the Capital Plan and Stress Test Cycles That Begin October 1, 2013
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Advanced approaches bank Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C
holding companies. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%
CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of
4.0%. 4.0%. 4.0%. 4.0%. 4.5%. 4.5%. 4.5%. 4.5%.
Non-advanced approaches bank Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C Current T1C
holding companies. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%. ratio of 5.0%
CET1 ratio of CET1 ratio of CET1 ratio of CET1 ratio of
4.5%. 4.5%. 4.5%. 4.5%.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current T1C ratio: the ratio of a bank holding company's tier 1 common capital calculated using the definitions in place as of the effective date of the interim final rule (i.e., tier 1
capital as defined under Appendix A of 12 CFR part 225, less the non-common elements of tier 1 capital, over total risk-weighted assets as defined under Appendices A, E, and G of 12 CFR part
225).
CET1 ratio: a bank holding company's common equity tier 1 capital ratio as calculated under 12 CFR part 217, including the transition provisions of 12 CFR part Sec. 217.300, as applicable
within each quarter of the capital plan and stress test cycles that begin October 1, 2013.
V. Parallel Run Notification Date
In light of the issuance of the revised capital framework, the
Board is also providing clarity on when a banking organization would be
required to estimate its minimum regulatory capital ratios over the
planning horizon using the advanced approaches for a given capital
planning and stress testing cycle.
A bank holding company that is an advanced approaches banking
organization is required to use the advanced approaches to calculate
its minimum regulatory capital ratios if it has conducted a
satisfactory parallel run, which is defined as a period of no less than
four consecutive calendar quarters during which a banking organization
complies with certain qualification requirements of the advanced
approaches.\16\ Currently, all advanced approaches banking
organizations are in parallel run, but it is possible that firms could
complete a satisfactory parallel run in the near term and, as a result,
be required to calculate their regulatory capital ratios using the
advanced approaches Under the current capital plan rule and stress test
rule, an advanced approaches banking organization would be required to
estimate its capital ratios over the planning horizon using the
advanced approaches if the firm is notified any time before January 5,
which is the date on which a banking organization must submit its
capital plan and its stress test results to the Board.
---------------------------------------------------------------------------
\16\ 12 CFR part 225, Appendix G, section 21(c).
---------------------------------------------------------------------------
In order to provide additional notice to an advanced approaches
banking organization regarding when it must begin to estimate its
advanced approaches regulatory capital ratios under stressed conditions
in a given capital plan or stress test cycle, the interim final rule
provides that a bank holding company must be notified that it has
completed its parallel run by September 30 of a given year in order to
be required to estimate its capital ratios using the advanced
approaches for the capital plan or stress test cycle that begins on
October 1 of that year.
VI. Technical Changes
The interim final rule makes minor technical changes to the capital
plan rule. It clarifies that a covered company that has not filed the
FR Y-9C report for the four most recent consecutive quarters will
calculate its total consolidated assets as reported on the company's
available FR Y-9C reports for the most recent quarter or consecutive
quarters. It clarifies that the Board (or the Reserve Bank, with
concurrence of the Board) may extend the resubmission period for a
capital plan beyond an initial 60 day extension if the Board or Reserve
Bank determines that such longer period is appropriate.
The interim final rule modifies the capital plan rule to reflect
the Board's current practice of publicly disclosing its decision to
object or not object to a bank holding company's capital plan along
with a summary of the Board's analyses of that company. The rule
provides that any disclosure will occur by March 31 of each calendar
year, unless the Board determines that another date is appropriate.
With regard to the Board's review of bank holding companies' capital
plans, the Board expects the summary results largely will be similar to
the results disclosed in previous CCAR exercises, unless the Board
determines that different or
[[Page 59782]]
additional disclosures would be appropriate.
The interim final rule also corrects a typographical numbering
error and removes the clarification of the start of the stress test
cycle for the stress test cycle that began in 2012.
VII. Effective Date; Solicitation of Comments
This interim final rule is effective September 30, 2013. Pursuant
to the Administrative Procedure Act (APA), at 5 U.S.C. 553(b)(B),
notice and comment are not required prior to the issuance of a final
rule if an agency, for good cause, finds that ``notice and public
procedure thereon are impracticable, unnecessary, or contrary to the
public interest.'' \17\ Similarly, a final rule may be published with
an immediate effective date if an agency finds good cause and publishes
such with the final rule.\18\
---------------------------------------------------------------------------
\17\ 5 U.S.C. 553(b)(B).
\18\
---------------------------------------------------------------------------
Consistent with section 553(b)(B) of the APA, the Board finds that
issuing this rule as an interim final rule is necessary to clarify how
a large bank holding company must incorporate the revised capital
framework adopted July 2, 2013, into its capital plan and stress tests
for purposes of the capital plan and stress test cycles that begin
October 1, 2013. This interim final rule also clarifies when a bank
holding company would be required to calculate its minimum regulatory
capital ratios using the advanced approaches for a given capital plan
and stress testing cycle. Obtaining notice and comment prior to issuing
the interim final rule would be impracticable and contrary to the
public interest. The capital rules were only recently revised and the
short effective date of those revisions provide good cause to publish
the interim final rule with an immediate effective date in order to
remove uncertainty about the standards in the capital plan rule and
reduce the burden of requiring firms to change their capital
calculations in advance of the effective date.
The approval by the Board of the revised capital framework in July,
2013, prompted a need to clarify how a large bank holding company would
incorporate these rules into its capital plan and stress tests for the
capital plan and stress test cycles that begin October 1, 2013. In
addition, the definition of ``tier 1 common ratio'' used in the capital
plan rule, and incorporated by cross reference in the stress test
rules, stated that the definition would remain in effect until the
Board had adopted an alternative tier 1 common ratio definition as a
minimum regulatory capital ratio.\19\ The approach taken in the interim
final rule is consistent with the Board's previous interpretations of
the capital plan and stress test rules.\20\ It also ensures that the
tier 1 common ratio is no less stringent than the ratio used in
previous cycles.
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\19\ Id.at Sec. 225.8(c)(9).
\20\ See Federal Reserve System Comprehensive Capital Analysis
and Review: Summary Instructions and Guidance (November 22, 2011),
available at: https://www.federalreserve.gov/newsevents/press/bcreg/bcreg20111122d1.pdf.
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In addition, the interim final rule provides that a bank holding
company must be notified that it has completed its parallel run by
September 30 of a given year in order to be required to estimate its
capital ratios using the advanced approaches for that year's capital
plan or stress test cycle. This change provides clearer notice to an
advanced approaches banking organization so that it could anticipate
when it will be required to calculate its regulatory capital ratios
using the advanced approaches in a given capital plan or stress test
cycle.
Moreover, the interim final rule should not impose any incremental
burden on these firms. The interim final rule relieves burden on them
by clarifying the process for their upcoming capital plan submissions
and company-run stress tests and providing additional time to build
systems and processes necessary to effectively implement in a stress
test the regulatory capital requirements of the advanced approaches
rules.
Although notice and comment are not required prior to the effective
date of this interim final rule, the Board invites comment on all
aspects of this rulemaking and will revise this interim final rule if
necessary or appropriate in light of the comments received. The Board
is seeking comments on all aspects of the interim final rule. In
particular:
Question 1. What, if any, additional transitional arrangements
should the Board consider for future capital plan and stress test
cycles? Should the Board remove the capital plan's tier 1 common ratio
of 5.0 percent, or conversely, maintain the tier 1 common ratio of 5.0
percent, but require bank holding companies to calculate the ratio
using the more stringent definition of capital?
