Application of Enhanced Prudential Standards and Reporting Requirements to General Electric Capital Corporation, 44111-44128 [2015-18124]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 80, Number 142 (Friday, July 24, 2015)]
[Notices]
[Pages 44111-44128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18124]


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FEDERAL RESERVE SYSTEM

[Docket No. R-1503]


Application of Enhanced Prudential Standards and Reporting 
Requirements to General Electric Capital Corporation

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final order applying enhanced prudential standards and 
reporting requirements to General Electric Capital Corporation.

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SUMMARY: General Electric Capital Corporation (GECC) is a nonbank 
financial company that the Financial Stability Oversight Council 
(Council) has designated under section 113 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) for 
supervision by the Board of Governors of the Federal Reserve System 
(Board). Section 165 of the Dodd-Frank Act provides that the Board 
must, as part of its supervision of a nonbank financial firm designated 
by the Council, adopt enhanced prudential standards for the firm that 
help prevent or mitigate risks to the financial stability of the United 
States that could arise from the material financial distress or failure 
of the firm. This final order establishes these enhanced prudential 
standards for GECC. In light of the substantial similarity of GECC's 
activities and risk profile to that of a similarly sized bank holding 
company, the enhanced prudential standards adopted by the Board are 
similar to those that apply to large bank holding companies, including 
capital requirements; capital-planning and stress-testing requirements; 
liquidity requirements; risk-management and risk-committee 
requirements; and reporting requirements. The Board has tailored these 
standards to reflect GECC's risk profile and its ongoing plan to divest 
certain assets and business lines and reorganize its operations. The 
Board has also deferred application of the enhanced capital, liquidity, 
governance, and reporting provisions until January 1, 2018.

DATES: The final order is effective in two phases. Phase I 
Requirements, as described more fully below, are effective on January 
1, 2016. Phase II Requirements, as described more fully below, are 
effective on January 1, 2018, unless otherwise noted.

FOR FURTHER INFORMATION CONTACT: Ann Misback, Associate Director, (202) 
452-3799, Jyoti Kohli, Senior Supervisory Financial Analyst, (202) 452-
2539, or Elizabeth MacDonald, Senior Supervisory Financial Analyst, 
(202) 475-6316, Division of Banking Supervision and Regulation; or 
Laurie Schaffer, Associate General Counsel, (202) 452-2277, Tate 
Wilson, Counsel, (202) 452-3696, or Dan Hickman, Attorney, (202) 973-
7432, Legal Division.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Framework for Supervision of GECC and Enhanced Prudential 
Standards
    A. Phase I Requirements
    1. Capital Requirements
    2. Liquidity Requirements
    B. Phase II Requirements
    1. Risk-Management and Risk Committee Requirements
    2. Capital Requirements--Additional Risk-Based and Leverage 
Capital Requirements
    3. Capital Planning Requirements--Capital Plan Rule
    4. Stress Testing Requirements
    5. Liquidity Requirements
    6. Other Prudential Standards: Restrictions on Intercompany 
Transactions
    7. Future Standards

[[Page 44112]]

    C. Reporting Requirements
    1. Phase I Requirements
    2. Phase II Requirements
III. Paperwork Reduction Act
IV. Final Order

I. Introduction

    General Electric Capital Corporation (GECC) is a major financial 
company with approximately $482 billion in total assets as of March 31, 
2015, approximately 55 percent of which are in the United States. It 
provides a wide variety of credit and other financial products to 
consumers and businesses in the United States and overseas. These 
include commercial loans and leases, equipment financing, consumer 
mortgages, various types of consumer loans, commercial real estate 
financing, auto loans, credit cards, private mortgage insurance, and 
other financial services. GECC also operates two large insured 
depository institutions, Synchrony Bank and GE Capital Bank, with 
combined total assets of approximately $74 billion as of March 31, 
2015. In addition to the funding obtained by these insured depository 
institutions through collection of deposits, GECC is a large issuer of 
commercial paper, with approximately $25 billion outstanding as of 
March 31, 2015. GECC is wholly owned by General Electric Company (GE).
    After reviewing the activities, structure, size, scope, and risks 
of GECC's operations and activities, the Financial Stability Oversight 
Council (Council) determined that GECC should be subject to supervision 
by the Board in order to help mitigate the risks that the failure of 
GECC might pose to financial stability in the United States. The Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 
provides the Board with the authority to examine GECC, including its 
operations, activities and risk management, and to take a variety of 
supervisory actions to protect the financial stability of the United 
States. As a result of this designation, the Federal Reserve has 
already initiated a program to examine and supervise the operations, 
activities, and risk management of GECC. In addition, because GECC has 
for some time controlled and currently continues to control a savings 
association, GECC is a savings and loan holding company subject to 
examination, supervision, and other regulatory requirements under the 
Home Owners' Loan Act, as amended.\1\
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    \1\ 12 U.S.C. 1461, et. seq.
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    In addition to these supervisory and regulatory requirements, 
section 165 of the Dodd-Frank Act directs the Board to establish 
enhanced prudential standards for nonbank financial companies that the 
Council has determined should be supervised by the Board (as well as 
for certain bank holding companies) in order to prevent or mitigate 
risks to U.S. financial stability that could arise from the material 
financial distress or failure, or ongoing activities of, these 
companies.\2\ By statute, the enhanced prudential standards must 
include risk-based and leverage capital requirements, liquidity 
requirements, risk-management and risk-committee requirements, 
resolution-planning requirements, single-counterparty credit limits, 
stress-test requirements, and a debt-to-equity limit under certain 
circumstances.\3\ Section 165 also permits the Board to establish 
additional enhanced prudential standards, including a contingent 
capital requirement, an enhanced public disclosure requirement, a 
short-term debt limit, and any other prudential standards that the 
Board determines are appropriate.\4\
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    \2\ 12 U.S.C. 5365.
    \3\ 12 U.S.C. 5365(b)(1)(A), (e), and (i). The debt-to-equity 
limit applies if the Council also determines the firm poses a grave 
threat to the financial stability of the United States, a finding 
the Council has not made in the case of GECC. See 12 U.S.C. 5365(j).
    \4\ 12 U.S.C. 5365(b)(1)(B).
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    In prescribing enhanced prudential standards, section 165(a)(2) of 
the Dodd-Frank Act permits the Board to tailor the enhanced prudential 
standards among companies on an individual basis, taking into 
consideration their ``capital structure, riskiness, complexity, 
financial activities (including the financial activities of their 
subsidiaries), size, and any other risk-related factors that the Board 
of Governors deems appropriate.'' \5\ In addition, under section 
165(b)(3) of the Dodd-Frank Act, the Board is required to take into 
account differences among bank holding companies covered by section 165 
and nonbank financial companies supervised by the Board.\6\
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    \5\ 12 U.S.C. 5365(a)(2).
    \6\ 12 U.S.C. 5365(b)(3).
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    The Board has issued by rule an integrated set of enhanced 
prudential standards for large bank holding companies and foreign 
banking organizations. These enhanced prudential standards include a 
capital planning rule,\7\ a stress testing rule,\8\ a resolution plan 
rule,\9\ and enhanced liquidity requirements.\10\ The Board also 
adopted an enhanced supplementary leverage ratio for the largest, most 
complex bank holding companies and has proposed a risk-based capital 
surcharge framework for U.S. global systemically-important banks (G-
SIBs).\11\ This integrated set of standards is designed to enhance the 
resiliency of these companies and mitigate the risk that their failure 
or material financial distress could pose to U.S. financial stability. 
The Board may issue additional standards through rulemakings in the 
future.
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    \7\ 12 CFR 225.8.
    \8\ 12 CFR part 252.
    \9\ 12 CFR part 243. The Board's resolution plan rule applies by 
its terms to all nonbank financial companies supervised by the 
Board, including GECC. See 12 CFR 243.1(b), .2(f)(1)(i).
    \10\ See 12 CFR part 249; see also 79 FR 17240, 17252 (March 27, 
2014).
    \11\ See 79 FR 24528 (May 1, 2014); 79 FR 75473 (December 18, 
2014).
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    In considering the application of enhanced prudential standards to 
nonbank financial companies supervised by the Board, the Board has 
stated that it intends to take account of the business model, capital 
structure, risk profile, and systemic footprint of a designated 
company.\12\ Consistent with this approach, in November 2014, the Board 
proposed a number of enhanced prudential standards for GECC.\13\
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    \12\ See Enhanced Prudential Standards for Bank Holding 
Companies and Foreign Banking organizations, 79 FR 17240, 17245 
(March 27, 2014).
    \13\ Application of Enhanced Prudential Standards and Reporting 
Requirements to General Electric Capital Corporation, 79 FR 71768 
(December 3, 2014) (Proposed Order).
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    In light of the substantial similarity of GECC's current activities 
and risk profile to that of a similarly sized bank holding company, the 
Board proposed to apply enhanced prudential standards to GECC that are 
similar to those that apply to large bank holding companies. 
Specifically, the Board proposed to apply: (1) Capital requirements; 
(2) capital-planning and stress-testing requirements; (3) liquidity 
requirements; and (4) risk-management and risk-committee requirements. 
The Board also proposed certain additional enhanced prudential 
standards for GECC in light of the unique aspects of GECC's activities, 
risk profile, and structure. These included certain independence 
requirements for GECC's board of directors and restrictions on 
intercompany transactions between GECC and its parent, GE, and certain 
affiliates. In addition, the Board proposed to require GECC to file 
certain reports with the Board that are similar to the reports required 
of bank holding companies. GECC was separately required by rule to 
submit a resolution plan.\14\
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    \14\ 12 CFR 243.3(a).

