Agency Information Collection Activities; Proposed Collection; Comment Request; Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $10 Billion to $50 Billion Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, 62942-62946 [2013-24721]

Download as PDF sroberts on DSK5SPTVN1PROD with FRONT MATTER 62942 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices Committee to the Secretary, pursuant to Public Law 103–202,§ 202(c)(1)(B).Thus, this information is exempt from disclosure under that provision and 5 U.S.C. 552b(c)(3)(B). In addition, the meeting is concerned with information that is exempt from disclosure under 5 U.S.C. 552b(c)(9)(A). The public interest requires that such meetings be closed to the public because the Treasury Department requires frank and full advice from representatives of the financial community prior to making its final decisions on major financing operations. Historically, this advice has been offered by debt management advisory committees established by the several major segments of the financial community. When so utilized, such a committee is recognized to be an advisory committee under 5 U.S.C. App. 2, 3. Although the Treasury’s final announcement of financing plans may not reflect the recommendations provided in reports of the Committee, premature disclosure of the Committee’s deliberations and reports would be likely to lead to significant financial speculation in the securities market. Thus, this meeting falls within the exemption covered by 5 U.S.C. 552b(c)(9)(A). Treasury staff will provide a technical briefing to the press on the day before the Committee meeting, following the release of a statement of economic conditions and financing estimates. This briefing will give the press an opportunity to ask questions about financing projections. The day after the Committee meeting, Treasury will release the minutes of the meeting, any charts that were discussed at the meeting, and the Committee’s report to the Secretary. The Office of Debt Management is responsible for maintaining records of debt management advisory committee meetings and for providing annual reports setting forth a summary of Committee activities and such other matters as may be informative to the public consistent with the policy of 5 U.S.C. 552(b). The Designated Federal Officer or other responsible agency official who may be contacted for additional information is Fred Pietrangeli, Director for Office of Debt Management (202) 622–1876. Dated: September 27, 2013. Matthew S. Rutherford, Assistant Secretary, (Financial Markets). [FR Doc. 2013–24136 Filed 10–21–13; 8:45 am] BILLING CODE 4810–25–P VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency Agency Information Collection Activities; Proposed Collection; Comment Request; Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $10 Billion to $50 Billion Under the Dodd-Frank Wall Street Reform and Consumer Protection Act Office of the Comptroller of the Currency, Treasury (OCC). ACTION: Notice. AGENCY: The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on this continuing information collection, as required by the Paperwork Reduction Act of 1995. Under the Paperwork Reduction Act, Federal agencies are required to publish notice in the Federal Register concerning each proposed collection of information and to allow 60 days for public comment in response to the notice. An agency may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment on a proposed new regulatory reporting requirement for national banks and Federal savings associations titled, ‘‘Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $10 Billion to $50 Billion under the Dodd-Frank Wall Street Reform and Consumer Protection Act.’’ The proposal describes the scope of reporting and the proposed reporting requirements. DATES: Comments must be received by November 21, 2013. ADDRESSES: Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557–0311, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465–4326 or by electronic mail to regs.comments@ occ.treas.gov. You may personally inspect and photocopy comments at the SUMMARY: PO 00000 Frm 00360 Fmt 4703 Sfmt 4703 OCC, 400 7th Street SW., Washington, DC 20219. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649–6700. Upon arrival, visitors will be required to present valid government-issued photo identification and to submit to security screening in order to inspect and photocopy comments. Additionally, please send a copy of your comments by mail to: OCC Desk Officer, 1557–0237, U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503, or by fax to (202) 395–6974. FOR FURTHER INFORMATION CONTACT: You can request additional information from or a copy of the collection from Johnny Vilela or Mary H. Gottlieb, Clearance Officers, (202) 649–5490, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E– 218, Mail Stop 9W–11, Washington, DC 20219. In addition, copies of the templates referenced in this notice can be found on the OCC’s Web site under Tools and Forms (https://www.occ.gov/ tools-forms/forms/bank-operations/ stress-test-reporting.html). SUPPLEMENTARY INFORMATION: In compliance with 44 U.S.C. 3507, the OCC has submitted the following proposed collection of information to OMB for review and clearance. Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $10 Billion to $50 Billion Under the DoddFrank Wall Street Reform and Consumer Protection Act Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act 1 (Dodd-Frank Act) requires certain financial companies, including national banks and Federal savings associations, to conduct annual stress tests 2 and requires the primary financial regulatory agency 3 of those financial companies to issue regulations implementing the stress test requirements.4 A national bank or Federal savings association is a ‘‘covered institution,’’ and therefore subject to the stress test requirements if its total consolidated assets exceed $10 billion. Under section 165(i)(2), a covered institution is required to submit to the Board of Governors of the Federal Reserve System (Board) and to its primary financial regulatory agency a 1 Public Law 111–203, 124 Stat. 1376, July 2010. U.S.C. 5365(i)(2)(A). 3 12 U.S.C. 5301(12). 4 12 U.S.C. 5365(i)(2)(C). 2 12 E:\FR\FM\22OCN1.SGM 22OCN1 sroberts on DSK5SPTVN1PROD with FRONT MATTER Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices report at such time, in such form, and containing such information as the primary financial regulatory agency may require.5 On October 9, 2012, the OCC published in the Federal Register a final rule implementing the section 165(i)(2) annual stress test requirements.6 This notice describes the reports and information required to meet the reporting requirements under section 165(i)(2) for covered institutions with average total consolidated assets between $10 and $50 billion. These information collections will be given confidential treatment (5 U.S.C. 552(b)(4)). The OCC intends to use the data collected through this proposal to assess the reasonableness of the stress test results of covered institutions and to provide forward-looking information to the OCC regarding a covered institution’s capital adequacy. The OCC also may use the results of the stress tests to determine whether additional analytical techniques and exercises could be appropriate to identify, measure, and monitor risks at the covered institution. The stress test results are expected to support ongoing improvement in a covered institution’s stress testing practices with respect to its internal assessments of capital adequacy and overall capital planning. The Dodd-Frank Act stress testing (DFAST) requirements apply to all covered institutions, but the OCC recognizes that many covered institutions with consolidated total assets of $50 billion or more have been subject to existing stress testing requirements under the Board’s Comprehensive Capital Analysis and Review (CCAR). The OCC also recognizes that these institutions’ stress tests will be applied to more complex portfolios and therefore warrant a broader set of reports to adequately capture the results of the company-run stress tests. These reports necessarily will require more detail than would be appropriate for smaller, less complex institutions. Therefore, the OCC has decided to specify separate reporting templates for covered institutions with total consolidated assets between $10 and $50 billion and for covered institutions with total consolidated assets of $50 billion or more.7 While the general reporting categories are the same (income statement, balance 5 12 U.S.C. 5365(i)(2)(B). FR 61238, October 9, 2012. 