Question 2. What, if any, modifications should be made to the
advanced approaches notification date to better facilitate the timely
notification of advanced approaches banking organizations of their need
to use the advanced approaches in estimating their regulatory capital
ratios for the capital plan and stress test purposes?
VIII. Regulatory Analysis
A. Regulatory Flexibility Act Analysis
The Board has considered the potential impact of the interim final
rule on small companies in accordance with the Regulatory Flexibility
Act (5 U.S.C. 603(b)). Based on its analysis and for the reasons stated
below, the Board believes that the interim final rule will not have a
significant economic impact on a substantial number of small entities.
Nevertheless, the Board is publishing a regulatory flexibility
analysis.
For the reason discussed in the Supplementary Information above,
the agencies are issuing this interim final rule to clarify the
requirements for certain companies required to submit capital plans to
the Board on January 5, 2014, and conduct Dodd-Frank Act company run
stress tests in the stress test cycle that commences on October 1,
2013. Under regulations issued by the Small Business Administration
(``SBA''), a small entity includes a depository institution, bank
holding company, or savings and loan holding company with total assets
of $500 million or less (a small banking organization). The interim
final rule would apply to bank holding companies with total
consolidated asset of $50 billion or more and nonbank financial
companies supervised by the Board. Companies that would be subject to
the interim finale rule therefore substantially exceed the $500 million
total asset threshold at which a company is considered a small company
under SBA regulations. In light of the foregoing, the Board does not
believe that the interim final rule would have a significant economic
impact on a substantial number of small entities.
B. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act required the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The Board invites comment on how to
make this interim final rule easier to understand. For example:
Has the Board organized the material to suit your needs?
If not, how could the rule be more clearly stated?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation
[[Page 59783]]
easier to understand? If so, what changes would make the regulation
easier to understand?
Would more, but shorter, sections be better? If so, which
sections should be changed?
What else could the Board do to make the regulation easier
to understand?
C. Paperwork Reduction Act
This interim final rule references currently approved collections
of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520)
provided for in the capital plan rules. This interim final rule does
not introduce any new collections of information nor does it
substantively modify the collections of information that Office of
Management and Budget (OMB) has approved. Therefore, no Paperwork
Reduction Act submissions to OMB are required.
List of Subjects
12 CFR Part 225
Administrative practice and procedure; Banks, banking; Capital
Planning; Holding companies; Reporting and recordkeeping requirements;
Securities, Stress Testing.
12 CFR Part 252
Administrative practice and procedure, Banks, Banking, Capital
Planning; Federal Reserve System, Holding companies, Reporting and
recordkeeping requirements, Securities, Stress Testing.
Authority and Issuance
For the reasons stated in the Supplementary Information, the Board
of Governors of the Federal Reserve System amends 12 CFR chapter II as
follows:
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
1. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
Subpart A--General Provisions
0
2. Revise Sec. 225.8 to read as follows:
Sec. 225.8 Capital planning.
(a) Purpose. This section establishes capital planning and prior
notice and approval requirements for capital distributions by certain
bank holding companies.
(b) Scope and effective date. (1) This section applies to every
top-tier bank holding company domiciled in the United States:
(i) With average total consolidated assets of $50 billion or more.
Average total consolidated assets means the average of the total
consolidated assets as reported by a bank holding company on its
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)
for the four most recent consecutive quarters. If the bank holding
company has not filed the FR Y-9C for each of the four most recent
consecutive quarters, average total consolidated assets means the
average of the company's total consolidated assets, as reported on the
company's FR Y-9C, for the most recent quarter or consecutive quarters.
Average total consolidated assets are measured on the as-of date of the
most recent FR Y-9C used in the calculation of the average; or
(ii) That is subject to this section, in whole or in part, by order
of the Board based on the institution's size, level of complexity, risk
profile, scope of operations, or financial condition.
(2) Beginning on December 23, 2011, the provisions of this section
shall apply to any bank holding company that is subject to this section
pursuant to paragraph (b)(1), provided that:
(i) Until July 21, 2015, this section will not apply to any bank
holding company subsidiary of a foreign banking organization that is
currently relying on Supervision and Regulation Letter SR 01-01 issued
by the Board (as in effect on May 19, 2010, available at https://www.federalreserve.gov/boarddocs/srletters/2001/sr0101.htm); and
(ii) A bank holding company that becomes subject to this section
pursuant to paragraph (b)(1)(i) after the 5th of January of a calendar
year shall not be subject to the requirements of paragraphs (d)(1)(ii),
(d)(4), and (f)(1)(iii) of this section until January 1 of the next
calendar year.
(3) Notwithstanding any other requirement in this section, for a
given capital plan cycle (including the January 5 submission of a
capital plan under paragraph (d)(1) of this section and any
resubmission of the capital plan under paragraph (d)(4) of this section
during the capital plan cycle), a bank holding company's estimates of
its pro forma regulatory capital ratios and its pro forma tier 1 common
ratio over the planning horizon shall not include estimates using the
advanced approaches if the bank holding company is notified on or after
the first day of that capital plan cycle (October 1) that the bank
holding company is required to calculate its risk-based capital
requirements using the advanced approaches.
(4) Nothing in this section shall limit the authority of the
Federal Reserve to issue a capital directive or take any other
supervisory or enforcement action, including action to address unsafe
or unsound practices or conditions or violations of law.
(c) Definitions. For purposes of this section, the following
definitions apply:
(1) Advanced approaches means the risk-weighted assets calculation
methodologies at 12 CFR part 225, appendix G, and 12 CFR part 217,
subpart E, as applicable, and any successor regulation.
(2) Capital action means any issuance of a debt or equity capital
instrument, any capital distribution, and any similar action that the
Federal Reserve determines could impact a bank holding company's
consolidated capital.
(3) Capital distribution means a redemption or repurchase of any
debt or equity capital instrument, a payment of common or preferred
stock dividends, a payment that may be temporarily or permanently
suspended by the issuer on any instrument that is eligible for
inclusion in the numerator of any minimum regulatory capital ratio, and
any similar transaction that the Federal Reserve determines to be in
substance a distribution of capital.
(4) Capital plan means a written presentation of a bank holding
company's capital planning strategies and capital adequacy process that
includes the mandatory elements set forth in paragraph (d)(2) of this
section.
(5) Capital plan cycle means the period beginning on October 1 of a
calendar year and ending on September 30 of the following calendar
year.
(6) Capital policy means a bank holding company's written
assessment of the principles and guidelines used for capital planning,
capital issuance, usage and distributions, including internal capital
goals; the quantitative or qualitative guidelines for dividend and
stock repurchases; the strategies for addressing potential capital
shortfalls; and the internal governance procedures around capital
policy principles and guidelines.
(7) Minimum regulatory capital ratio means any minimum regulatory
capital ratio that the Federal Reserve may require of a bank holding
company, by regulation or order, including, as applicable, the bank
holding company's tier 1 and supplementary leverage ratios and common
equity tier 1, tier 1, and total risk-based capital ratios as
calculated under appendices A, D, E, and G to this part (12 CFR part
225) and
[[Page 59784]]
12 CFR part 217, as applicable, including the transition provisions at
12 CFR 217.1(f)(4) and 12 CFR 217.300, or any successor regulation.
(8) Planning horizon means the period of at least nine quarters,
beginning with the quarter preceding the quarter in which the bank
holding company submits its capital plan, over which the relevant
projections extend.