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[[Page 44113]]

    The Board invited comment on this proposal from the public.\15\ The 
Board received 21 comments on the proposed order including comments 
from certain of GE's directors, GECC, other companies, industry 
associations, and individuals. Several commenters supported application 
of the proposed enhanced prudential standards to GECC, and asserted 
that it was appropriate to require GECC to comply with standards 
similar to those applicable to bank holding companies. In its comments, 
GECC recognized the importance of the Federal Reserve's supervision in 
ensuring the safety and soundness of the U.S. financial system, and the 
purpose of enhanced prudential standards generally for a large, 
interconnected, and complicated financial firm such as the current 
GECC.
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    \15\ Proposed Order, 79 FR at 71769.
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    Some commenters, including GECC, asserted however that the proposed 
standards were not sufficiently tailored to GECC. For example, GECC and 
a financial services trade association suggested that standards for G-
SIBs should not be applied to GECC because they believed GECC's 
business model, capital structure, risk profile, and systemic footprint 
were unlike those of the U.S. G-SIBs. Several commenters, including 
GECC, investment advisers, and corporate governance associations also 
criticized the corporate governance standards in the proposed order, 
arguing that they were inconsistent with Delaware law and inappropriate 
for GECC. In addition, GECC and financial services trade associations 
requested that GECC be granted additional time for compliance with the 
standards and the reporting requirements set forth in the proposed 
order in order to help GECC address operational and technological 
challenges associated with compliance. Some commenters, including trade 
associations for insurance companies, argued that it was inappropriate 
to issue an order for a specific nonbank financial company.\16\ These 
commenters also expressed concern that the Board might apply similar 
standards to nonbank financial companies with predominantly insurance 
activities. A detailed discussion of the comments on particular aspects 
of the proposal is provided below.
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    \16\ Some commenters, in particular trade associations for 
insurance companies, asserted that, while they did not have any 
particular view on GECC's structure or the appropriateness of bank 
holding company standards for GECC, the Board should develop 
standards for insurance companies that are specific to the insurance 
industry, and should propose those standards through a public 
rulemaking process. The Board followed a public comment process in 
proposing and adopting enhanced prudential standards for GECC. The 
Board expects to follow a public comment process when proposing and 
establishing enhanced prudential standards for other companies 
designated by the Council, and will determine the appropriate 
process and appropriate enhanced prudential standards based on each 
case.
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    In April 2015, after the Board invited comment on its proposed 
order regarding GECC, GE and GECC announced plans to significantly 
reorganize and refocus GECC. Under this proposal, GECC would divest or 
liquidate much of its commercial lending and leasing operations and all 
of its consumer lending businesses, including its U.S. banking 
operations, and shrink its total assets from approximately $482 billion 
to approximately $140 billion by year-end 2017. The divestitures are 
subject to a detailed plan with a definitive timeline. GECC has already 
begun to implement this plan, including by selling an indirect interest 
in its savings association and selling a significant amount of 
commercial real estate assets, and GECC has stated that it expects to 
complete its reorganization plan within three years. GECC plans to 
retain only those businesses directly related to GE's core industrial 
businesses, which it identifies as aviation, energy, and health-care. 
As part of this divestiture plan, GECC has indicated that it intends to 
seek rescission of the Council designation when appropriate.\17\
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    \17\ GE Press Release, April 10, 2014 (GE Announcement), 
available at: https://www.genewsroom.com/press-releases/ge-create-simpler-more-valuable-industrial-company-selling-most-ge-capital-assets.
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II. Framework for Supervision of GECC and Enhanced Prudential Standards

    The Board is required to consider a variety of factors when 
establishing enhanced prudential standards for large bank holding 
companies and nonbank financial companies supervised by the Board and 
to adapt those standards as appropriate in light of the predominant 
lines of business of the companies.\18\ The Board is also permitted by 
statute to tailor application of enhanced prudential standards based on 
the capital structure, riskiness, complexity, financial activities, 
size, and other risk factors regarding the company as the Board deems 
appropriate.\19\
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    \18\ 12 U.S.C. 5365(b)(3).
    \19\ 12 U.S.C. 5365(a)(2).
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    The Board has taken these factors into account, as well as 
information and views provided by GE and the public commenters, in 
establishing enhanced prudential standards for GECC. One commenter 
asserted that GECC differs substantially from bank holding companies 
and that standards for bank holding companies were inappropriate for 
GECC. This commenter asserted that, because GECC is a financing arm of 
an industrial company, its activities, objectives, and risk profile 
differ from those of a bank holding company. The commenter also 
asserted that the proposal would adversely affect financing for 
businesses and consumers that purchase products from GE. Several other 
commenters argued, on the other hand, that standards developed for bank 
holding companies are appropriate for GECC, and urged the Board to 
strengthen standards further for both bank holding companies and GECC.
    As a starting point for assessing appropriate prudential standards, 
the Board notes that GECC engages in financial activities that are very 
similar to those of the largest bank holding companies. GECC's 
leverage, off-balance-sheet exposures, risk profile, asset composition, 
interconnectedness with other large financial firms, and mix of 
activities are substantially similar to those of many large bank 
holding companies. GECC is a significant participant in financing 
activities, including as a provider of consumer and commercial credit 
in the United States. As noted above, like many of the largest bank 
holding companies, GECC focuses its activities primarily on lending and 
leasing to commercial companies and on consumer financing and deposit 
products. GECC holds a large portfolio of on-balance sheet financial 
assets, such as commercial and consumer loans and investment 
securities, that is comparable to those of the largest bank holding 
companies.
    Moreover, GECC borrows in the wholesale funding markets by issuing 
commercial paper and long-term debt to wholesale counterparties, and 
makes significant use of derivatives to hedge interest rate risk, 
foreign exchange risk, and other financial risks. GECC currently 
controls two insured depository institutions that offer traditional 
banking products to both consumer and commercial customers.\20\ Similar 
to the insured depository institutions of large bank holding companies, 
GECC's subsidiary insured depository institutions serve as a 
significant source of funding and as a source of credit for a portion 
of its lending activities.
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    \20\ As discussed above, GECC intends to divest Synchrony Bank 
and GE Capital Bank.
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    To address the similarities in these risks, structure, and 
activities, and to account for the unique characteristics of GECC and 
its ongoing restructuring plan, the Board has determined to establish a 
supervisory program and framework of enhanced prudential