7 See 77 FR 49485 for the Paperwork Reduction Act Notice and the OCC Web site at https://occ.gov/ news-issuances/news-releases/2012/nr-occ-2012121.html for the reporting templates for covered institutions with total consolidated assets of $50 billion or more. 6 77 VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 sheet and capital), the level of granularity for individual reporting items is less for $10 to $50 billion institutions. For example, accounting for provisions by category is not required, and less detail is required for commercial and industrial lending. Because smaller banks with assets of $10 to $50 billion generally have less complex balance sheets, the OCC believes that highly detailed reporting is not warranted, and so the OCC is not requiring supplemental schedules on such areas as retail balances, securities and trading, operational risk, and preprovision net revenue (PPNR). The OCC has worked closely with the Board and the Federal Deposit Insurance Corporation (FDIC) to make the agencies’ respective rules implementing the annual stress testing requirements under the Dodd-Frank Act consistent and comparable by requiring similar standards for scope of application, scenarios, data collection and reporting forms. The OCC also has worked to minimize any potential duplication of effort related to the annual stress test requirements. Additionally, the agencies have coordinated to allow for a unified results submission process. The proposed OCC DFAST 10–50 reporting templates for institutions with assets of $10 to $50 billion are described below. Description of Reporting Results Templates for Institutions With $10 Billion to $50 Billion in Assets The ‘‘Dodd-Frank Annual Stress Test Reporting Results Template for Covered Institutions with Total Consolidated Assets Between $10 and $50 Billion’’ ($10–$50 results template) includes data collection worksheets necessary for the OCC to assess the company-run stress test results for baseline, adverse and severely adverse scenarios as well as any other scenario specified in accordance with regulations issued by the OCC. The $10-$50B results template includes worksheets that collect information on the following areas: 1. Income Statement 2. Balance Sheet 3. Capital Each $10 to $50 billion covered institution reporting to the OCC using this form will be required to submit results for each scenario provided to covered institutions in accordance with regulations implementing Section 165(i)(2) as specified by the OCC. Worksheets: Income Statement The income statement worksheet collects data for the quarter preceding PO 00000 Frm 00361 Fmt 4703 Sfmt 4703 62943 the planning horizon and for each quarter of the planning horizon for the stress test on projected losses and revenues in the following categories: 1. Net charge-offs 2. Pre-provision net revenue 3. Provision for loan and lease losses 4. Realized gains (losses) on held to maturity (HTM) and available-for-sale (AFS) securities 5. All other gains (losses) 6. Taxes Memoranda items: 7. Total other than temporary impairment (OTTI) losses This worksheet provides information used to assess losses and revenues that covered institutions can sustain in baseline, adverse and severely adverse stress scenarios. Worksheets: Balance Sheet The balance sheet worksheet collects data for the quarter preceding the planning horizon and for each quarter of the planning horizon for the stress test on projected equity capital, as well as on assets and liabilities in the following categories: 1. Loans 2. HTM securities 3. AFS securities 4. Trading assets 5. Total intangible assets 6. Other real estate 7. All other assets 8. Retail funding (core deposits) 9. Wholesale funding 10. Trading liabilities 11. All other liabilities 12. Perpetual preferred stock and related surplus 13. Equity capital The OCC intends to use this worksheet to assess the projected changes in assets and liabilities that a covered institution can sustain in baseline, adverse and severely adverse stress scenarios. This worksheet will also be used to assess the revenue and loss projections identified in the income statement worksheet. Worksheets: Capital The capital worksheet, which is appended to the balance sheet worksheet, collects data for the quarter preceding the planning horizon and for each quarter of the planning horizon for the stress test on the following areas: 1. Unrealized gains (losses) on AFS securities 2. Disallowed deferred tax asset 3. Tier 1 capital 4. Qualifying subordinated debt and redeemable preferred stock 5. Allowance includable in Tier 2 capital E:\FR\FM\22OCN1.SGM 22OCN1 62944 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices 6. Tier 2 capital 7. Total risk-based capital 8. Total capital 9. Risk-weighted assets 10. Total assets for leverage purposes 11. Tier 1 risk-based capital ratio 12. Tier 1 leverage ratio 13. Total risk-based capital ratio Memoranda: 14. Sale, conversion, acquisition or retirement of capital stock 15. Cash dividends declared on preferred stock 16. Cash dividends declared on common stock Additionally, the Summary Schedule captures projections for regulatory capital ratios over the planning horizon by scenario. The OCC intends to use these worksheets to assess the impact on capital of the projected losses and projected changes in assets that the covered institution can sustain in a stressed scenario. In addition to reviewing the worksheet in the context of the balance sheet and income statement projections, the OCC also intends to use this worksheet in assessing capital planning processes for each covered institution. Description of DFAST Scenario Variables Template To conduct the stress test required under this rule, a covered institution may need to project additional economic and financial variables to estimate losses or revenues for some or all of its portfolios. In such a case, the covered institution is required to complete the DFAST Scenario Variables template for each scenario where such additional variables are used to conduct the stress test. Each scenario worksheet collects the variable name (matching that reported on the Scenario Variable Definitions worksheet), the actual value of the variable during the third quarter of the reporting year, and the projected value of the variable for nine future quarters. sroberts on DSK5SPTVN1PROD with FRONT MATTER Description of Supporting Documentation Covered institutions must submit clear documentation in support of the projections included in the worksheets to support efficient and timely review of annual stress test results by the OCC. The supporting documentation should be submitted electronically and is not expected to be reported in the workbooks used for required data reporting. This supporting documentation must describe the types of risks included in the stress test; describe clearly the methodology used VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 to produce the stress test projections; describe the methods used to translate the macroeconomic factors into a covered institution’s projections; and also include an explanation of the most significant causes for the changes in regulatory capital ratios. The supporting documentation also should address the impact of anticipated corporate events, including mergers, acquisitions or divestitures of business lines or entities, and changes in strategic direction, and should describe how such changes are reflected in stress test results, including the impact on estimates of losses, expenses and revenues, net interest margins, non-interest income items, and balance sheet amounts. Where company-specific assumptions are made that differ from the broad macroeconomic assumptions incorporated in stress scenarios provided by the OCC, the documentation also must describe such assumptions and how those assumptions relate to reported projections. Where historical relationships are relied upon, the covered institutions must describe the historical data and provide the basis for the expectation that these relationships would be maintained in each scenario, particularly under adverse and severely adverse conditions. Summary of Comments and Changes From Proposal In the Federal Register of March 11, 2013 (78 FR 49488), OCC published a notice requesting comment on the templates and the collection of information. OCC received comments from seven groups on the notice. Five of the commenters were banking organizations, one was an industry group, and one was a financial services consulting firm. The OCC has made several changes to the OCC DFAST 10– 50 results template in light of comments received. The OCC, the Board and the FDIC coordinated the changes made to each agency’s templates in order to keep the templates identical and minimize the burden on affected institutions. Some commenters expressed concern about having to submit stress testing results in a