(9) Tier 1 capital has the same meaning as under appendix A to this
part or under 12 CFR part 217, as applicable, or any successor
regulation.
(10) Tier 1 common capital means tier 1 capital as defined under
appendix A to this part less the non-common elements of tier 1 capital,
including perpetual preferred stock and related surplus, minority
interest in subsidiaries, trust preferred securities and mandatory
convertible preferred securities.
(11) Tier 1 common ratio means the ratio of a bank holding
company's tier 1 common capital to total risk-weighted assets as
defined under appendices A and E to this part.
(d) General requirements--(1) Annual capital planning. (i) A bank
holding company must develop and maintain a capital plan.
(ii) A bank holding company must submit its complete capital plan
to the appropriate Reserve Bank and the Board each year by the 5th of
January, or such later date as directed by the Board or the appropriate
Reserve Bank, with concurrence of the Board.
(iii) The bank holding company's board of directors or a designated
committee thereof must at least annually and prior to submission of the
capital plan under paragraph (d)(1)(ii) of this section:
(A) Review the robustness of the bank holding company's process for
assessing capital adequacy,
(B) Ensure that any deficiencies in the bank holding company's
process for assessing capital adequacy are appropriately remedied; and
(C) Approve the bank holding company's capital plan.
(2) Mandatory elements of capital plan. A capital plan must contain
at least the following elements:
(i) An assessment of the expected uses and sources of capital over
the planning horizon that reflects the bank holding company's size,
complexity, risk profile, and scope of operations, assuming both
expected and stressful conditions, including:
(A) Estimates of projected revenues, losses, reserves, and pro
forma capital levels, including any minimum regulatory capital ratios
(for example, leverage, tier 1 risk-based, and total risk-based capital
ratios) and any additional capital measures deemed relevant by the bank
holding company, over the planning horizon under expected conditions
and under a range of stressed scenarios, including any scenarios
provided by the Federal Reserve and at least one stressed scenario
developed by the bank holding company appropriate to its business model
and portfolios;
(B) A calculation of the pro forma tier 1 common ratio over the
planning horizon under expected conditions and under a range of
stressed scenarios and discussion of how the company will maintain a
pro forma tier 1 common ratio above 5 percent under expected conditions
and the stressed scenarios required under paragraphs (d)(2)(i)(A) and
(ii) of this section;
(C) A discussion of the results of any stress test required by law
or regulation, and an explanation of how the capital plan takes these
results into account; and
(D) A description of all planned capital actions over the planning
horizon.
(ii) A detailed description of the bank holding company's process
for assessing capital adequacy, including:
(A) A discussion of how the bank holding company will, under
expected and stressful conditions, maintain capital commensurate with
its risks, maintain capital above the minimum regulatory capital ratios
and above a tier 1 common ratio of 5 percent, and serve as a source of
strength to its subsidiary depository institutions;
(B) A discussion of how the bank holding company will, under
expected and stressful conditions, maintain sufficient capital to
continue its operations by maintaining ready access to funding, meeting
its obligations to creditors and other counterparties, and continuing
to serve as a credit intermediary;
(iii) The bank holding company's capital policy; and
(iv) A discussion of any expected changes to the bank holding
company's business plan that are likely to have a material impact on
the firm's capital adequacy or liquidity.
(3) Data collection. Upon the request of the Board or appropriate
Reserve Bank, the bank holding company shall provide the Federal
Reserve with information regarding--
(i) The bank holding company's financial condition, including its
capital;
(ii) The bank holding company's structure;
(iii) Amount and risk characteristics of the bank holding company's
on- and off-balance sheet exposures, including exposures within the
bank holding company's trading account, other trading-related exposures
(such as counterparty-credit risk exposures) or other items sensitive
to changes in market factors, including, as appropriate, information
about the sensitivity of positions to changes in market rates and
prices;
(iv) The bank holding company's relevant policies and procedures,
including risk management policies and procedures;
(v) The bank holding company's liquidity profile and management;
and
(vi) Any other relevant qualitative or quantitative information
requested by the Board or the appropriate Reserve Bank to facilitate
review of the bank holding company's capital plan under this section.
(4) Re-submission of a capital plan. (i) A bank holding company
must update and re-submit its capital plan to the appropriate Reserve
Bank within 30 calendar days of the occurrence of one of the following
events:
(A) The bank holding company determines there has been or will be a
material change in the bank holding company's risk profile, financial
condition, or corporate structure since the bank holding company
adopted the capital plan;
(B) The Board or the appropriate Reserve Bank objects to the
capital plan; or
(C) The Board or the appropriate Reserve Bank, with concurrence of
the Board, directs the bank holding company in writing to revise and
resubmit its capital plan for any of the following reasons:
(1) The capital plan is incomplete or the capital plan, or the bank
holding company's internal capital adequacy process, contains material
weaknesses;
(2) There has been or will likely be a material change in the bank
holding company's risk profile (including a material change in its
business strategy or any risk exposure), financial condition, or
corporate structure;
(3) The stressed scenario(s) developed by the bank holding company
is not appropriate to its business model and portfolios, or changes in
financial markets or the macro-economic outlook that could have a
material impact on a bank holding company's risk profile and financial
condition require the use of updated scenarios; or
(4) The capital plan or the condition of the bank holding company
raise any of the issues described in paragraph (e)(2)(ii) of this
section.
(ii) The Board or the appropriate Reserve Bank, with concurrence of
the Board, may, at its discretion, extend the
[[Page 59785]]
30-day period in paragraph (d)(4)(i) of this section for up to an
additional 60 calendar days, or such longer period as the Board or the
appropriate Reserve Bank, with concurrence of the Board, determines
appropriate.
(iii) Any updated capital plan must satisfy all the requirements of
this section; however, a bank holding company may continue to rely on
information submitted as part of a previously submitted capital plan to
the extent that the information remains accurate and appropriate.
(e) Review of capital plans by the Federal Reserve; publication of
summary results--(1) Considerations and inputs. (i) The Board or the
appropriate Reserve Bank, with concurrence of the Board, will consider
the following factors in reviewing a bank holding company's capital
plan:
(A) The comprehensiveness of the capital plan, including the extent
to which the analysis underlying the capital plan captures and
addresses potential risks stemming from activities across the firm and
the company's capital policy;
(B) The reasonableness of the bank holding company's assumptions
and analysis underlying the capital plan and its methodologies for
reviewing the robustness of its capital adequacy process; and
(C) The bank holding company's ability to maintain capital above
each minimum regulatory capital ratio and above a tier 1 common ratio
of 5 percent on a pro forma basis under expected and stressful
conditions throughout the planning horizon, including but not limited
to any stressed scenarios required under paragraph (d)(2)(i)(A) and
(ii) of this section.
(ii) The Board or the appropriate Reserve Bank, with concurrence of
the Board, will also consider the following information in reviewing a
bank holding company's capital plan:
(A) Relevant supervisory information about the bank holding company
and its subsidiaries;
(B) The bank holding company's regulatory and financial reports, as
well as supporting data that would allow for an analysis of the bank
holding company's loss, revenue, and reserve projections;
(C) As applicable, the Federal Reserve's own pro forma estimates of
the firm's potential losses, revenues, reserves, and resulting capital
adequacy under expected and stressful conditions, including but not
limited to any stressed scenarios required under paragraph (d)(2)(i)(A)
and (ii) of this section, as well as the results of any stress tests
conducted by the bank holding company or the Federal Reserve; and
(D) Other information requested or required by the appropriate
Reserve Bank or the Board, as well as any other information relevant,
or related, to the bank holding company's capital adequacy.