[[Page 44114]]

standards for GECC that would proceed in two stages.\21\
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    \21\ The final order applies to GECC and to any successor to 
GECC, without further action by the Board.
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    As explained more fully below, in order to ensure that GECC has 
adequate capital and liquidity to support its current operations and to 
mitigate the risk to financial stability that might occur if GECC were 
to come under stress while implementing its divestiture plan, effective 
January 1, 2016, the final order applies capital standards applicable 
to bank holding companies, liquidity standards applicable to the 
largest bank holding companies, and certain reporting requirements. 
These Phase I Requirements require GECC to comply with the standardized 
risk-based capital requirements, restrictions on distributions and 
certain discretionary bonus payments associated with the capital 
conservation buffer, the traditional balance-sheet leverage ratio 
requirement in the Board's regulatory capital framework, as well as 
with the liquidity coverage ratio rule (LCR rule) applicable to bank 
holding companies with $250 billion or more in total consolidated 
assets or $10 billion or more in on-balance-sheet foreign exposures 
(advanced approaches banking organizations), as described further 
below. Beginning January 1, 2016, GECC would also be required to comply 
with certain reporting requirements that support the risk-based capital 
requirements, the leverage ratio, the LCR rule, and the Board's 
supervision of GECC to mitigate risks to the financial stability of the 
United States.
    GECC is currently subject to a number of statutory, regulatory, and 
supervisory requirements, and will continue to be subject to these 
requirements in addition to the Phase I Requirements. GECC is subject 
to examination by the Federal Reserve, the enforcement authority of the 
Board, resolution planning requirements, and approval requirements for 
expansion proposals.\22\ GECC is also subject to limits on 
concentrations that generally prohibit GECC from merging with or 
acquiring another company if the resulting company's liabilities upon 
consummation would exceed 10 percent of the aggregate liabilities of 
all financial companies.\23\ The Board has been supervising GECC 
pursuant to the consolidated supervision framework for large financial 
companies.\24\ Finally, the final order does not preempt or otherwise 
alter the Board's authority to supervise GE, GECC, and GE Consumer 
Finance, as savings and loan holding companies under the Home Owners' 
Loan Act,\25\ so long as they control a savings association.
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    \22\ See 12 U.S.C. 5361(b) (establishing examination authority); 
5362 (establishing enforcement authority), 5365(d) (requiring 
submission of a resolution plan), and 5363(b) (requiring the prior 
approval of the Board for certain acquisitions).
    \23\ See 12 CFR part 251.
    \24\ See Supervision and Regulation Letter SR 12-17, 
Consolidated Supervision Framework for Large Financial Institutions 
(December 17, 2012) (SR 12-17) (establishing risk-management 
guidance and supervisory expectations for nonbank financial 
companies supervised by the Board), available at: https://www.federalreserve.gov/bankinforeg/srletters/sr1217.htm.
    \25\ 12 U.S.C. 1467a, et. seq.
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    The Board also believes that certain enhanced prudential standards 
should be applied in the supervision of GECC. These Phase II 
Requirements are more stringent than the minimum requirements 
applicable to bank holding companies. At the same time, the Board has 
tailored the enhanced standards to account for certain unique 
structures and risks at GECC. Moreover, in light of the reorganization 
plan currently underway at GECC and the amount of resources and systems 
necessary to implement these enhanced prudential standards, the Board 
has delayed the imposition of these standards until January 1, 2018.
    As explained more fully below, these enhanced prudential standards 
include general risk management standards, enhanced capital standards, 
capital planning, stress testing, enhanced liquidity risk management 
standards, and restrictions on intercompany transactions. They also 
include requirements to file additional reports with the Board.
    The delayed timing of the Phase II Requirements reflects the public 
commitment that GE and GECC have made to their divestiture and 
reorganization plans, progress observed to date on GECC's execution of 
its plans, and other changes at GE and GECC since issuance of the 
proposed order. GECC has noted that it intends to request that the 
Council rescind its designation in 2016.\26\ If the designation of GECC 
is rescinded prior to January 1, 2018, these enhanced prudential 
standards would not apply to GECC. In the event that GECC is unable to 
complete or implement the divestiture plan as expected or if the 
Council does not rescind GECC's designation, the effective date of 
January 1, 2018, for the Phase II Requirements provides GECC with 
sufficient time to prepare for compliance with the requirements of the 
final order.
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    \26\ Letter from Keith S. Sherin, Chairman & CEO, GECC, to 
Robert deV. Frierson, Secretary, Board of Governors of the Federal 
Reserve System, May 4, 2015, available at: https://www.federalreserve.gov/SECRS/2015/May/20150506/R-1503/R-1503_050415_129930_568761743161_1.pdf.
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    The Board expects to continue to monitor and assess GECC's 
activities and risk profile, and, in accordance with the requirements 
of section 165 of the Dodd-Frank Act, to take into account any 
additional factors or considerations, as necessary, in the adoption of 
future standards, or in tailoring of any standards imposed in the 
future.

A. Phase I Requirements

1. Capital Requirements
    The Board has long held the view that a bank holding company 
generally should maintain capital that is commensurate with its risk 
profile and activities so that the firm can meet its obligations to 
creditors and other counterparties, as well as continue to serve as a 
financial intermediary, through periods of financial and economic 
stress.\27\ Bank holding companies that are comparable in size, 
complexity, activities, and risk to GECC are subject to a capital 
framework that includes a minimum common equity tier 1 risk-based 
capital ratio of 4.5 percent, a minimum tier 1 risk-based capital ratio 
of 6 percent, a minimum total risk-based capital ratio of 8 percent, a 
common equity tier 1 capital conservation buffer of 2.5 percent of 
risk-weighted assets, a standardized methodology for calculating risk-
weighted assets, and a 4 percent minimum leverage ratio of tier 1 
capital to average total consolidated assets (the generally applicable 
leverage ratio).
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    \27\ See 12 CFR part 217; 12 CFR 225.8; SR 12-17, supra note 24; 
Supervision and Regulation Letter 99-18, Assessing Capital Adequacy 
in Relation to Risk at Large Banking Organizations and Others with 
Complex Risk Profiles (July 1, 1999) (SR 99-18), available at: 
https://www.federalreserve.gov/boarddocs/srletters/1999/SR9918.HTM.
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    Because GECC's activities and balance sheet are substantially 
similar to those of a large bank holding company, the Board proposed to 
apply the same capital framework to GECC. The final order requires 
GECC, beginning on January 1, 2016, to maintain the minimum risk-based 
capital ratios and the generally applicable leverage ratio described 
above, to comply with restrictions on capital distributions and certain 
discretionary bonus payments associated with the capital conservation 
buffer, and to calculate risk-weighted assets using the standardized 
methodology.\28\ These regulatory capital requirements will help to 
ensure that GECC maintains high-quality regulatory capital in amounts 
commensurate with

[[Page 44115]]