Call Report-type format, noting that their existing stress testing software was not developed with such a format in mind and asking for less detailed reporting forms. These commenters requested that the agencies consider further delaying implementation of the reporting requirements and/or limiting the report submissions to the OCC DFAST 10–50 summary schedule. The OCC has determined that using reporting templates modeled on the Call Report is PO 00000 Frm 00362 Fmt 4703 Sfmt 4703 the best solution because of familiarity with this format by the OCC, covered institutions and the public, particularly when mandatory public disclosure of summary results under the severely adverse scenario becomes effective in 2015. The OCC DFAST 10–50 results template, aligned to the Call Report, provides a format that is well understood and utilized by the industry. Therefore, the OCC believes that the reporting requirements will not place undue burden on institutions’ ability to report stress test results. Using the Call Report format would also ensure a high level of consistency and facilitate assessment of the results. The OCC has already delayed the application of the stress testing rules for the $10–$50 billion covered institutions, in part so that they would have time to create the necessary infrastructure to submit the appropriate stress testing results. Two commenters expressed concern about the differences among stress testing templates used to respond to different stress testing requirements and about the burden some banking organizations (companies with $50 billion or more in assets that control subsidiaries with $10–50 billion in assets) might face in having to prepare multiple sets of templates. The OCC notes that the final OCC DFA stress testing rule allows such subsidiaries to file the same template as filed by its parent. Per the final OCC DFA stress testing rule, ‘‘any $10 to $50 billion covered institution that elects to apply the requirements of an over $50 billion covered institution shall remain subject to the requirements applicable to an over $50 billion covered institution until otherwise approved by the OCC.’’ 8 Additionally, implementation of the stress test requirements has already been delayed for the $10–$50 billion companies and public disclosure is not required until 2015. One commenter suggested the application of generalized, bankdeveloped loss assumptions for immaterial portfolios. The commenter also noted that an immaterial portfolio exception is allowed for firms with $50 billion or more assets in stress testing submissions. The OCC has considered the burden of calculating losses for immaterial portfolios for companies with $10–$50 billion in assets and determined that providing a safe harbor that defines immaterial portfolios, where no or little consideration of the risk of these portfolios is undertaken, would be contrary to the purpose of a company-run stress test and could unintentionally mask or cause 8 12 E:\FR\FM\22OCN1.SGM CFR 46.3(e)(2). 22OCN1 sroberts on DSK5SPTVN1PROD with FRONT MATTER Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices institutions to erroneously conclude that the aggregation of immaterial portfolios would always pose little or no risk to an institution. Although stress testing should be applied to all exposures, the OCC recognizes that the same level of rigor and analysis may not be necessary for lower-risk, immaterial portfolios.9 For such portfolios, it may be appropriate for a company to use a less sophisticated approach for its stress test projections, assuming the results of that approach are conservative and welldocumented. The OCC has therefore not established a reporting threshold for immaterial portfolios in the reporting requirements for the proposed OCC DFAST 10–50 results template. Institutions should refer to the proposed interagency supervisory guidance on implementing Dodd-Frank Act company-run stress tests for banking organizations with total consolidated assets of more than $10 billion but less than $50 billion for more information on estimates for immaterial portfolios.10 One commenter asked for clarification regarding the calculation and reporting of regulatory capital and risk-weighted assets (RWAs), noting the expectation that capital and RWA calculations and definitions would change over the planning horizon as new rules are implemented (specifically noting new definitions when the Basel III final rule is adopted). In addition, this commenter also requested clarification on the calculation of tier 1 non-common capital elements. OCC staff acknowledges that tier 1 common equity and non-common capital elements for institutions with total assets of less than $50 billion were not defined by regulation or rule prior to the final rule recently adopted to implement Basel III.11 There are three line items in the proposed OCC DFAST 10–50 results template that would be specifically affected by the capital framework that implements Basel III standards: Tier 1 common equity capital, non-common capital elements, and RWAs. Common equity tier 1 capital was recently defined in the Basel III final rule for all institutions and generally will not become effective for institutions with $10–$50 billion in assets until 2015. To effectively model alternative capital calculations more than halfway through the planning horizon for these banking organizations adds complexity and increases the potential or likelihood of erroneous 9 Immaterial portfolios are defined as those that would not present a consequential effect on capital adequacy under any of the scenarios provided. 10 78 FR 47217 (August 5, 2013). 11 https://www.federalreserve.gov/newsevents/ press/bcreg/20130702a.htm. VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 calculations or assumptions. This complexity and increased risk of error could cause institutions to detract from the main purpose of conducting a company-run stress test; mainly to make a forward-looking assessment of capital planning processes and internal capital needs under various scenarios. Lastly, as the first required public disclosure will not commence until the 2014 stress test cycle with disclosure occurring in June of 2015, the additional burden of transitioning to a new capital calculation more than halfway through the 2013 stress test planning horizon will not provide the public with any insight into a firm’s capital adequacy or planning process in this instance. Accordingly, the OCC removed tier 1 common and non-common capital line items, and the associated equity ratios, from the DFAST 10–50 results template for the 2013 stress test cycle. The final template requires covered institutions to report capital and RWAs for the entire planning horizon using the regulatory capital rules and definitions that are applicable on the ‘‘as of’’ date of each report for this initial reporting submission. For the 2013 stress testing cycle institutions should use the OCC’s applicable risk-based capital rules as they are effective as of September 30, 2013. Two commenters argued that the level of detail demanded by the templates was excessive. These commenters stated that separating 1–4 family construction loans from all other construction loans would require more detailed reporting for the OCC DFAST 10–50 results template than what is required for firms subject to CCAR, and firms with $50 billion or more in assets that report the DFAST 14–A form. While the templates for firms with $50 billion or more in assets do not segment 1–4 family construction loans, that specific data item is required for these firms on both the FR Y–14Q and M input data reports. More importantly, the OCC believes this data item is particularly relevant to these smaller organizations which reported material concentrations in this product type and given that a significant amount of the industry’s losses during the most recent economic downturn emanated from this product. These data would provide necessary information for the institutions to effectively manage risk and appropriately assess and plan for their capital needs. One commenter also argued that requiring separate line items for retail and wholesale funding would add unnecessary complexity and burden. The OCC, however, believes it is necessary to maintain these separate items. The breakdown of deposits PO 00000 Frm 00363 Fmt 4703 Sfmt 4703 62945 between retail and wholesale is easily facilitated through Call Report data and the proposed OCC DFAST 10–50 instructions indicate that institutions should use the Call Report segmentation definitions to project these line items. In addition, retail and wholesale funding have historically reacted differently under stressed economic conditions and projecting the retail and wholesale