(2) Federal Reserve action on a capital plan. (i) The Board or the
appropriate Reserve Bank, with concurrence of the Board, will object,
in whole or in part, to the capital plan or provide the bank holding
company with a notice of non-objection to the capital plan:
(A) By March 31 of the calendar year in which a capital plan was
submitted pursuant to paragraph (d)(1)(ii) of this section, and
(B) By the date that is 75 calendar days after the date on which a
capital plan was resubmitted pursuant to paragraph (d)(4) of this
section.
(ii) The Board or the appropriate Reserve Bank, with concurrence of
the Board, may object to a capital plan if it determines that:
(A) The bank holding company has material unresolved supervisory
issues, including but not limited to issues associated with its capital
adequacy process;
(B) The assumptions and analysis underlying the bank holding
company's capital plan, or the bank holding company's methodologies for
reviewing the robustness of its capital adequacy process, are not
reasonable or appropriate;
(C) The bank holding company has not demonstrated an ability to
maintain capital above each minimum regulatory capital ratio and above
a tier 1 common ratio of 5 percent, on a pro forma basis under expected
and stressful conditions throughout the planning horizon; or
(D) The bank holding company's capital planning process or proposed
capital distributions otherwise constitute an unsafe or unsound
practice, or would violate any law, regulation, Board order, directive,
or any condition imposed by, or written agreement with, the Board. In
determining whether a capital plan or any proposed capital distribution
would constitute an unsafe or unsound practice, the appropriate Reserve
Bank would consider whether the bank holding company is and would
remain in sound financial condition after giving effect to the capital
plan and all proposed capital distributions.
(iii) The Board or the appropriate Reserve Bank, with concurrence
of the Board, will notify the bank holding company in writing of the
reasons for a decision to object to a capital plan.
(iv) If the Board or the appropriate Reserve Bank, with concurrence
of the Board, objects to a capital plan and until such time as the
Board or the appropriate Reserve Bank, with concurrence of the Board,
issues a non-objection to the bank holding company's capital plan, the
bank holding company may not make any capital distribution, other than
those capital distributions with respect to which the Board or the
appropriate Reserve Bank has indicated in writing its non-objection.
(v) The Board may disclose publicly its decision to object or not
object to a bank holding company's capital plan under this section,
along with a summary of the Board's analyses of that company. Any
disclosure under this paragraph (e)(2)(v) will occur by March 31,
unless the Board determines that a later disclosure date is
appropriate.
(3) Request for reconsideration or hearing. Within 10 calendar days
of receipt of a notice of objection to a capital plan by the Board or
the appropriate Reserve Bank:
(i) A bank holding company may submit a written request to the
Board requesting reconsideration of the objection, including an
explanation of why reconsideration should be granted. Within 10
calendar days of receipt of the bank holding company's request, the
Board will notify the company of its decision to affirm or withdraw the
objection to the bank holding company's capital plan or a specific
capital distribution; or
(ii) As an alternative to paragraph (e)(3)(i) of this section, a
bank holding company may submit a written request to the Board for a
hearing. Any hearing shall follow the procedures described in paragraph
(f)(5)(ii) through (iii) of this section.
(f) Approval requirements for certain capital actions--(1)
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (e)(2)(i) of this section a bank holding
company may not make a capital distribution under the following
circumstances, unless it receives approval from the Board or
appropriate Reserve Bank pursuant to paragraph (f)(4) of this section:
(i) After giving effect to the capital distribution, the bank
holding company would not meet a minimum regulatory capital ratio or a
tier 1 common ratio of at least 5 percent;
(ii) The Board or the appropriate Reserve Bank, with concurrence of
the Board, notifies the company in writing that the Federal Reserve has
determined that the capital distribution would result in a material
adverse change to the organization's capital or liquidity
[[Page 59786]]
structure or that the company's earnings were materially
underperforming projections;
(iii) Except as provided in paragraph (f)(2) of this section, the
dollar amount of the capital distribution will exceed the amount
described in the capital plan for which a non-objection was issued
under this section; or
(iv) The capital distribution would occur after the occurrence of
an event requiring resubmission under paragraphs (d)(4)(i)(A) and (C)
of this section and before the Federal Reserve acted on the resubmitted
capital plan.
(2) Exception for well capitalized bank holding companies. (i) A
bank holding company may make a capital distribution for which the
dollar amount exceeds the amount described in the capital plan for
which a non-objection was issued under this section if the following
conditions are satisfied:
(A) The bank holding company is, and after the capital distribution
would remain, well capitalized as defined in Sec. 225.2(r) of
Regulation Y (12 CFR 225.2(r));
(B) The bank holding company's performance and capital levels are,
and after the capital distribution would remain, consistent with its
projections under expected conditions as set forth in its capital plan
under this paragraph (d)(2)(i);
(C) The annual aggregate dollar amount of all capital distributions
(beginning on April 1 of a calendar year and ending on March 31 of the
following calendar year) would not exceed the total amounts described
in the company's capital plan for which the bank holding company
received a notice of non-objection by more than 1.00 percent multiplied
by the bank holding company's tier 1 capital, as reported to the
Federal Reserve on the bank holding company's first quarter FR Y-9C;
(D) The bank holding company provides the appropriate Reserve Bank
with notice 15 calendar days prior to a capital distribution that
includes the elements described in paragraph (f)(3) of this section;
and
(E) The Board or the appropriate Reserve Bank, with concurrence of
the Board, does not object to the transaction proposed in the notice.
In determining whether to object to the proposed transaction, the Board
or the appropriate Reserve Bank, with concurrence of the Board, shall
apply the criteria described in paragraph (f)(4)(iv) of this section.
(ii) The exception in this paragraph (f)(2) shall not apply if the
Board or the appropriate Reserve Bank notifies the bank holding company
in writing that it may not take advantage of this exception.
(3) Contents of request. (i) A request for a capital distribution
under this section shall be filed with the appropriate Reserve Bank and
the Board and shall contain the following information:
(A) The bank holding company's current capital plan or an
attestation that there have been no changes to the capital plan since
it was last submitted to the Federal Reserve;
(B) The purpose of the transaction;
(C) A description of the capital distribution, including for
redemptions or repurchases of securities, the gross consideration to be
paid and the terms and sources of funding for the transaction, and for
dividends, the amount of the dividend(s); and
(D) Any additional information requested by the Board or the
appropriate Reserve Bank (which may include, among other things, an
assessment of the bank holding company's capital adequacy under a
revised stress scenario provided by the Federal Reserve, a revised
capital plan, and supporting data).
(ii) Any request submitted with respect to a capital distribution
described in paragraph (f)(1)(i) of this section shall also include a
plan for restoring the bank holding company's capital to an amount
above a minimum level within 30 days and a rationale for why the
capital distribution would be appropriate.
(4) Approval of certain capital distributions. (i) A bank holding
company must obtain approval from the Board or the appropriate Reserve
Bank, with concurrence of the Board, before making a capital
distribution described in paragraph (f)(1) of this section.
(ii) A request for a capital distribution under this section must
be filed with the appropriate Reserve Bank and contain all the
information set forth in paragraph (f)(3) of this section.