its risk as it executes its divestiture plan. Compliance with these 
basic capital requirements should not require substantial incremental 
operational investments by GECC.
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    \28\ See 12 CFR part 217, subpart D.
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2. Liquidity Requirements
    On September 3, 2014, the Board adopted the LCR rule, which 
implements a quantitative liquidity requirement consistent with the 
liquidity coverage ratio (LCR) standard established by the Basel 
Committee on Banking Supervision.\29\ The LCR rule is designed to 
promote the resilience of the short-term liquidity risk profile of 
large complex banking organizations, thereby improving the banking 
sector's ability to measure and manage liquidity risk and to absorb 
shocks arising from financial and economic stress. The LCR rule 
requires a company subject to the rule to maintain an amount of high-
quality liquid assets (HQLA) (the numerator of the ratio) that is equal 
to or greater than its total expected net cash outflows over a 
prospective 30 calendar-day period (the denominator of the ratio).
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    \29\ 79 FR 61440 (October 10, 2014); see 12 CFR part 249.
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    The LCR rule does not by its terms apply automatically to nonbank 
financial companies supervised by the Board such as GECC. Rather, the 
Board indicated when it adopted the LCR rule that, following 
designation of a nonbank financial company for supervision by the 
Board, the Board would assess the business model, capital structure, 
and risk profile of the designated company to determine whether the LCR 
rule should apply to the company, and, if appropriate, would tailor 
application of the rule's requirements by order or regulation to that 
nonbank financial company or to a category of nonbank financial 
companies.
    The Board proposed to apply to GECC the requirements in the LCR 
rule that apply to advanced approaches banking organizations beginning 
July 1, 2015. The proposed order would have adopted the same transition 
periods and compliance timelines for GECC as applied to advanced 
approaches banking organizations that have less than $700 billion in 
total consolidated assets and less than $10 trillion in assets under 
custody. These transition periods would have permitted GECC to conduct 
LCR calculations on a monthly (rather than daily) basis until July 1, 
2016, and would have required GECC to maintain an LCR of at least 80 
percent from July 1, 2015 to December 31, 2015, an LCR of at least 90 
percent from January 1, 2016 to December 31, 2016, and an LCR of at 
least 100 percent thereafter.\30\
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    \30\ 12 CFR 249.50(b).
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    In comments on the proposed order, GECC requested that the Board 
defer the requirement to calculate its LCR daily until January 1, 2018. 
GECC also requested that application of the LCR rule to GECC be 
tailored to reflect GECC's inability to hold significant Federal 
Reserve Bank balances and its holding of substantial amounts of 
deposits at third-party banks. GECC noted that it maintains a greater 
proportion of its cash liquidity in third-party commercial bank 
deposits that are not credited as HQLA and are subject to a 75 percent 
cap on net inflows. GECC requested that the LCR requirements as applied 
to GECC count GECC's deposits in third-party commercial banks as 
inflows in the denominator of the LCR, consistent with the LCR that 
applies to bank holding companies, and that the inflows not be subject 
to the 75 percent cap if the third-party commercial bank or its holding 
company is subject to the full LCR or a foreign equivalent and the 
deposits are not concentrated in any one affiliated group of banks.
    The final order requires GECC to comply with the LCR rule beginning 
January 1, 2016, to maintain an LCR of at least 90 percent from January 
1, 2016 to December 31, 2016, and to maintain an LCR of at least 100 
percent thereafter. The January 1, 2016, effective date for the 90 
percent requirement is consistent with the proposed order and with the 
liquidity levels already maintained by GECC. The ability to rapidly 
monetize HQLA is expected to assist GECC in meeting its liquidity needs 
during a period of acute short-term liquidity stress and therefore both 
improve the firm's resiliency and reduce the likelihood of fire-sales 
of less liquid assets, which can damage financial stability. Because 
the LCR rule applies outflow and inflow rates that are based on the 
particular risk profile and activities of a company subject to the 
rule, the LCR requirements would be appropriately tailored to GECC's 
activities, balance sheet, and risk profile, and would help ensure that 
GECC holds a sufficient amount of HQLA to meet its expected net cash 
outflows over a 30 calendar-day stress period.\31\
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    \31\ As indicated in the supplementary information section of 
the LCR rule, the Board anticipated separately seeking comment on 
proposed regulatory reporting requirements and instructions 
pertaining to the LCR. 79 FR 61440, 61445 (October 10, 2014). In 
December 2014, the Board proposed revisions to liquidity reporting 
requirements that would relate to the LCR calculation. The Board 
proposed these reporting requirements and instructions to apply to 
any nonbank financial company supervised by the Board that the Board 
has required by rule or order to comply with the LCR. 79 FR 71416, 
71417 (December 2, 2014).
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    As noted above, GECC requested that the Board tailor the 
application of the LCR rule to reflect its inability to hold 
significant Federal Reserve Bank balances and its greater proportion of 
liquidity maintained in third-party commercial banks. Central bank 
reserves are not, however, the only qualifying HQLA under the LCR rule. 
Various high-credit-quality securities are also counted as HQLA under 
the LCR rule. Further, reducing the cash inflow cap and allowing GECC 
to rely heavily on inflows from deposits at third-party banks to offset 
cash outflows would increase the interconnectedness of the financial 
system and could reduce systemic stability. As the Board noted in the 
preamble to the final LCR rule,\32\ such deposits do not meet the 
Board's LCR criteria for HQLA because during a liquidity stress event 
many commercial banks may exhibit the same liquidity stress correlation 
and wrong-way risk. Further, adopting GECC's modification regarding 
third-party commercial bank deposits could reduce the value of 
horizontal comparisons between GECC and other companies with similar 
balance sheets and risk profiles. The final order therefore adopts this 
aspect of the proposal without change.
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    \32\ See 79 FR 61440, 61457 (October 10, 2014).
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    In recognition of the infrastructure necessary for daily LCR 
calculations, the Board has determined to defer requiring GECC to 
perform daily LCR calculations until January 1, 2018. Accordingly, the 
final order provides that GECC may calculate its LCR monthly on each 
calculation date that is the last business day of the applicable 
calendar month until January 1, 2018.

B. Phase II Requirements

1. Risk-Management and Risk Committee Requirements
    Sound enterprise-wide risk management by a large financial company 
reduces the likelihood of its material distress or failure and thus 
promotes financial stability. Section 165(b)(1)(A) of the Dodd-Frank 
Act requires the Board to establish enhanced risk-management 
requirements for nonbank financial companies supervised by the Board 
and bank holding companies with total consolidated assets of $50 
billion or more.\33\ In addition, section 165(h) directs the Board to 
issue regulations requiring publicly traded nonbank financial companies 
and publicly traded

[[Page 44116]]

bank holding companies with total consolidated assets of $10 billion or 
more to establish risk committees.\34\ Section 165(h) requires the risk 
committee to be responsible for the oversight of the enterprise-wide 
risk-management practices of the company, to have such number of 
independent directors as the Board determines appropriate, and to 
include at least one risk-management expert with experience in 
identifying, assessing, and managing risk exposures of large, complex 
firms.\35\
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    \33\ 12 U.S.C. 5365(b)(1)(A)(iii).
    \34\ 12 U.S.C. 5365(h); see also 12 CFR 252.2(p) (defining 
publicly traded).
    \35\ 12 U.S.C. 5365(h)(3).
---------------------------------------------------------------------------

    The Board has adopted risk-management standards in Regulation YY 
that require a covered bank holding company to tailor its compliance 
framework to the particular size, complexity, structure, risk profile, 
and activities of the organization. The Board has required all bank 
holding companies with $50 billion or more in total consolidated assets 
to establish a risk committee that is an independent committee of the 
company's board of directors, is chaired by an independent director, 
and has at least one member who has experience in identifying, 
assessing and managing risk exposures of large, complex financial 
firms.\36\ The risk committee is required to approve and periodically 
review the risk-management policies of the bank holding company's 
global operations, oversee the operation of the bank holding company's 
global risk-management framework, and oversee the bank holding 
company's compliance with the liquidity risk-management requirements of 
Regulation YY.\37\ In addition, a covered bank holding company is 
required to appoint a chief risk officer with experience in 
identifying, assessing and managing risk exposures of large, complex 
financial firms, and who has responsibility for establishing 
enterprise-wide risk limits for the company and monitoring compliance 
with such limits.\38\
---------------------------------------------------------------------------

    \36\ 12 CFR 252.33(a)(3), (4).
    \37\ 12 CFR 252.33(a).
    \38\ 12 CFR 252.33(b).
---------------------------------------------------------------------------

    Under Regulation YY, each covered bank holding company is required 
to establish a global risk-management framework that is commensurate 
with the company's structure, risk profile, complexity, activities, and 
size.\39\ The risk-management framework is required to include policies 
and procedures for the establishment of risk-management governance and 
risk-control infrastructure of the company's global operations. In 
addition, the risk-management framework must include processes and 
systems for identifying and reporting risk-management deficiencies in 
an effective and timely manner, must establish managerial and employee 
responsibilities for risk management, must ensure the independence of 
the risk-management function, and must integrate risk management and 
associated controls with management goals and with the compensation 
structure for the global operations of the company.\40\
---------------------------------------------------------------------------

    \39\ 12 CFR 252.33(a)(2).
    \40\ Id.
---------------------------------------------------------------------------

    The proposed order would have required GECC to adopt a risk 
management framework that is consistent with the supervisory 
expectations established for bank holding companies of a similar size 
beginning July 1, 2015. The proposal also included a requirement that 
GECC establish a dedicated risk committee at GECC that would be 
responsible for the oversight of GECC's risk management.
    The Board noted in the proposed order that in implementing these 
requirements, GECC would be expected to tailor its risk-management 
framework to suit the company's structure. The proposed order would 
also have applied additional risk-management requirements that were 
tailored to reflect GECC's structure as an intermediate holding company 
of a larger, publicly traded company.\41\ To ensure that GECC's board 
of directors included members who were independent of GE, and whose 
attention was focused on the business operations and safety and 
soundness of GECC, the proposed order would have required that two or 
more of the directors of GECC be independent of GECC's management and 
of GE's management and board of directors. One of these directors would 
have been required to serve as the chair of GECC's risk committee.\42\
---------------------------------------------------------------------------