deposit structure throughout the planning horizon as proposed would provide useful information to the institutions and regulators with respect to how an institution internally assesses capital adequacy, plans for their capital needs, and manages risk. One commenter stated that gathering available-for-sale (AFS) and held-tomaturity (HTM) balances for U.S. government obligations and obligations of government-sponsored entities (GSE) would require more detailed reporting for the OCC DFAST 10–50 templates than what is required for the DFAST 14A. Another commenter suggested separating GSE obligations from other government obligations on the OCC DFAST 10–50 balance sheet consistent with the treatment on the Call Report income statement. While the DFAST 14A collects only total AFS and HTM balances on the balance sheet worksheet, this reporting series requires more granular data than the OCC DFAST 10–50 on government securities through other schedules within the DFAST 14A report. The reporting requirements for the Call Report balance sheet require more detailed information on AFS and HTM GSE obligations relative to the reporting requirements for the OCC DFAST 10–50. Gathering AFS and HTM balances for U.S. government obligations and obligations of GSEs would provide relevant and required data to project net income and regulatory capital over the planning horizon. Commenters also favored the elimination of several line items. Several commenters stated that the level of detail required by the balance sheet memoranda items were not informative or necessary to the loss estimation process, or entailed more detail than what was required by the DFAST 14A. Specific memoranda items cited by commenters included troubled debt restructurings and loans secured by 1– 4 family in foreclosure. Based on this comment, the OCC also evaluated the utility of another balance sheet memoranda item: Loans and leases guaranteed by either U.S. government or GSE guarantees (i.e., non-FDIC loss sharing agreements). The OCC agrees that these memoranda data items are already captured within the OCC E:\FR\FM\22OCN1.SGM 22OCN1 sroberts on DSK5SPTVN1PROD with FRONT MATTER 62946 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices DFAST 10–50 reporting requirements for loans and leases and that eliminating these items from the reporting template would not affect an institution’s ability to project pre-provision net revenue, net income, or regulatory capital in order to assess their capital needs under stressed conditions. Therefore, the OCC eliminated these three supplemental balance sheet memoranda reporting items. Commenters also requested that common stock, retained earnings, surplus, and other equity components be reported as a single line item. The OCC agrees with this comment and has combined the aforementioned capital components into one line item to be reported as ‘‘equity capital.’’ One commenter noted that separately modeling average rates for each type of deposit would also involve a significant amount of work and potentially affect other company-run models. The OCC agrees that the average rate information is not a necessary data input needed for an institution to project losses, preprovision net revenue, or capital. Further, the additional burden placed on institutions to calculate the projected average rates could unnecessarily distract institutions from the primary goal of the annual company-run stress test—to effectively estimate the possible impact of an economic downturn on a firm’s capital position in order to plan for capital needs and identify and manage risk. Therefore, the OCC has removed all average rate memoranda items on the balance sheet. This change is consistent with the OCC’s goal of making the DFAST 10–50 report similar to the Call Report and of reducing new burden on covered institutions. Two commenters favored the elimination of the income statement item for Gains and Losses on Other Real Estate Owned (OREO). One commenter noted that this element could effectively be combined with forecasting of other OREO expenses. The other commenter stated that the level of detail for this element is more granular than what is required for the DFAST 14A template. The OCC notes that gains or losses on OREO are captured in the pre-provision net revenue metrics worksheet of the DFAST 14A template; therefore, this requirement would not be more burdensome for the $10–$50 billion firms. Nevertheless, the OCC has eliminated this item since gains and losses on OREO would already be captured within the non-interest income statement memoranda item ‘‘itemize and describe amounts greater than 15% of non-interest income’’ or in the ‘‘itemize and describe amounts greater than 15% of non-interest expense’’ VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 when the amount meets the 15% threshold required by the proposed OCC DFAST 10–50 results template. In response to a few technical comments received, the OCC has adjusted the templates and instructions accordingly. These changes include correction of formulaic errors; correction of Micro Data Reference Manual (MDRM) errors; clarified reporting instructions for income statement memoranda items; and more detailed technical reporting instructions, including the elimination of the contact information schedule as this information would be collected through the results template cover sheet and related data collection application. Burden Estimates: OCC estimates the burden of this collection of information as follows: Estimated Number of Respondents: 33. Estimated Total Annual Burden: 15,312 hours. The burden for each $10 to $50 billion covered institution that completes the DFAST 10–50 results template is estimated to be 440 hours for a total of 14,520 hours. This burden includes 20 hours to input these data and 420 hours for work related to modeling efforts. The estimated burden for each $10 to $50 billion covered institution that completes the annual DFAST scenarios variables template is estimated to be 24 hours for a total of 792 hours. Start up costs for new respondents are estimated to be 93,600 hours and ongoing revisions for existing firms, 4,160 hours. Comments continue to be invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility; (b) The accuracy of the OCC’s estimate of the burden of the collection of information; (c) Ways to enhance the quality, utility, and clarity of the information to be collected; (d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and, (e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Dated: October 1, 2013. Michele Meyer, Assistant Director, Legislative and Regulatory Activities Division. [FR Doc. 2013–24721 Filed 10–21–13; 8:45 am] BILLING CODE 4810–33–P PO 00000 Frm 00364 Fmt 4703 Sfmt 4703 DEPARTMENT OF THE TREASURY Office of Foreign Assets Control Additional Designations, Foreign Narcotics Kingpin Designation Act Office of Foreign Assets Control, Treasury. ACTION: Notice. AGENCY: The U.S. Department of the Treasury ’s Office of Foreign Assets Control (‘‘OFAC’’) is publishing the names of two individuals and one entity whose property and interests in property have been blocked pursuant to the Foreign Narcotics Kingpin Designation Act (‘‘Kingpin Act’’) (21 U.S.C. 1901–1908, 8 U.S.C. 1182). DATES: The designation by the Director of OFAC of the two individuals and one entity identified in this notice pursuant to section 805(b) of the Kingpin Act is effective on September 30, 2013. FOR FURTHER INFORMATION CONTACT: Assistant Director, Sanctions Compliance & Evaluation, Office of Foreign Assets Control, U.S. Department of the Treasury, Washington, DC 20220, Tel: (202) 622–2490. SUPPLEMENTARY INFORMATION: SUMMARY: Electronic and Facsimile Availability This document and additional information concerning OFAC are available on OFAC’s Web site at https://www.treasury.gov/ofac or via facsimile through a 24-hour fax-ondemand service at (202) 622–0077. Background The Kingpin Act became law on December 3, 1999. The Kingpin Act establishes a program targeting the activities of significant foreign narcotics traffickers and their organizations on a worldwide basis. It provides a statutory framework for the imposition of sanctions against significant foreign narcotics traffickers and their organizations on a worldwide basis, with the objective of denying their businesses and agents access to the U.S. financial system and the benefits of trade and transactions involving U.S. companies and individuals. The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President. In addition, the Secretary of the Treasury, in consultation with the Attorney General, the Director of the Central Intelligence Agency, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of E:\FR\FM\22OCN1.SGM 22OCN1