(iii) The Board or the appropriate Reserve Bank, with concurrence
of the Board, will act on a request under this paragraph (f)(4) within
30 calendar days after the receipt of a complete request under
paragraph (f)(4)(ii) of this section. The Board or the appropriate
Reserve Bank may, at any time, request additional information that it
believes is necessary for its decision.
(iv) In acting on a request under this paragraph, the Board or
appropriate Reserve Bank will apply the considerations and principles
in paragraph (e) of this section. In addition, the Board or the
appropriate Reserve Bank may disapprove the transaction if the bank
holding company does not provide all of the information required to be
submitted under paragraphs (f)(3) and (f)(5)(iii) of this section.
(5) Disapproval and hearing. (i) The Board or the appropriate
Reserve Bank will notify the bank holding company in writing of the
reasons for a decision to disapprove any proposed capital distribution.
Within 10 calendar days after receipt of a disapproval by the Board,
the bank holding company may submit a written request for a hearing.
(ii) The Board will order a hearing within 10 calendar days of
receipt of the request if it finds that material facts are in dispute,
or if it otherwise appears appropriate. Any hearing conducted under
this paragraph shall be held in accordance with the Board's Rules of
Practice for Formal Hearings (12 CFR part 263).
(iii) At the conclusion of the hearing, the Board will by order
approve or disapprove the proposed capital distribution on the basis of
the record of the hearing.
PART 252--ENHANCED PRUDENTIAL STANDARDS (Regulation YY).
0
3. The authority citation for part 252 continues to read as follows:
Authority: 12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1,
1844(b), 1844(c), 5361, 5365, 5366.
0
4. Subpart F to part 252 is revised to read as follows:
Subpart F--Supervisory Stress Test Requirements for Covered
Companies
Sec.
252.131 Authority and purpose.
252.132 Definitions.
252.133 Applicability
252.134 Annual analysis conducted by the Board.
252.135 Data and information required to be submitted in support of
the Board's analyses.
252.136 Review of the Board's analysis; publication of summary
results.
252.137 Use requirement.
Sec. 252.131 Authority and purpose.
(a) Authority. 12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1,
1844(b), 1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements section 165(i)(1) of the Dodd-
Frank Act (12 U.S.C. 5365(i)(1)), which requires the Board to conduct
annual analyses of nonbank financial companies supervised by the Board
and bank holding companies with $50 billion or more in total
consolidated assets to evaluate whether such companies have the
capital, on a total consolidated basis, necessary to absorb losses as a
result of adverse economic conditions.
[[Page 59787]]
Sec. 252.132 Definitions.
For purposes of this subpart F, the following definitions apply:
(a) Advanced approaches means the risk-weighted assets calculation
methodologies at 12 CFR part 225, appendix G, and 12 CFR part 217,
subpart E, as applicable, and any successor regulation.
(b) Adverse scenario means a set of conditions that affect the U.S.
economy or the financial condition of a covered company that are more
adverse than those associated with the baseline scenario and may
include trading or other additional components.
(c) Average total consolidated assets means the average of the
total consolidated assets as reported by a bank holding company on its
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)
for the four most recent consecutive quarters. If the bank holding
company has not filed the FR Y-9C for each of the four most recent
consecutive quarters, average total consolidated assets means the
average of the company's total consolidated assets, as reported on the
company's FR Y-9C, for the most recent quarter or consecutive quarters.
Average total consolidated assets are measured on the as-of date of the
most recent FR Y-9C used in the calculation of the average.
(d) Bank holding company has the same meaning as in Sec. 225.2(c)
of the Board's Regulation Y (12 CFR 225.2(c)).
(e) Baseline scenario means a set of conditions that affect the
U.S. economy or the financial condition of a covered company and that
reflect the consensus views of the economic and financial outlook.
(f) Covered company means:
(1) A bank holding company (other than a foreign banking
organization) with average total consolidated assets of $50 billion or
more; and
(2) A nonbank financial company supervised by the Board.
(g) Depository institution has the same meaning as in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
(h) Foreign banking organization has the same meaning as in Sec.
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)).
(i) Nonbank financial company supervised by the Board means a
nonbank financial company that the Financial Stability Oversight
Council has determined under section 113 of the Dodd-Frank Act (12
U.S.C. 5323) shall be supervised by the Board and for which such
determination is still in effect.
(j) Planning horizon means the period of at least nine quarters,
beginning on the first day of a stress test cycle (on October 1) over
which the relevant projections extend.
(k) Pre-provision net revenue means the sum of net interest income
and non-interest income less expenses before adjusting for loss
provisions.
(l) Provision for loan and lease losses means the provision for
loan and lease losses as reported by the covered company on the FR Y-
9C.
(m) Regulatory capital ratio means a capital ratio for which the
Board established minimum requirements for the company by regulation or
order, including, as applicable, the company's tier 1 and supplementary
leverage ratios and common equity tier 1, tier 1, and total risk-based
capital ratios as calculated under appendices A, D, E, and G to this
part (12 CFR part 225) and 12 CFR part 217, as applicable, including
the transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or
any successor regulation.
(n) Scenarios are those sets of conditions that affect the U.S.
economy or the financial condition of a covered company that the Board
annually determines are appropriate for use in the supervisory stress
tests, including, but not limited to, baseline, adverse, and severely
adverse scenarios.
(o) Severely adverse scenario means a set of conditions that affect
the U.S. economy or the financial condition of a covered company and
that overall are more severe than those associated with the adverse
scenario and may include trading or other additional components.
(p) Stress test cycle means the period between October 1 of a
calendar year and September 30 of the following calendar year.
(q) Subsidiary has the same meaning as in Sec. 225.2(o) the
Board's Regulation Y (12 CFR 225.2).
(r) Tier 1 common ratio has the same meaning as in the Board's
Regulation Y (12 CFR 225.8).
Sec. 252.133 Applicability.
(a) Compliance date for bank holding companies that are covered
companies as of November 15, 2012--(1) In general. Except as provided
in paragraph (a)(2) or (3) of this section, a bank holding company that
is a covered company as of November 15, 2012, must comply with the
requirements of this subpart beginning with the stress test cycle that
commences on October 1, 2013, unless that time is extended by the Board
in writing.
(2) 2009 Supervisory Capital Assessment Program. A bank holding
company that participated in the 2009 Supervisory Capital Assessment
Program, or a successor to such a bank holding company, must comply
with the requirements of this subpart beginning with the stress test
cycle that commences on November 15, 2012, unless that time is extended
by the Board in writing.
(3) SR Letter 01-01. A U.S.-domiciled bank holding company that is
a covered company as of November 15, 2012, and is a subsidiary of a
foreign banking organization that is currently relying on Supervision
and Regulation Letter SR 01-01 issued by the Board (as in effect on May
19, 2010) must comply with the requirements of this subpart beginning
with the stress test cycle that commences on October 1, 2015, unless
that time is extended by the Board in writing.
(b) Compliance date for institutions that become covered companies
after November 15, 2012--(1) Bank holding companies. A bank holding
company that becomes a covered company after November 15, 2012, must
comply with the requirements of this subpart beginning with the stress
test cycle that commences in the calendar year after the year in which
the bank holding company becomes a covered company, unless that time is
extended by the Board in writing.
(2) Nonbank financial companies supervised by the Board. A company
that becomes a nonbank financial company supervised by the Board must
comply with the requirements of this subpart beginning with the stress
test cycle that commences in the calendar year after the year in which
the company first becomes subject to the Board's minimum regulatory
capital requirements, unless the Board accelerates or extends the
compliance date.