    \41\ Proposed Order, 79 FR at 71778.
    \42\ 12 CFR 252.33(a)(4).
---------------------------------------------------------------------------

    In addition, consistent with Regulation YY, GECC would have been 
required to maintain at least one director with expertise in 
``identifying, assessing, and managing risk exposures of large, complex 
financial firms'' on its risk committee.\43\
---------------------------------------------------------------------------

    \43\ Id.
---------------------------------------------------------------------------

    Commenters, including GECC and the independent directors of GE, as 
well as several investment advisers and corporate governance 
associations, recognized the importance and heightened obligations of 
management of large financial firms for risk management and supported 
heightened enterprise wide risk management requirements, including a 
risk committee with expertise and independent leadership. GECC and the 
independent directors of GE pointed out that GE and GECC already have 
adopted several of the requirements in the Board's proposed order.
    Several commenters, including GECC and the independent directors of 
GE, argued, however, that the proposal to require GECC to maintain at 
least two directors independent of GE's board of directors as well as 
GE and GECC management would create uncertainty about the 
responsibilities of those independent directors, who would be expected 
under the Board's proposed order to focus on the risks at GECC alone, 
and who simultaneously would owe a fiduciary duty under Delaware law to 
GE as the sole shareholder of GECC. Some commenters also questioned the 
Board's authority under the Dodd-Frank Act to impose this 
requirement.\44\ GECC and the independent directors of GE proposed, 
instead, that independent directors on the GE board be permitted to 
comprise the majority of GECC's board of directors. They argued that 
this would ensure that the majority of directors at GECC were 
independent of both management of GE and management of GECC. GECC and 
the independent directors of GE asserted that the independent directors 
currently offer strong oversight of GECC's risk management that is 
independent of the management of either GE or GECC, and are well 
informed about the risks to GECC, including risks posed by the 
interactions between GE and GECC.
---------------------------------------------------------------------------

    \44\ Although GECC does not have publicly traded shares of 
common equity, the company has debt securities that are publicly 
traded on the New York Stock Exchange under section 12(b) of the 
Securities Exchange Act of 1934.
---------------------------------------------------------------------------

    After considering the public comments, including those provided by 
GECC and GECC's current independent directors, the Board believes that 
requiring a specific number of individuals to serve on the GECC board 
who are not also members of the GE board is unnecessary in this case 
for achieving the overarching supervisory interest of ensuring that 
GECC board members are capable of dedicating time and resources to the 
unique issues and risks of GECC and focusing appropriate attention on 
ensuring that its operations are safe and sound and consistent with 
financial stability. The Board understands that GE has established a 
dedicated risk committee that oversees the risk management of GE and 
GECC. In this regard, the GE independent directors have devoted a 
significant

[[Page 44117]]

amount of time over the past three years to providing the type of 
independent oversight contemplated by the Dodd-Frank Act and have 
demonstrated the willingness and ability to continue to remain fully 
engaged in their oversight of GECC.
    Accordingly, the final order modifies the proposed risk-management 
requirements to require that a majority of the GECC board of directors 
be independent directors, unaffiliated with GE management or GECC 
management, with an independent director chair of the board and risk 
committee at GECC. This provision becomes effective on January 1, 2018. 
The final order does not require that the independent directors on 
GECC's board also be independent of the GE board.\45\
---------------------------------------------------------------------------

    \45\ The Board intends to monitor the effectiveness of GECC's 
independent directors and if the facts and circumstances indicate 
that the independent directors are unable to focus their attention 
on the business operations and safety and soundness of GECC, then 
the corporate governance and risk management requirements may be 
revised.
---------------------------------------------------------------------------

    The final order also requires GECC to comply with the risk 
committee and risk-management framework requirements in section 252.33 
of the Board's Regulation YY, beginning January 1, 2018.\46\ The Board 
believes that consistent with the designation of GECC as a nonbank 
financial company, GECC's risk-management framework should have a 
dedicated risk committee at the company that is solely responsible for 
the oversight of GECC's risk management. In addition, the final order 
requires the entire GECC risk committee to be comprised of independent 
directors, unaffiliated with GE management or GECC management.
---------------------------------------------------------------------------

    \46\ 12 CFR 252.33.
---------------------------------------------------------------------------

    The Board believes these requirements satisfy the requirements of 
section 165(b)(1)(A) and (h) of the Dodd-Frank Act and establish a risk 
management structure that can be effective in identifying, monitoring, 
and mitigating risks at GECC. These requirements ensure that the 
perspectives of qualified individuals independent of the management of 
GE and GECC will have a strong voice in the governance of GECC and 
counterbalance any tendency to operate GECC in a manner that, while 
advantageous to GE as the sole shareholder of GECC, may pose risks to 
the financial stability of the United States.
2. Capital Requirements--Additional Risk-Based and Leverage Capital 
Requirements
    In the proposed order, the Board would have required GECC, 
beginning on July 1, 2015, to comply with the regulatory capital 
framework applicable to a large bank holding company, including the 
minimum common equity tier 1, tier 1, and total risk-based capital 
ratios, the minimum generally-applicable leverage ratio, and any 
restrictions on capital distributions or discretionary bonus payments 
associated with the capital conservation buffer, described above. In 
addition to the generally applicable capital adequacy requirements 
described above, the capital framework contains supplemental measures 
applicable to the largest, most interconnected bank holding companies. 
For advanced approaches banking organizations, these include the 
advanced approaches risk-based capital rule, a supplementary leverage 
ratio of tier 1 capital to total leverage exposure of 3 percent, a 
requirement to include accumulated other comprehensive income (AOCI) in 
tier 1 capital, and a countercyclical capital buffer. The proposed 
order would also have applied these requirements, except for the 
requirement to comply with the advanced approaches rule.\47\
---------------------------------------------------------------------------

    \47\ Proposed Order, 79 FR at 71772.
---------------------------------------------------------------------------

    In comments on the proposed order, GECC requested that the enhanced 
capital requirements be deferred pending completion of GE and GECC's 
divestiture plan. In the alternative, GECC requested that the Board 
allow it to exclude recognition of AOCI in regulatory capital relating 
to investment securities held by legacy insurance businesses that it is 
winding-down. GECC argued that these securities are generally held for 
the long term, are used to support future payment obligations on 
outstanding insurance contracts, and are subject to fluctuations in 
value that can result in volatility in AOCI.
    The Board believes that the enhanced capital framework adopted for 
the largest bank holding companies, including the requirement to 
recognize most elements of AOCI in regulatory capital, is an 
appropriate capital framework for GECC because of the similarities in 
activities, size, risk, and exposures of GECC to large bank holding 
companies. The maintenance of a strong base of capital by GECC, which 
the Council has designated as systemically important, is particularly 
important because capital shortfalls at GECC could endanger the 
financial health of the firm and contribute to systemic distress. Thus, 
the Board believes the regulatory capital framework applicable to 
advanced approaches bank holding companies represents the appropriate 
enhanced prudential standard for GECC, with the exception noted above 
regarding compliance with the advanced approaches rule. The Board notes 
that GECC appears to meet or exceed minimum levels required in the 
enhanced capital framework for the largest bank holding companies. 
However, as explained below, the Board has deferred application of 
these requirements until January 1, 2018, in light of GECC's ongoing 
restructuring efforts.
    The proposed order also would have required GECC to meet a 
supplementary leverage ratio of 5 percent (eSLR) in order to avoid 
restrictions on capital distributions and discretionary bonus payments 
to executive officers.\48\ The eSLR is designed to minimize leverage at 
banking organizations that pose substantial systemic risk, thereby 
strengthening the ability of such organizations to remain going 
concerns during times of economic stress and minimizing the likelihood 
that problems at these organizations would contribute to financial 
instability.\49\
---------------------------------------------------------------------------

    \48\ 12 CFR 217.11(a)(4).
    \49\ See 79 FR 24528 (May 1, 2014).
---------------------------------------------------------------------------