Agencies

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62942-62946]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24721]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

Agency Information Collection Activities; Proposed Collection;
Comment Request; Company-Run Annual Stress Test Reporting Template and
Documentation for Covered Institutions With Total Consolidated Assets
of $10 Billion to $50 Billion Under the Dodd-Frank Wall Street Reform
and Consumer Protection Act

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

ACTION: Notice.

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SUMMARY: The OCC, as part of its continuing effort to reduce paperwork
and respondent burden, invites the general public and other Federal
agencies to comment on this continuing information collection, as
required by the Paperwork Reduction Act of 1995. Under the Paperwork
Reduction Act, Federal agencies are required to publish notice in the
Federal Register concerning each proposed collection of information and
to allow 60 days for public comment in response to the notice. An
agency may not conduct or sponsor, and a respondent is not required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number.
The OCC is soliciting comment on a proposed new regulatory
reporting requirement for national banks and Federal savings
associations titled, ``Company-Run Annual Stress Test Reporting
Template and Documentation for Covered Institutions with Total
Consolidated Assets of $10 Billion to $50 Billion under the Dodd-Frank
Wall Street Reform and Consumer Protection Act.'' The proposal
describes the scope of reporting and the proposed reporting
requirements.

DATES: Comments must be received by November 21, 2013.

ADDRESSES: Because paper mail in the Washington, DC area and at the OCC
is subject to delay, commenters are encouraged to submit comments by
email if possible. Comments may be sent to: Legislative and Regulatory
Activities Division, Office of the Comptroller of the Currency,
Attention: 1557-0311, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-
11, Washington, DC 20219. In addition, comments may be sent by fax to
(571) 465-4326 or by electronic mail to regs.comments@occ.treas.gov.
You may personally inspect and photocopy comments at the OCC, 400 7th
Street SW., Washington, DC 20219. For security reasons, the OCC
requires that visitors make an appointment to inspect comments. You may
do so by calling (202) 649-6700. Upon arrival, visitors will be
required to present valid government-issued photo identification and to
submit to security screening in order to inspect and photocopy
comments.
Additionally, please send a copy of your comments by mail to: OCC
Desk Officer, 1557-0237, U.S. Office of Management and Budget, 725 17th
Street NW., 10235, Washington, DC 20503, or by fax to (202)
395-6974.

FOR FURTHER INFORMATION CONTACT: You can request additional information
from or a copy of the collection from Johnny Vilela or Mary H.
Gottlieb, Clearance Officers, (202) 649-5490, Legislative and
Regulatory Activities Division, Office of the Comptroller of the
Currency, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11,
Washington, DC 20219. In addition, copies of the templates referenced
in this notice can be found on the OCC's Web site under Tools and Forms
(https://www.occ.gov/tools-forms/forms/bank-operations/stress-test-reporting.html).

SUPPLEMENTARY INFORMATION: In compliance with 44 U.S.C. 3507, the OCC
has submitted the following proposed collection of information to OMB
for review and clearance.

Company-Run Annual Stress Test Reporting Template and Documentation for
Covered Institutions With Total Consolidated Assets of $10 Billion to
$50 Billion Under the Dodd-Frank Wall Street Reform and Consumer
Protection Act

Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act \1\ (Dodd-Frank Act) requires certain financial
companies, including national banks and Federal savings associations,
to conduct annual stress tests \2\ and requires the primary financial
regulatory agency \3\ of those financial companies to issue regulations
implementing the stress test requirements.\4\ A national bank or
Federal savings association is a ``covered institution,'' and therefore
subject to the stress test requirements if its total consolidated
assets exceed $10 billion. Under section 165(i)(2), a covered
institution is required to submit to the Board of Governors of the
Federal Reserve System (Board) and to its primary financial regulatory
agency a

[[Page 62943]]

report at such time, in such form, and containing such information as
the primary financial regulatory agency may require.\5\ On October 9,
2012, the OCC published in the Federal Register a final rule
implementing the section 165(i)(2) annual stress test requirements.\6\
This notice describes the reports and information required to meet the
reporting requirements under section 165(i)(2) for covered institutions
with average total consolidated assets between $10 and $50 billion.
These information collections will be given confidential treatment (5
U.S.C. 552(b)(4)).
---------------------------------------------------------------------------

\1\ Public Law 111-203, 124 Stat. 1376, July 2010.
\2\ 12 U.S.C. 5365(i)(2)(A).
\3\ 12 U.S.C. 5301(12).
\4\ 12 U.S.C. 5365(i)(2)(C).
\5\ 12 U.S.C. 5365(i)(2)(B).
\6\ 77 FR 61238, October 9, 2012.
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The OCC intends to use the data collected through this proposal to
assess the reasonableness of the stress test results of covered
institutions and to provide forward-looking information to the OCC
regarding a covered institution's capital adequacy. The OCC also may
use the results of the stress tests to determine whether additional
analytical techniques and exercises could be appropriate to identify,
measure, and monitor risks at the covered institution. The stress test
results are expected to support ongoing improvement in a covered
institution's stress testing practices with respect to its internal
assessments of capital adequacy and overall capital planning.
The Dodd-Frank Act stress testing (DFAST) requirements apply to all
covered institutions, but the OCC recognizes that many covered
institutions with consolidated total assets of $50 billion or more have
been subject to existing stress testing requirements under the Board's
Comprehensive Capital Analysis and Review (CCAR). The OCC also
recognizes that these institutions' stress tests will be applied to
more complex portfolios and therefore warrant a broader set of reports
to adequately capture the results of the company-run stress tests.
These reports necessarily will require more detail than would be
appropriate for smaller, less complex institutions. Therefore, the OCC
has decided to specify separate reporting templates for covered
institutions with total consolidated assets between $10 and $50 billion
and for covered institutions with total consolidated assets of $50
billion or more.\7\
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\7\ See 77 FR 49485 for the Paperwork Reduction Act Notice and
the OCC Web site at https://occ.gov/news-issuances/news-releases/2012/nr-occ-2012-121.html for the reporting templates for covered
institutions with total consolidated assets of $50 billion or more.
---------------------------------------------------------------------------