(c) Ongoing application. A bank holding company that is a covered
company will remain subject to the requirements of this subpart unless
and until its total consolidated assets fall below $50 billion for each
of four consecutive quarters, as reported on the FR Y-9C. The
calculation will be effective on the as-of date of the fourth
consecutive FR Y-9C.
(d) Advanced approaches. Notwithstanding any other requirement in
this section, the Board's analysis of a covered company's capital in a
given stress test cycle will not include estimates using the advanced
approaches if the covered company is notified on or after the first day
of that stress test cycle (October 1) that the covered company is
required to calculate its risk-based capital
[[Page 59788]]
requirements using the advanced approaches.
Sec. 252.134 Annual analysis conducted by the Board.
(a) In general. (1) On an annual basis, the Board will conduct an
analysis of each covered company's capital, on a total consolidated
basis, taking into account all relevant exposures and activities of
that covered company, to evaluate the ability of the covered company to
absorb losses in specified economic and financial conditions.
(2) The analysis will include an assessment of the projected
losses, net income, and pro forma capital levels and regulatory capital
ratios, tier 1 common ratio, and other capital ratios for the covered
company and use such analytical techniques that the Board determines
are appropriate to identify, measure, and monitor risks of the covered
company that may affect the financial stability of the United States.
(3) In conducting the analyses, the Board will coordinate with the
appropriate primary financial regulatory agencies and the Federal
Insurance Office, as appropriate.
(b) Economic and financial scenarios related to the Board's
analysis. The Board will conduct its analysis under this section using
a minimum of three different scenarios, including a baseline scenario,
adverse scenario, and severely adverse scenario. The Board will notify
covered companies of the scenarios that the Board will apply to conduct
the analysis for each stress test cycle by no later than November 15 of
each year, except with respect to trading or any other components of
the scenarios and any additional scenarios that the Board will apply to
conduct the analysis, which will be communicated by no later than
December 1.
Sec. 252.135 Data and information required to be submitted in support
of the Board's analyses.
(a) Regular submissions. Each covered company must submit to the
Board such data, on a consolidated basis, that the Board determines is
necessary in order for the Board to derive the relevant pro forma
estimates of the covered company over the planning horizon under the
scenarios described in section 252.134(b).
(b) Additional submissions required by the Board. The Board may
require a covered company to submit any other information on a
consolidated basis that the Board deems necessary in order to:
(1) Ensure that the Board has sufficient information to conduct its
analysis under this subpart; and
(2) Project a company's pre-provision net revenue, losses,
provision for loan and lease losses, and net income; and, pro forma
capital levels, regulatory capital ratios, tier 1 common ratio, and any
other capital ratio specified by the Board under the scenarios
described in Sec. 252.134(b).
(c) Confidential treatment of information submitted. The
confidentiality of information submitted to the Board under this
subpart and related materials shall be determined in accordance with
the Freedom of Information Act (5 U.S.C. 552(b)) and the Board's Rules
Regarding Availability of Information (12 CFR part 261).
Sec. 252.136 Review of the Board's analysis; publication of summary
results.
(a) Review of results. Based on the results of the analysis
conducted under this subpart, the Board will conduct an evaluation to
determine whether the covered company has the capital, on a total
consolidated basis, necessary to absorb losses and continue its
operation by maintaining ready access to funding, meeting its
obligations to creditors and other counterparties, and continuing to
serve as a credit intermediary under baseline, adverse and severely
adverse scenarios, and any additional scenarios.
(b) Communication of results to covered companies. The Board will
convey to a covered company a summary of the results of the Board's
analyses of such covered company within a reasonable period of time,
but no later than March 31.
(c) Publication of results by the Board. By March 31 of each
calendar year, the Board will disclose a summary of the results of the
Board's analyses of a covered company.
Sec. 252.137 Use requirement.
(a) In general. The board of directors and senior management of
each covered company must consider the results of the analysis
conducted by the Board under this subpart, as appropriate:
(1) As part of the covered company's capital plan and capital
planning process, including when making changes to the covered
company's capital structure (including the level and composition of
capital);
(2) When assessing the covered company's exposures, concentrations,
and risk positions; and
(3) In the development or implementation of any plans of the
covered company for recovery or resolution.
(b) Resolution plan updates. Each covered company must update its
resolution plan as the Board determines appropriate, based on the
results of the Board's analyses of the covered company under this
subpart.
0
3. Subpart G to part 252 is revised to read as follows:
Subpart G--Company-Run Stress Test Requirements for Covered
Companies
Sec.
252.141 Authority and purpose.
252.142 Definitions.
252.143 Applicability.
252.144 Annual stress test.
252.145 Mid-cycle stress test.
252.146 Methodologies and practices.
252.147 Reports of stress test results.
252.148 Disclosure of stress test results.
Sec. 252.141 Authority and purpose.
(a) Authority. 12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1,
1844(b), 1844(c), 5361, 5365, 5366.
(b) Purpose. This subpart implements section 165(i)(2) of the Dodd-
Frank Act (12 U.S.C. 5365(i)(2)), which requires a covered company to
conduct annual and semi-annual stress tests. This subpart also
establishes definitions of stress test and related terms, methodologies
for conducting stress tests, and reporting and disclosure requirements.
Sec. 252.142 Definitions.
For purposes of this subpart, the following definitions apply:
(a) Advanced approaches means the risk-weighted assets calculation
methodologies at 12 CFR part 225, appendix G, and 12 CFR part 217,
subpart E, as applicable, and any successor regulation.
(b) Adverse scenario means a set of conditions that affect the U.S.
economy or the financial condition of a covered company that are more
adverse than those associated with the baseline scenario and may
include trading or other additional components.
(c) Average total consolidated assets means the average of the
total consolidated assets as reported by a bank holding company on its
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)
for the four most recent consecutive quarters. If the bank holding
company has not filed the FR Y-9C for each of the four most recent
consecutive quarters, average total consolidated assets means the
average of the company's total consolidated assets, as reported on the
company's FR Y-9C, for the most recent quarter or consecutive quarters.
Average total consolidated assets are measured on the as-of date of the
most recent FR Y-9C used in the calculation of the average.
(d) Bank holding company has the same meaning as in section
225.2(c) of the Board's Regulation Y (12 CFR 225.2(c)).
[[Page 59789]]
(e) Baseline scenario means a set of conditions that affect the
U.S. economy or the financial condition of a covered company and that
reflect the consensus views of the economic and financial outlook.
(f) Capital action has the same meaning as in section 225.8(c)(2)
of the Board's Regulation Y (12 CFR 225.8(c)(2)).
(g) Covered company means:
(1) A bank holding company (other than a foreign banking
organization) with average total consolidated assets of $50 billion or
more; and
(2) A nonbank financial company supervised by the Board.
(h) Depository institution has the same meaning as in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
(i) Foreign banking organization has the same meaning as in section
211.21(o) of the Board's Regulation K (12 CFR 211.21(o)).
(j) Nonbank financial company supervised by the Board means a
nonbank financial company that the Financial Stability Oversight
Council has determined under section 113 of the Dodd-Frank Act (12
U.S.C. 5323) shall be supervised by the Board and for which such
determination is still in effect.
(k) Planning horizon means the period of at least nine quarters,
beginning on the first day of a stress test cycle (on October 1 or
April 1, as appropriate) over which the relevant projections extend.