    GECC asserted that subjecting GECC to the eSLR was inappropriate 
because GECC does not meet the size threshold for application of the 
eSLR and should be exempt from the eSLR just as a bank holding company 
of similar size and risks. In the alternative, GECC argued that the 
Board should tailor the ratio to GECC's smaller systemic footprint. 
GECC also requested that, for purposes of calculation of the eSLR and 
other reporting requirements, GECC be permitted to phase in the daily 
averaging of on-balance sheet exposures beginning on July 1, 2018. GECC 
suggested that a phase-in schedule would allow GECC the time to 
implement all of the operational infrastructure necessary to complete 
daily averaging.
    Consistent with the Dodd-Frank Act's requirement to apply enhanced 
leverage requirements to nonbank financial companies supervised by the 
Board, the final order retains the eSLR standard for GECC, but tailors 
the standard to GECC's risk profile, complexity, activities, and size. 
Specifically, the final order requires GECC to exceed a 4 percent 
supplementary leverage ratio in order to avoid restrictions on capital 
distributions and certain discretionary bonus payments, as opposed to 
the 5 percent supplementary leverage ratio required for other 
institutions subject to the eSLR. The lower requirement in the final 
order is intended to reflect GECC's

[[Page 44118]]

smaller systemic footprint compared to other banking organizations 
subject to the eSLR, while still minimizing leverage at GECC and 
reducing the likelihood that problems at GECC would cause it to fail in 
a manner that affects financial stability. The Board has also 
determined to defer application of the eSLR until January 1, 2018. 
Because GECC will not be required to comply with either the SLR or the 
eSLR prior to January 1, 2018, the Board will not require daily 
averaging prior to that time.
    With the exception of an eSLR, the Board is not through this order 
applying to GECC other standards established for G-SIBs. Accordingly, 
the Board would not, without further action, impose the proposed G-SIB 
risk-based capital surcharge to GECC or otherwise define GECC as a G-
SIB. As the Board adopts additional standards for G-SIBs, the Board 
will consider whether it is appropriate to require GECC to comply with 
these additional standards and would seek notice and comment prior to 
applying such standards to GECC. Most commenters supported this 
approach.
3. Capital Planning Requirements--Capital Plan Rule
    The recent financial crisis highlighted a need for large bank 
holding companies to incorporate into their capital planning forward-
looking assessments of capital adequacy under stressed conditions. The 
crisis also underscored the importance of strong internal capital 
planning practices and processes among large bank holding companies. 
The Board issued the capital plan rule to ensure that large bank 
holding companies have robust systems and processes that incorporate 
forward-looking projections of revenue and losses to monitor and 
maintain their internal capital adequacy. By helping to ensure that the 
largest bank holding companies have sufficient capital to withstand 
significant stress and to continue to operate, the capital plan rule 
helps to ensure that the financial system as a whole can continue to 
function under stressed conditions.
    The capital plan rule requires each bank holding company with $50 
billion or more in total consolidated assets to develop an annual 
capital plan describing its planned capital actions and demonstrating 
its ability to meet a 5 percent tier 1 common capital ratio and 
maintain capital ratios above the regulatory minimum requirements under 
both baseline and stressed conditions over a forward-looking planning 
horizon.\50\ A capital plan must also include an assessment of a bank 
holding company's sources and expected uses of capital, reflecting the 
size, complexity, risk profile, and scope of operations of the company, 
assuming both expected and stressed conditions. In addition, each bank 
holding company must describe its process for assessing capital 
adequacy, its capital policy, and provide a discussion of any expected 
changes to the bank holding company's business plan that are likely to 
have a material impact on the company's capital adequacy or liquidity.
---------------------------------------------------------------------------

    \50\ See 12 CFR 225.8.
---------------------------------------------------------------------------

    Under the capital plan rule, the Board annually evaluates a large 
bank holding company's capital adequacy and capital planning practices 
and the comprehensiveness of the capital plan, including the strength 
of the underlying analysis. The Comprehensive Capital Analysis and 
Review (CCAR) is the Board's supervisory process for reviewing capital 
plans submitted by bank holding companies under the capital plan rule. 
As part of CCAR, the Board conducts a quantitative assessment of each 
large bank holding company's capital adequacy under an assumption of 
stressed conditions and conducts a qualitative assessment of the 
company's internal capital planning practices. If the Board objects to 
a bank holding company's capital plan, the company may not make any 
capital distribution other than those approved in writing by the Board 
or the appropriate Reserve Bank. A bank holding company that receives 
an objection may submit a revised capital plan for review by the Board.
    To ensure that GECC continues to maintain sufficient capital and 
has internal processes for assessing its capital adequacy that 
appropriately account for the company's risks, the proposed order would 
have required GECC to comply with the Board's capital plan rule \51\ 
for the capital plan cycle beginning January 1, 2016, and to submit its 
first submission under the capital plan rule on April 5, 2016.
---------------------------------------------------------------------------

    \51\ 12 CFR 225.8.
---------------------------------------------------------------------------

    Several commenters, including GECC and a public interest group, 
agreed generally that the application of capital planning to GECC would 
be appropriate. In particular, GECC acknowledged that capital planning 
would be an effective tool for ensuring its capital strength and 
safeguarding it in its interactions with GE. GECC, however, requested 
that the Board defer implementation of capital planning in order to 
allow it sufficient time to develop necessary internal systems and to 
focus its capital plan compliance efforts on the business and assets it 
intends to retain after the divestiture plan.
    The Board has determined to adopt the capital planning 
requirements. As described above, GECC's activities, risk profile, and 
balance sheet are similar to those of large bank holding companies. 
Requiring GECC to comply with the Board's capital plan rule as if it 
were a large bank holding company will help ensure that GECC holds 
capital that is commensurate with its risk profile and activities, can 
meet its obligations to creditors and other counterparties, and can 
continue to serve as a financial intermediary through periods of 
financial and economic stress.\52\
---------------------------------------------------------------------------

    \52\ See 12 CFR part 217; 12 CFR 225.8; SR 12-17, supra note 24; 
SR 99-18, supra note 27.
---------------------------------------------------------------------------

    The Board recognizes that, unlike domestic bank holding companies, 
GECC is an intermediate holding company of a larger, publicly-traded 
company. However, GECC is itself a significant entity designated by the 
Council for supervision by the Federal Reserve because of the threat 
posed by the material financial distress of GECC to financial 
stability. Notwithstanding the recently announced guarantee of much of 
GECC's debt, GE is not obligated to provide capital or other financial 
support to GECC and, during a period of stress, may not be able to 
provide that support. A robust capital planning process at GECC will 
help ensure that GECC manages its capital, and any capital 
distributions to its parent, in a manner that is commensurate with its 
risks and consistent with its safety and soundness.\53\ The capital 
plan rule acts as a counterweight to pressures that a company may face 
to make capital distributions during a period of economic stress, 
thereby helping to mitigate the risk of material financial distress at 
GECC.
---------------------------------------------------------------------------

    \53\ In addition to GECC, other intermediate holding companies 
are subject to the capital plan rule. Notably, some U.S. bank 
holding company subsidiaries of foreign banking organizations 
participate in CCAR. In addition, under the Board's Regulation YY, 
all foreign banking organizations with $50 billion or more in U.S. 
non-branch assets are required to form a U.S. intermediate holding 
company subject to the capital plan rule. See 12 CFR 252, subpart O.
---------------------------------------------------------------------------

    To account for the efforts that GE and GECC are undergoing to 
reorganize their operations, the Board has also determined to make the 
capital planning requirements effective beginning January 1, 2018. The 
Board recognizes that GECC likely will need time to build and implement 
the internal systems and infrastructure necessary fully to meet the 
requirements of the capital plan rule and the CCAR process. Moreover, 
for GECC's first capital plan cycle

[[Page 44119]]

beginning on January 1, 2018, the quantitative assessment of GECC's 
capital plan under the capital plan rule will not be based on 
supervisory stress test estimates conducted pursuant to the Board's 
stress test rules.\54\ Instead, the Board intends to conduct a more 
limited quantitative assessment of GECC's capital plan based on GECC's 
own stress scenario and any scenarios provided by the Board and a 
qualitative assessment of GECC's capital planning processes and 
supporting practices. This approach would be consistent with the 
capital plan review process that the Board used to evaluate the initial 
capital plan submissions of bank holding companies that were subject to 
the capital plan rule but that did not participate in the 2009 
Supervisory Capital Assessment Program.
---------------------------------------------------------------------------

    \54\ See 12 CFR part 252, subpart E.
---------------------------------------------------------------------------