While the general reporting categories are the same (income
statement, balance sheet and capital), the level of granularity for
individual reporting items is less for $10 to $50 billion institutions.
For example, accounting for provisions by category is not required, and
less detail is required for commercial and industrial lending. Because
smaller banks with assets of $10 to $50 billion generally have less
complex balance sheets, the OCC believes that highly detailed reporting
is not warranted, and so the OCC is not requiring supplemental
schedules on such areas as retail balances, securities and trading,
operational risk, and pre-provision net revenue (PPNR).
The OCC has worked closely with the Board and the Federal Deposit
Insurance Corporation (FDIC) to make the agencies' respective rules
implementing the annual stress testing requirements under the Dodd-
Frank Act consistent and comparable by requiring similar standards for
scope of application, scenarios, data collection and reporting forms.
The OCC also has worked to minimize any potential duplication of effort
related to the annual stress test requirements. Additionally, the
agencies have coordinated to allow for a unified results submission
process.
The proposed OCC DFAST 10-50 reporting templates for institutions
with assets of $10 to $50 billion are described below.

Description of Reporting Results Templates for Institutions With $10
Billion to $50 Billion in Assets

The ``Dodd-Frank Annual Stress Test Reporting Results Template for
Covered Institutions with Total Consolidated Assets Between $10 and $50
Billion'' ($10-$50 results template) includes data collection
worksheets necessary for the OCC to assess the company-run stress test
results for baseline, adverse and severely adverse scenarios as well as
any other scenario specified in accordance with regulations issued by
the OCC. The $10-$50B results template includes worksheets that collect
information on the following areas:

1. Income Statement
2. Balance Sheet
3. Capital

Each $10 to $50 billion covered institution reporting to the OCC
using this form will be required to submit results for each scenario
provided to covered institutions in accordance with regulations
implementing Section 165(i)(2) as specified by the OCC.

Worksheets: Income Statement

The income statement worksheet collects data for the quarter
preceding the planning horizon and for each quarter of the planning
horizon for the stress test on projected losses and revenues in the
following categories:

1. Net charge-offs
2. Pre-provision net revenue
3. Provision for loan and lease losses
4. Realized gains (losses) on held to maturity (HTM) and available-for-
sale (AFS) securities
5. All other gains (losses)
6. Taxes

Memoranda items:

7. Total other than temporary impairment (OTTI) losses

This worksheet provides information used to assess losses and
revenues that covered institutions can sustain in baseline, adverse and
severely adverse stress scenarios.

Worksheets: Balance Sheet

The balance sheet worksheet collects data for the quarter preceding
the planning horizon and for each quarter of the planning horizon for
the stress test on projected equity capital, as well as on assets and
liabilities in the following categories:

1. Loans
2. HTM securities
3. AFS securities
4. Trading assets
5. Total intangible assets
6. Other real estate
7. All other assets
8. Retail funding (core deposits)
9. Wholesale funding
10. Trading liabilities
11. All other liabilities
12. Perpetual preferred stock and related surplus
13. Equity capital

The OCC intends to use this worksheet to assess the projected
changes in assets and liabilities that a covered institution can
sustain in baseline, adverse and severely adverse stress scenarios.
This worksheet will also be used to assess the revenue and loss
projections identified in the income statement worksheet.

Worksheets: Capital

The capital worksheet, which is appended to the balance sheet
worksheet, collects data for the quarter preceding the planning horizon
and for each quarter of the planning horizon for the stress test on the
following areas:

1. Unrealized gains (losses) on AFS securities
2. Disallowed deferred tax asset
3. Tier 1 capital
4. Qualifying subordinated debt and redeemable preferred stock
5. Allowance includable in Tier 2 capital

[[Page 62944]]

6. Tier 2 capital
7. Total risk-based capital
8. Total capital
9. Risk-weighted assets
10. Total assets for leverage purposes
11. Tier 1 risk-based capital ratio
12. Tier 1 leverage ratio
13. Total risk-based capital ratio

Memoranda:

14. Sale, conversion, acquisition or retirement of capital stock
15. Cash dividends declared on preferred stock
16. Cash dividends declared on common stock

Additionally, the Summary Schedule captures projections for
regulatory capital ratios over the planning horizon by scenario.
The OCC intends to use these worksheets to assess the impact on
capital of the projected losses and projected changes in assets that
the covered institution can sustain in a stressed scenario. In addition
to reviewing the worksheet in the context of the balance sheet and
income statement projections, the OCC also intends to use this
worksheet in assessing capital planning processes for each covered
institution.

Description of DFAST Scenario Variables Template

To conduct the stress test required under this rule, a covered
institution may need to project additional economic and financial
variables to estimate losses or revenues for some or all of its
portfolios. In such a case, the covered institution is required to
complete the DFAST Scenario Variables template for each scenario where
such additional variables are used to conduct the stress test. Each
scenario worksheet collects the variable name (matching that reported
on the Scenario Variable Definitions worksheet), the actual value of
the variable during the third quarter of the reporting year, and the
projected value of the variable for nine future quarters.

Description of Supporting Documentation

Covered institutions must submit clear documentation in support of
the projections included in the worksheets to support efficient and
timely review of annual stress test results by the OCC. The supporting
documentation should be submitted electronically and is not expected to
be reported in the workbooks used for required data reporting. This
supporting documentation must describe the types of risks included in
the stress test; describe clearly the methodology used to produce the
stress test projections; describe the methods used to translate the
macroeconomic factors into a covered institution's projections; and
also include an explanation of the most significant causes for the
changes in regulatory capital ratios. The supporting documentation also
should address the impact of anticipated corporate events, including
mergers, acquisitions or divestitures of business lines or entities,
and changes in strategic direction, and should describe how such
changes are reflected in stress test results, including the impact on
estimates of losses, expenses and revenues, net interest margins, non-
interest income items, and balance sheet amounts.
Where company-specific assumptions are made that differ from the
broad macroeconomic assumptions incorporated in stress scenarios
provided by the OCC, the documentation also must describe such
assumptions and how those assumptions relate to reported projections.
Where historical relationships are relied upon, the covered
institutions must describe the historical data and provide the basis
for the expectation that these relationships would be maintained in
each scenario, particularly under adverse and severely adverse
conditions.

