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 (http://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 http://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 http://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 http://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 
(http://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)).
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    \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 http://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\
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    \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\ http://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