    The Board also expects to communicate to GECC the Board's 
expectations on capital planning practices and capital adequacy 
processes in connection with its first capital plan submission. The 
Board intends to tailor its supervisory expectations on capital 
planning practices and capital adequacy processes for GECC to account 
for any material changes in the size, scope of activities, and risks of 
the company that result from the implementation of its divestiture 
plan.
4. Stress Testing Requirements
    Section 165 of the Dodd-Frank Act requires the Board to conduct 
annual supervisory stress tests of each nonbank financial company 
supervised by the Board and requires the Board to issue regulations 
that require those companies to conduct company-run stress tests semi-
annually.\55\ In 2012, the Board, in coordination with the Federal 
Deposit Insurance Corporation, the Office of the Comptroller of the 
Currency, and the Federal Insurance Office, adopted stress testing 
rules under section 165(i) of the Dodd-Frank Act (stress test 
rules).\56\ The stress test rules establish a framework for the Board 
to conduct annual supervisory stress tests and require covered 
companies to conduct semi-annual company-run stress tests.
---------------------------------------------------------------------------

    \55\ 12 U.S.C. 5365(i).
    \56\ 77 FR 62378 (October 12, 2012); 12 CFR part 252, subparts E 
and F.
---------------------------------------------------------------------------

    The stress tests conducted under the Board's stress test rules are 
complementary to the Board's review of a company's capital plan in the 
CCAR process. The Board's stress test rules require the use of stylized 
capital action assumptions to calculate the post-stress capital ratios, 
while the CCAR post-stress capital ratios use the company's planned 
capital actions in the baseline scenario provided by the Board under 
the stress test rules. The capital action assumptions in the Board's 
stress test rules are intended to make the results of the stress tests 
more comparable across institutions, which enhances the quality of the 
required public disclosure of the stress-testing results. Under the 
stress test rules, covered companies are also subject to mid-cycle 
company-run stress tests, in which companies develop and employ their 
own baseline, adverse, and severely adverse scenarios in conducting 
internal stress tests. For both the annual and mid-cycle company-run 
stress tests, covered companies must disclose the results of their 
company-run stress test conducted under the severely adverse scenario.
    The proposed order would have required GECC to comply with the 
stress-testing requirements applicable to bank holding companies with 
$50 billion or more in total consolidated assets under the stress test 
rules \57\ in the cycle beginning January 1, 2017. Several commenters, 
including GECC and a public interest group, agreed generally with the 
application of stress testing to GECC, asserting that it would be an 
important safeguard for GECC in its interactions with GE. GECC also 
acknowledged that stress testing would be an effective tool for 
ensuring its capital strength. GECC requested, however, that the Board 
defer implementation of stress testing requirements to January 1, 2018, 
in order to allow it sufficient time to develop the necessary internal 
systems and, ultimately, focus its stress-testing efforts on the 
business and assets it intends to retain after the divestiture plan.
---------------------------------------------------------------------------

    \57\ 12 CFR part 252, subparts E and F.
---------------------------------------------------------------------------

    The Board has determined to apply the stress test rules to GECC in 
the same manner as they currently apply to large bank holding companies 
because of the similarity in activities, risk profile, and balance 
sheet composition between GECC and large bank holding companies. 
Compliance with the stress testing requirements would enhance the 
capital planning process for GECC and regularly test the adequacy of 
GECC's capital against hypothetical stressed situations to ensure that 
its capital raising and capital distribution efforts adequately prepare 
the firm for potential stress environments. The stress testing 
requirements under the Board's stress test rules thus would enhance the 
resiliency of GECC and lessen the potential that its failure would have 
a significant adverse effect on financial stability. Because the 
supervisory stress tests are conducted on the basis of standardized 
scenarios and capital assumptions, supervisory stress testing of GECC 
would also allow supervisors and markets to assess GECC's capital 
adequacy compared with that of large bank holding companies that have 
comparable activities, risk profiles, and balance sheets.
    The stress testing rules require a rigorous analysis and are 
dependent on accurate and detailed information regarding the 
composition, historical performance, and sensitivity to stress of the 
assets held by the company. GECC has not been subject to the stress-
testing information collection requirements to date and its current 
divestiture efforts could have a significant impact on its ability to 
collect and report data that will reflect the nature of the company's 
activities during the nine-quarter period for the stress test. 
Consequently, to account for the divestiture plan and to allow GECC 
time to develop systems and processes for conducting stress tests and 
allow the Board adequate time to further assess the activities and risk 
profile of GECC and appropriately tailor the stress testing 
requirements based on GECC's systemic footprint, the Board has 
determined to require GECC to comply with the stress testing 
requirements starting with the stress testing cycle beginning January 
1, 2019.
5. Liquidity Requirements
    Section 165(b) of the Dodd-Frank Act directs the Board to adopt 
enhanced liquidity requirements for nonbank financial companies 
supervised by the Board as well for as bank holding companies with 
total consolidated assets of $50 billion or more.\58\ Liquidity is 
measured by a company's capacity to efficiently meet its expected and 
unexpected cash outflows and collateral needs at a reasonable cost 
without adversely affecting the daily operations or the financial 
condition of the company. As noted above, the financial crisis of 2008-
2009 illustrated that liquidity can evaporate quickly and cause severe 
stress at financial firms and in the financial markets, and 
demonstrated that even solvent financial companies may experience 
material financial distress if they do not manage their liquidity in a 
prudent manner. Through recent rulemakings and guidance, the Board has 
established quantitative liquidity requirements and qualitative 
liquidity risk-management standards in order to ensure the

[[Page 44120]]

resiliency of financial companies during periods of financial market 
stress.
---------------------------------------------------------------------------

    \58\ 12 U.S.C. 5365(b)(1)(A)(ii).
---------------------------------------------------------------------------

    To complement the LCR requirements described above, the proposed 
order would have applied the individualized liquidity risk-management 
requirements established in Regulation YY to GECC beginning July 1, 
2015. The liquidity risk-management requirements of Regulation YY 
include requirements that the board of directors of a covered bank 
holding company approve an acceptable level of liquidity risk that the 
bank holding company may assume in connection with its operating 
strategies (liquidity risk tolerance), receive and review information 
from senior management regarding the company's compliance with the 
established liquidity risk tolerance, and approve and periodically 
review liquidity risk-management strategies, policies, and procedures 
established by senior management.\59\ Regulation YY requires senior 
management of a covered bank holding company to establish and implement 
liquidity risk-management strategies, policies, and procedures, 
approved by the company's board of directors; review and approve new 
products and business lines; and evaluate liquidity costs, benefits and 
risks related to new business lines and products.\60\ In addition, 
Regulation YY requires a covered bank holding company to establish and 
maintain procedures for monitoring collateral, legal entity exposures, 
and intraday liquidity risks, and requires an independent review of a 
covered bank holding company's liquidity risk-management processes and 
its liquidity stress-testing processes and assumptions.\61\
---------------------------------------------------------------------------

    \59\ 12 CFR 252.34(a).
    \60\ 12 CFR 252.34(c).
    \61\ 12 CFR 252.34(d), (h).
---------------------------------------------------------------------------

    Regulation YY also requires covered bank holding companies to 
produce comprehensive cash-flow projections that project cash flows 
arising from assets, liabilities, and off-balance sheet exposures over 
short-term and long-term horizons.\62\ In addition, a covered bank 
holding company must establish and maintain a contingency funding plan 
that sets forth strategies for addressing liquidity and funding needs 
during liquidity stress events.\63\
---------------------------------------------------------------------------

    \62\ 12 CFR 252.34(e).
    \63\ 12 CFR 252.34(f).
---------------------------------------------------------------------------

    The liquidity requirements in Regulation YY are designed to 
complement the requirements of the LCR rule. The internal liquidity 
stress-test requirements in Regulation YY provide a view of an 
individual firm under multiple scenarios and include assumptions 
tailored to the idiosyncratic aspects of a firm's liquidity risk 
profile, while the standardized measure of liquidity adequacy under the 
LCR is designed to facilitate a transparent assessment of a covered 
bank holding company's liquidity position under a standard stress 
scenario and to facilitate comparisons across firms.
    Finally, the Board also proposed to apply SR Letter 10-6, 
Interagency Policy Statement on Funding and Liquidity Risk Management 
(SR 10-6) to GECC, and to require compliance with the guidance outlined 
in that letter by July 1, 2015.\64\ SR 10-6 provides guidance on sound 
practices for managing the funding and liquidity risks of depository 
institutions. The guidance also explains the expectation that 
institutions manage liquidity risk using processes and systems that are 
commensurate with the institution's complexity, risk profile, and scope 
of operations.
---------------------------------------------------------------------------