Summary of Comments and Changes From Proposal

In the Federal Register of March 11, 2013 (78 FR 49488), OCC
published a notice requesting comment on the templates and the
collection of information. OCC received comments from seven groups on
the notice. Five of the commenters were banking organizations, one was
an industry group, and one was a financial services consulting firm.
The OCC has made several changes to the OCC DFAST 10-50 results
template in light of comments received. The OCC, the Board and the FDIC
coordinated the changes made to each agency's templates in order to
keep the templates identical and minimize the burden on affected
institutions.
Some commenters expressed concern about having to submit stress
testing results in a Call Report-type format, noting that their
existing stress testing software was not developed with such a format
in mind and asking for less detailed reporting forms. These commenters
requested that the agencies consider further delaying implementation of
the reporting requirements and/or limiting the report submissions to
the OCC DFAST 10-50 summary schedule. The OCC has determined that using
reporting templates modeled on the Call Report is the best solution
because of familiarity with this format by the OCC, covered
institutions and the public, particularly when mandatory public
disclosure of summary results under the severely adverse scenario
becomes effective in 2015. The OCC DFAST 10-50 results template,
aligned to the Call Report, provides a format that is well understood
and utilized by the industry. Therefore, the OCC believes that the
reporting requirements will not place undue burden on institutions'
ability to report stress test results. Using the Call Report format
would also ensure a high level of consistency and facilitate assessment
of the results. The OCC has already delayed the application of the
stress testing rules for the $10-$50 billion covered institutions, in
part so that they would have time to create the necessary
infrastructure to submit the appropriate stress testing results.
Two commenters expressed concern about the differences among stress
testing templates used to respond to different stress testing
requirements and about the burden some banking organizations (companies
with $50 billion or more in assets that control subsidiaries with $10-
50 billion in assets) might face in having to prepare multiple sets of
templates. The OCC notes that the final OCC DFA stress testing rule
allows such subsidiaries to file the same template as filed by its
parent. Per the final OCC DFA stress testing rule, ``any $10 to $50
billion covered institution that elects to apply the requirements of an
over $50 billion covered institution shall remain subject to the
requirements applicable to an over $50 billion covered institution
until otherwise approved by the OCC.'' \8\ Additionally, implementation
of the stress test requirements has already been delayed for the $10-
$50 billion companies and public disclosure is not required until 2015.
---------------------------------------------------------------------------

\8\ 12 CFR 46.3(e)(2).
---------------------------------------------------------------------------

One commenter suggested the application of generalized, bank-
developed loss assumptions for immaterial portfolios. The commenter
also noted that an immaterial portfolio exception is allowed for firms
with $50 billion or more assets in stress testing submissions. The OCC
has considered the burden of calculating losses for immaterial
portfolios for companies with $10-$50 billion in assets and determined
that providing a safe harbor that defines immaterial portfolios, where
no or little consideration of the risk of these portfolios is
undertaken, would be contrary to the purpose of a company-run stress
test and could unintentionally mask or cause

[[Page 62945]]

institutions to erroneously conclude that the aggregation of immaterial
portfolios would always pose little or no risk to an institution.
Although stress testing should be applied to all exposures, the OCC
recognizes that the same level of rigor and analysis may not be
necessary for lower-risk, immaterial portfolios.\9\ For such
portfolios, it may be appropriate for a company to use a less
sophisticated approach for its stress test projections, assuming the
results of that approach are conservative and well-documented. The OCC
has therefore not established a reporting threshold for immaterial
portfolios in the reporting requirements for the proposed OCC DFAST 10-
50 results template. Institutions should refer to the proposed
interagency supervisory guidance on implementing Dodd-Frank Act
company-run stress tests for banking organizations with total
consolidated assets of more than $10 billion but less than $50 billion
for more information on estimates for immaterial portfolios.\10\
---------------------------------------------------------------------------

\9\ Immaterial portfolios are defined as those that would not
present a consequential effect on capital adequacy under any of the
scenarios provided.
\10\ 78 FR 47217 (August 5, 2013).
---------------------------------------------------------------------------

One commenter asked for clarification regarding the calculation and
reporting of regulatory capital and risk-weighted assets (RWAs), noting
the expectation that capital and RWA calculations and definitions would
change over the planning horizon as new rules are implemented
(specifically noting new definitions when the Basel III final rule is
adopted). In addition, this commenter also requested clarification on
the calculation of tier 1 non-common capital elements.
OCC staff acknowledges that tier 1 common equity and non-common
capital elements for institutions with total assets of less than $50
billion were not defined by regulation or rule prior to the final rule
recently adopted to implement Basel III.\11\ There are three line items
in the proposed OCC DFAST 10-50 results template that would be
specifically affected by the capital framework that implements Basel
III standards: Tier 1 common equity capital, non-common capital
elements, and RWAs. Common equity tier 1 capital was recently defined
in the Basel III final rule for all institutions and generally will not
become effective for institutions with $10-$50 billion in assets until
2015. To effectively model alternative capital calculations more than
halfway through the planning horizon for these banking organizations
adds complexity and increases the potential or likelihood of erroneous
calculations or assumptions. This complexity and increased risk of
error could cause institutions to detract from the main purpose of
conducting a company-run stress test; mainly to make a forward-looking
assessment of capital planning processes and internal capital needs
under various scenarios. Lastly, as the first required public
disclosure will not commence until the 2014 stress test cycle with
disclosure occurring in June of 2015, the additional burden of
transitioning to a new capital calculation more than halfway through
the 2013 stress test planning horizon will not provide the public with
any insight into a firm's capital adequacy or planning process in this
instance.
---------------------------------------------------------------------------

\11\ https://www.federalreserve.gov/newsevents/press/bcreg/20130702a.htm.
---------------------------------------------------------------------------