(l) Pre-provision net revenue means the sum of net interest income
and non-interest income less expenses before adjusting for loss
provisions.
(m) Provision for loan and lease losses means the provision for
loan and lease losses as reported by the covered company on the FR Y-
9C.
(n) Regulatory capital ratio means a capital ratio for which the
Board established minimum requirements for the company by regulation or
order, including, as applicable, the company's tier 1 and supplementary
leverage ratios and common equity tier 1, tier 1, and total risk-based
capital ratios as calculated under appendices A, D, E, and G to this
part (12 CFR part 225) and 12 CFR part 217, as applicable, including
the transition provisions at 12 CFR 217.1(f)(4) and 12 CFR 217.300, or
any successor regulation.
(o) Scenarios are those sets of conditions that affect the U.S.
economy or the financial condition of a covered company that the Board,
or with respect to the mid-cycle stress test required under section
252.145 of this subpart, the covered company, annually determines are
appropriate for use in the company-run stress tests, including, but not
limited to, baseline, adverse, and severely adverse scenarios.
(p) Severely adverse scenario means a set of conditions that affect
the U.S. economy or the financial condition of a covered company and
that overall are more severe than those associated with the adverse
scenario and may include trading or other additional components.
(q) Stress test means a process to assess the potential impact of
scenarios on the consolidated earnings, losses, and capital of a
covered company over the planning horizon, taking into account its
current condition, risks, exposures, strategies, and activities.
(r) Stress test cycle means the period between October 1 of a
calendar year and September 30 of the following calendar year.
(s) Subsidiary has the same meaning as in section 225.2(o) the
Board's Regulation Y (12 CFR 225.2).
(t) Tier 1 common ratio has the same meaning as in section 225.8 of
the Board's Regulation Y (12 CFR 225.8).
Sec. 252.143 Applicability.
(a) Compliance date for bank holding companies that are covered
companies as of November 15, 2012--(1) In general. Except as provided
in paragraph (a)(2) or (3) of this section, a bank holding company that
is a covered company as of November 15, 2012, must comply with the
requirements of this subpart beginning with the stress test cycle
commencing on October 1, 2013, unless that time is extended by the
Board in writing.
(2) 2009 Supervisory Capital Assessment Program. A bank holding
company that participated in the 2009 Supervisory Capital Assessment
Program, or a successor to such a bank holding company, must comply
with the requirements of this subpart beginning with the stress test
cycle commencing on November 15, 2012, unless that time is extended by
the Board in writing.
(3) SR Letter 01-01. A U.S.-domiciled bank holding company that is
a covered company as of November 15, 2012, and is a subsidiary of a
foreign banking organization that is currently relying on Supervision
and Regulation Letter SR 01-01 issued by the Board (as in effect on May
19, 2010) must comply with the requirements of this subpart beginning
with the stress test cycle commencing on October 1, 2015, unless that
time is extended by the Board in writing.
(b) Compliance date for institutions that become covered companies
after November 15, 2012--(1) Bank holding companies. A bank holding
company that becomes a covered company after November 15, 2012, must
comply with the requirements of this subpart beginning with the stress
test cycle that commences in the calendar year after the year in which
the bank holding company becomes a covered company, unless that time is
extended by the Board in writing.
(2) Nonbank financial companies supervised by the Board. A company
that becomes a nonbank financial company supervised by the Board must
comply with the requirements of this subpart beginning with the stress
test cycle that commences in the calendar year after the year in which
company first becomes subject to the Board's minimum regulatory capital
requirements, unless the Board accelerates or extends the compliance
date.
(c) Ongoing application. A bank holding company that is a covered
company will remain subject to the requirements of this subpart unless
and until its total consolidated assets fall below $50 billion for each
of four consecutive quarters, as reported on the FR Y-9C. The
calculation will be effective on the as-of date of the fourth
consecutive FR Y-9C.
(d) Advanced approaches. Notwithstanding any other requirement in
this section, for a given stress test cycle, a covered company's
estimates of its pro forma regulatory capital ratios and the estimate
of its pro forma tier 1 common ratio over the planning horizon shall
not include estimates using the advanced approaches if the company is
notified on or after the first day of that stress test cycle (October
1) that it is required to calculate its risk-based capital requirements
using the advanced approaches.
Sec. 252.144 Annual stress test.
(a) In general. A covered company must conduct an annual stress
test by January 5 during each stress test cycle based on data as of
September 30 of the preceding calendar year, unless the time or the as
of date is extended by the Board in writing.
(b) Scenarios provided by the Board--(1) In general. In conducting
a stress test under this section, a covered company must use the
scenarios provided by the Board. Except as provided in paragraphs
(b)(2) and (3) of this section, the Board will provide a description of
the scenarios to each covered company no later than November 15 of that
calendar year.
(2) Additional components. (i) The Board may require a covered
company with significant trading activity, as determined by the Board
and specified
[[Page 59790]]
in the Capital Assessments and Stress Testing report (FR Y-14), to
include a trading and counterparty component in its adverse and
severely adverse scenarios in the stress test required by this section.
The data used in this component will be as of a date between October 1
and December 1 of that calendar year selected by the Board, and the
Board will communicate the as-of date and a description of the
component to the company no later than December 1 of the calendar year.
(ii) The Board may require a covered company to include one or more
additional components in its adverse and severely adverse scenarios in
the stress test required by this section based on the company's
financial condition, size, complexity, risk profile, scope of
operations, or activities, or risks to the U.S. economy.
(3) Additional scenarios. The Board may require a covered company
to use one or more additional scenarios in the stress test required by
this section based on the company's financial condition, size,
complexity, risk profile, scope of operations, or activities, or risks
to the U.S. economy.
(4) Notice and response. If the Board requires a covered company to
include one or more additional components in its adverse and severely
adverse scenarios under paragraph (b)(2)(ii) of this section or to use
one or more additional scenarios under paragraph (b)(3) of this
section, the Board will notify the company in writing no later than
September 30. The notification will include a general description of
the additional component(s) or additional scenario(s) and the basis for
requiring the company to include the additional component(s) or
additional scenario(s). Within 14 calendar days of receipt of a
notification under this paragraph, the covered company may request in
writing that the Board reconsider the requirement that the company
include the additional component(s) or additional scenario(s),
including an explanation as to why the reconsideration should be
granted. The Board will respond in writing within 14 calendar days of
receipt of the company's request. The Board will provide the covered
company with a description of any additional component(s) or additional
scenario(s) by December 1.
Sec. 252.145 Mid-cycle stress test.
(a) Mid-cycle stress test requirement. In addition to the stress
test required under section 252.144 of this subpart, a covered company
must conduct a stress test by July 5 during each stress test cycle
based on data as of March 31 of that calendar year, unless the time or
the as-of date is extended by the Board in writing.
(b) Scenarios related to mid-cycle stress tests--(1) In general. A
covered company must develop and employ a minimum of three scenarios,
including a baseline scenario, adverse scenario, and severely adverse
scenario, that are appropriate for its own risk profile and operations,
in conducting the stress test required by this section.
(2) Additional components. The Board may require a covered company
to include one or more additional components in its adverse and
severely adverse scenarios in the stress test required by this section
based on the company's financial condition, size, complexity, risk
profile, scope of operations, or activities, or risks to the U.S.
economy.
(3) Additional scenarios. The Board may require a covered company
to use one or more additional scenarios in the stress test required by
this section based on the company's financial condition, size,
complexity, risk profile, scope of operations, or activities, or risks
to the U.S. economy.