Accordingly, the OCC removed tier 1 common and non-common capital
line items, and the associated equity ratios, from the DFAST 10-50
results template for the 2013 stress test cycle. The final template
requires covered institutions to report capital and RWAs for the entire
planning horizon using the regulatory capital rules and definitions
that are applicable on the ``as of'' date of each report for this
initial reporting submission. For the 2013 stress testing cycle
institutions should use the OCC's applicable risk-based capital rules
as they are effective as of September 30, 2013.
Two commenters argued that the level of detail demanded by the
templates was excessive. These commenters stated that separating 1-4
family construction loans from all other construction loans would
require more detailed reporting for the OCC DFAST 10-50 results
template than what is required for firms subject to CCAR, and firms
with $50 billion or more in assets that report the DFAST 14-A form.
While the templates for firms with $50 billion or more in assets do not
segment 1-4 family construction loans, that specific data item is
required for these firms on both the FR Y-14Q and M input data reports.
More importantly, the OCC believes this data item is particularly
relevant to these smaller organizations which reported material
concentrations in this product type and given that a significant amount
of the industry's losses during the most recent economic downturn
emanated from this product. These data would provide necessary
information for the institutions to effectively manage risk and
appropriately assess and plan for their capital needs.
One commenter also argued that requiring separate line items for
retail and wholesale funding would add unnecessary complexity and
burden. The OCC, however, believes it is necessary to maintain these
separate items. The breakdown of deposits between retail and wholesale
is easily facilitated through Call Report data and the proposed OCC
DFAST 10-50 instructions indicate that institutions should use the Call
Report segmentation definitions to project these line items. In
addition, retail and wholesale funding have historically reacted
differently under stressed economic conditions and projecting the
retail and wholesale deposit structure throughout the planning horizon
as proposed would provide useful information to the institutions and
regulators with respect to how an institution internally assesses
capital adequacy, plans for their capital needs, and manages risk.
One commenter stated that gathering available-for-sale (AFS) and
held-to-maturity (HTM) balances for U.S. government obligations and
obligations of government-sponsored entities (GSE) would require more
detailed reporting for the OCC DFAST 10-50 templates than what is
required for the DFAST 14A. Another commenter suggested separating GSE
obligations from other government obligations on the OCC DFAST 10-50
balance sheet consistent with the treatment on the Call Report income
statement. While the DFAST 14A collects only total AFS and HTM balances
on the balance sheet worksheet, this reporting series requires more
granular data than the OCC DFAST 10-50 on government securities through
other schedules within the DFAST 14A report. The reporting requirements
for the Call Report balance sheet require more detailed information on
AFS and HTM GSE obligations relative to the reporting requirements for
the OCC DFAST 10-50. Gathering AFS and HTM balances for U.S. government
obligations and obligations of GSEs would provide relevant and required
data to project net income and regulatory capital over the planning
horizon.
Commenters also favored the elimination of several line items.
Several commenters stated that the level of detail required by the
balance sheet memoranda items were not informative or necessary to the
loss estimation process, or entailed more detail than what was required
by the DFAST 14A. Specific memoranda items cited by commenters included
troubled debt restructurings and loans secured by 1-4 family in
foreclosure. Based on this comment, the OCC also evaluated the utility
of another balance sheet memoranda item: Loans and leases guaranteed by
either U.S. government or GSE guarantees (i.e., non-FDIC loss sharing
agreements). The OCC agrees that these memoranda data items are already
captured within the OCC

[[Page 62946]]

DFAST 10-50 reporting requirements for loans and leases and that
eliminating these items from the reporting template would not affect an
institution's ability to project pre-provision net revenue, net income,
or regulatory capital in order to assess their capital needs under
stressed conditions. Therefore, the OCC eliminated these three
supplemental balance sheet memoranda reporting items.
Commenters also requested that common stock, retained earnings,
surplus, and other equity components be reported as a single line item.
The OCC agrees with this comment and has combined the aforementioned
capital components into one line item to be reported as ``equity
capital.''
One commenter noted that separately modeling average rates for each
type of deposit would also involve a significant amount of work and
potentially affect other company-run models. The OCC agrees that the
average rate information is not a necessary data input needed for an
institution to project losses, pre-provision net revenue, or capital.
Further, the additional burden placed on institutions to calculate the
projected average rates could unnecessarily distract institutions from
the primary goal of the annual company-run stress test--to effectively
estimate the possible impact of an economic downturn on a firm's
capital position in order to plan for capital needs and identify and
manage risk. Therefore, the OCC has removed all average rate memoranda
items on the balance sheet. This change is consistent with the OCC's
goal of making the DFAST 10-50 report similar to the Call Report and of
reducing new burden on covered institutions.
Two commenters favored the elimination of the income statement item
for Gains and Losses on Other Real Estate Owned (OREO). One commenter
noted that this element could effectively be combined with forecasting
of other OREO expenses. The other commenter stated that the level of
detail for this element is more granular than what is required for the
DFAST 14A template. The OCC notes that gains or losses on OREO are
captured in the pre-provision net revenue metrics worksheet of the
DFAST 14A template; therefore, this requirement would not be more
burdensome for the $10-$50 billion firms. Nevertheless, the OCC has
eliminated this item since gains and losses on OREO would already be
captured within the non-interest income statement memoranda item
``itemize and describe amounts greater than 15% of non-interest
income'' or in the ``itemize and describe amounts greater than 15% of
non-interest expense'' when the amount meets the 15% threshold required
by the proposed OCC DFAST 10-50 results template.
In response to a few technical comments received, the OCC has
adjusted the templates and instructions accordingly. These changes
include correction of formulaic errors; correction of Micro Data
Reference Manual (MDRM) errors; clarified reporting instructions for
income statement memoranda items; and more detailed technical reporting
instructions, including the elimination of the contact information
schedule as this information would be collected through the results
template cover sheet and related data collection application.
Burden Estimates: OCC estimates the burden of this collection of
information as follows:
Estimated Number of Respondents: 33.
Estimated Total Annual Burden: 15,312 hours.
The burden for each $10 to $50 billion covered institution that
completes the DFAST 10-50 results template is estimated to be 440 hours
for a total of 14,520 hours. This burden includes 20 hours to input
these data and 420 hours for work related to modeling efforts. The
estimated burden for each $10 to $50 billion covered institution that
completes the annual DFAST scenarios variables template is estimated to
be 24 hours for a total of 792 hours. Start up costs for new
respondents are estimated to be 93,600 hours and ongoing revisions for
existing firms, 4,160 hours.
Comments continue to be invited on:
(a) Whether the collection of information is necessary for the
proper performance of the functions of the OCC, including whether the
information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the
collection of information;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the collection on respondents,
including through the use of automated collection techniques or other
forms of information technology; and,
(e) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.

Dated: October 1, 2013.
Michele Meyer,
Assistant Director, Legislative and Regulatory Activities Division.
[FR Doc. 2013-24721 Filed 10-21-13; 8:45 am]
BILLING CODE 4810-33-P

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