(4) Notice and response. If the Board requires a covered company to
include one or more additional components in its adverse and severely
adverse scenarios under paragraph (b)(2) of this section or one or more
additional scenarios under paragraph (b)(3) of this section, the Board
will notify the company in writing no later than March 31. The
notification will include a general description of the additional
component(s) or additional scenario(s) and the basis for requiring the
company to include the additional component(s) or additional
scenario(s). Within 14 calendar days of receipt of a notification under
this paragraph, the covered company may request in writing that the
Board reconsider the requirement that the company include the
additional component(s) or additional scenario(s), including an
explanation as to why the reconsideration should be granted. The Board
will respond in writing within 14 calendar days of receipt of the
company's request. The Board will provide the covered company with a
description of any additional component(s) or additional scenario(s) by
June 1.
Sec. 252.146 Methodologies and practices.
(a) Potential impact on capital. In conducting a stress test under
sections 252.144 and 252.145, for each quarter of the planning horizon,
a covered company must estimate the following for each scenario
required to be used:
(1) Losses, pre-provision net revenue, provision for loan and lease
losses, and net income; and
(2) The potential impact on pro forma regulatory capital levels and
pro forma capital ratios (including regulatory capital ratios, the tier
1 common ratio, and any other capital ratios specified by the Board),
incorporating the effects of any capital actions over the planning
horizon and maintenance of an allowance for loan losses appropriate for
credit exposures throughout the planning horizon.
(b) Assumptions regarding capital actions. In conducting a stress
test under Sec. Sec. 252.144 and 252.145, a covered company is
required to make the following assumptions regarding its capital
actions over the planning horizon--
(1) For the first quarter of the planning horizon, the covered
company must take into account its actual capital actions as of the end
of that quarter; and
(2) For each of the second through ninth quarters of the planning
horizon, the covered company must include in the projections of
capital:
(i) Common stock dividends equal to the quarterly average dollar
amount of common stock dividends that the company paid in the previous
year (that is, the first quarter of the planning horizon and the
preceding three calendar quarters);
(ii) Payments on any other instrument that is eligible for
inclusion in the numerator of a regulatory capital ratio equal to the
stated dividend, interest, or principal due on such instrument during
the quarter; and
(iii) An assumption of no redemption or repurchase of any capital
instrument that is eligible for inclusion in the numerator of a
regulatory capital ratio.
(c) Controls and oversight of stress testing processes--(1) In
general. The senior management of a covered company must establish and
maintain a system of controls, oversight, and documentation, including
policies and procedures, that are designed to ensure that its stress
testing processes are effective in meeting the requirements in this
subpart. These policies and procedures must, at a minimum, describe the
covered company's stress testing practices and methodologies, and
processes for validating and updating the company's stress test
practices and methodologies consistent with applicable laws,
regulations, and supervisory guidance. Policies of covered companies
must also describe processes for scenario development for the mid-cycle
stress test required under Sec. 252.145.
[[Page 59791]]
(2) Oversight of stress testing processes. The board of directors,
or a committee thereof, of a covered company must approve and review
the policies and procedures of the stress testing processes as
frequently as economic conditions or the condition of the covered
company may warrant, but no less than annually. The board of directors
and senior management of the covered company must receive a summary of
the results of any stress test conducted under this subpart.
(3) Role of stress testing results. The board of directors and
senior management of each covered company must consider the results of
the analysis it conducts under this subpart, as appropriate:
(i) As part of the covered company's capital plan and capital
planning process, including when making changes to the covered
company's capital structure (including the level and composition of
capital);
(ii) When assessing the covered company's exposures,
concentrations, and risk positions; and
(iii) In the development or implementation of any plans of the
covered company for recovery or resolution.
Sec. 252.147 Reports of stress test results.
(a) Reports to the Board of stress test results. (1) A covered
company must report the results of the stress test required under Sec.
252.144 to the Board by January 5 of each calendar year in the manner
and form prescribed by the Board, unless that time is extended by the
Board in writing.
(2) A covered company must report the results of the stress test
required under Sec. 252.145 to the Board by July 5 of each calendar
year in the manner and form prescribed by the Board, unless that time
is extended by the Board in writing.
(b) Confidential treatment of information submitted. The
confidentiality of information submitted to the Board under this
subpart and related materials shall be determined in accordance with
applicable exemptions under the Freedom of Information Act (5 U.S.C.
552(b)) and the Board's Rules Regarding Availability of Information (12
CFR part 261).
Sec. 252.148 Disclosure of stress test results.
(a) Public disclosure of results--(1) In general. (i) A covered
company must disclose a summary of the results of the stress test
required under section 252.144 in the period beginning on March 15 and
ending on March 31, unless that time is extended by the Board in
writing.
(ii) A covered company must disclose a summary of the results of
the stress test required under Sec. 252.145 in the period beginning on
September 15 and ending on September 30, unless that time is extended
by the Board in writing.
(2) Disclosure method. The summary required under this section may
be disclosed on the Web site of a covered company, or in any other
forum that is reasonably accessible to the public.
(b) Summary of results. A covered company must disclose, at a
minimum, the following information regarding the severely adverse
scenario:
(1) A description of the types of risks included in the stress
test;
(2) A general description of the methodologies used in the stress
test, including those employed to estimate losses, revenues, provision
for loan and lease losses, and changes in capital positions over the
planning horizon;
(3) Estimates of--
(i) Pre-provision net revenue and other revenue;
(ii) Provision for loan and lease losses, realized losses or gains
on available-for-sale and held-to-maturity securities, trading and
counterparty losses, and other losses or gains;
(iii) Net income before taxes;
(iv) Loan losses (dollar amount and as a percentage of average
portfolio balance) in the aggregate and by subportfolio, including:
domestic closed-end first-lien mortgages; domestic junior lien
mortgages and home equity lines of credit; commercial and industrial
loans; commercial real estate loans; credit card exposures; other
consumer loans; and all other loans; and
(v) Pro forma regulatory capital ratios and the tier 1 common ratio
and any other capital ratios specified by the Board;
(4) An explanation of the most significant causes for the changes
in regulatory capital ratios and the tier 1 common ratio; and
(5) With respect to a stress test conducted pursuant to section
165(i)(2) of the Dodd-Frank Act by an insured depository institution
that is a subsidiary of the covered company and that is required to
disclose a summary of its stress tests results under applicable
regulations, changes in regulatory capital ratios and any other capital
ratios specified by the Board of the depository institution subsidiary
over the planning horizon, including an explanation of the most
significant causes for the changes in regulatory capital ratios.
(c) Content of results. (1) The following disclosures required
under paragraph (b) of this section must be on a cumulative basis over
the planning horizon:
(i) Pre-provision net revenue and other revenue;
(ii) Provision for loan and lease losses, realized losses/gains on
available-for-sale and held-to-maturity securities, trading and
counterparty losses, and other losses or gains;
(iii) Net income before taxes; and
(iv) Loan losses in the aggregate and by subportfolio.
(2) The disclosure of pro forma regulatory capital ratios, the tier
1 common ratio, and any other capital ratios specified by the Board
that is required under paragraph (b) of this section must include the
beginning value, ending value, and minimum value of each ratio over the
planning horizon.
By order of the Board of Governors of the Federal Reserve
System, September 24, 2013.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2013-23618 Filed 9-27-13; 8:45 am]
BILLING CODE 6210-01-P