    \64\ Supervision and Regulation Letter SR 10-6, Interagency 
Policy Statement on Funding and Liquidity Risk Management (March 17, 
2010) (SR 10-6), available at: https://www.federalreserve.gov/boarddocs/srletters/2010/sr1006.htm. SR 10-6 reiterates the process 
that institutions should follow to appropriately identify, measure, 
monitor, and control their funding and liquidity risk. In 
particular, the guidance re-emphasizes the importance of cash-flow 
projections, diversified funding sources, stress testing, a cushion 
of liquid assets, and a formal well-developed contingency funding 
plan as primary tools for measuring and managing liquidity risk.
---------------------------------------------------------------------------

    In comments on the proposed order, GECC argued that the Board 
should not apply intraday liquidity monitoring requirements, asserting 
that GECC's business mix does not result in high intraday liquidity 
volatility. GECC also argued that any intraday liquidity monitoring 
requirement should be applied only after an evaluation of whether such 
a requirement is necessary in light of GECC's liquidity profile and the 
costs required to develop and maintain such a monitoring system.
    In order to promote the resilience of GECC, improve its ability to 
withstand financial and economic stress, and mitigate the potential 
adverse effects on other financial firms and markets, the Board has 
determined to require GECC to manage its liquidity in a manner that is 
comparable to a bank holding company subject to Regulation YY and SR 
10-6.\65\ GECC, like a large bank holding company, is primarily a 
lender and lessor to commercial entities and consumers, and is 
substantially involved in the provision of credit in the United States. 
Similar to large bank holding companies, GECC is also an active 
participant in the capital markets and relies on wholesale funding, 
such as commercial paper held by institutional investors and committed 
lines of credit provided by large commercial banks, exposing the 
company to liquidity risks.
---------------------------------------------------------------------------

    \65\ See 12 CFR 252.34, .35.
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    The firm-specific liquidity risk management and stress testing 
requirements of Regulation YY would enhance the resilience of GECC and 
mitigate the potential risks to U.S. financial stability by helping to 
ensure that GECC develops the necessary risk management infrastructure 
to evaluate the liquidity risk profile of its operations on a 
continuing basis, including in stressed environments. The liquidity 
risk management and stress testing requirements of Regulation YY 
require each covered company to tailor its compliance framework to the 
particular size, complexity, structure, risk profile, and activities of 
the organization. Thus, in implementing these requirements, GECC would 
be expected to tailor its risk management framework to suit the 
company's liquidity risks.
    Intraday monitoring is an important liquidity risk management 
process that is designed to address the risk that a large banking 
organization is unable to receive or make critical payments, which can 
lead to systemic disruptions. A company's procedures for monitoring and 
managing intraday liquidity positions should, however, reflect in 
stringency and complexity the scope of operations of the company. 
Consistent with Regulation YY, under the final order, GECC may tailor 
its intraday liquidity monitoring procedures to its business mix and 
risk.
    In order to account for the effect that the divestitures proposed 
under the GECC reorganization plan will have on the liquidity needs and 
sources for GECC and the time required to establish the necessary 
monitoring systems, the Board has determined to defer these 
requirements until January 1, 2018.
6. Other Prudential Standards: Restrictions on Intercompany 
Transactions
    Section 165(b)(1)(B) of the Dodd-Frank Act allows the Board to 
establish additional enhanced prudential standards for nonbank 
financial companies supervised by the Board and for bank holding 
companies with assets of $50 billion or more.\66\ The Board proposed to 
apply as an enhanced prudential standard certain restrictions on 
transactions between GECC and its affiliated entities that are not 
under GECC's control. In particular, the Board proposed that GECC 
comply with the

[[Page 44121]]

requirements of section 23B of the Federal Reserve Act and the 
corresponding provisions of Regulation W (subpart F of 12 CFR part 223) 
in all transactions between GECC (or any of its subsidiaries) with any 
other affiliate, as if GECC (or any of its subsidiaries) were a 
``member bank'' and GE (or any of its subsidiaries other than GECC and 
subsidiaries of GECC) were an ``affiliate.'' \67\ This requirement has 
the effect of requiring that all transactions between GECC (or any of 
its subsidiaries) and an affiliate of GECC be on market terms or, if a 
market does not exist for the transaction, on terms that are at least 
as favorable to GECC as those in a transaction between GECC and an 
unaffiliated third party.
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    \66\ 12 U.S.C. 5365(b)(1)(B).
    \67\ 12 U.S.C. 371c-1; 12 CFR part 223, subpart F.
---------------------------------------------------------------------------

    GECC acknowledged that the proposed restriction on affiliate 
transactions was an appropriate safeguard that could protect GECC from 
conflicts of interest and inappropriate transfers of risk from GE to 
GECC. GECC requested, however, that the Board apply those requirements 
only on a prospective basis. GECC argued that retroactive application 
of these requirements to transactions that already exist between GECC 
and GE affiliates would disturb existing contractual relationships, and 
would be time-consuming, costly, and of limited benefit.
    The application of section 23B of the Federal Reserve Act to 
transactions between GECC and its affiliates is designed to enhance the 
safety and soundness of GECC and to reduce the risk of material 
financial distress at GECC by ensuring that GECC is not engaging in 
transactions with affiliates on terms unfavorable to GECC, or in 
transactions that would not have been conducted, but for the 
affiliation between the companies. The Board believes that ensuring the 
long-term safe and sound operation of GECC is served by requiring all 
affiliate transactions to comply with the requirements of section 23B 
of the Federal Reserve Act and the corresponding provisions of 
Regulation W. While the Board recognizes that there could be costs in 
conforming existing arrangements to section 23B, the costs exist only 
to the extent that GE and its affiliates have received terms in 
transactions with GECC that are not at least as favorable to GECC as 
would be available in the marketplace. At the same time, these 
transactions result in GECC providing a subsidy to GE or is affiliates, 
thereby increasing the cost and risk to GECC. Accordingly, the Board 
has determined to require that certain transactions that are 
outstanding between GECC and any of its affiliates on January 1, 2018, 
be conformed to the requirements of section 23B and all transactions 
between GECC and its affiliates initiated on or after that date be in 
conformance with section 23B.
7. Future Standards
    The Board continues to consider whether it would be appropriate to 
develop additional standards for nonbank financial companies supervised 
by the Board and large bank holding companies, and if it proposes to 
adopt additional standards, the Board will do so in a process that 
allows for public participation.\68\
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    \68\ For example, the Board's initial proposed rules to 
implement the requirements of section 165 and 166 of the Dodd-Frank 
Act included single-counterparty credit limits and early remediation 
requirements for the companies covered under sections 165 and 166 of 
the Dodd-Frank Act.
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    As noted above, if the Council rescinds its determination under 
section 113 of the Dodd-Frank Act that GECC should be subject to 
supervision by the Board and enhanced prudential standards, the 
enhanced prudential standards imposed by the Board order will no longer 
apply to GECC. No further action by the Board will be necessary to 
terminate the order's application to GECC or any successor. So long as 
GE or GECC controls a savings association, they are subject to the 
requirements and supervisory standards applicable under the Home 
Owners' Loan Act, as amended.

C. Reporting Requirements

    Section 161(a) of the Dodd-Frank Act authorizes the Board to 
require a nonbank financial company supervised by the Board, and any 
subsidiary thereof, to submit reports to the Board related to the 
financial condition of the company or subsidiary, systems of the 
company or subsidiary for monitoring and controlling financial, 
operating, and other risks, and the extent to which the activities and 
operations of the company or subsidiary pose a threat to the financial 
stability of the United States.\69\ The Board may also require reports 
in order to monitor compliance by the company or subsidiary with the 
requirements of Title I of the Dodd-Frank Act, which includes the 
enhanced prudential standards to which nonbank financial companies are 
subject.\70\
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    \69\ 12 U.S.C. 5361(a).
    \70\ Id.
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    Pursuant to this authority, the Board proposed to require GECC to 
file the reports identified below. Other than the FR Y-14 series 
reporting forms, the proposed order would have required GECC to file 
each of the reports identified below beginning on July 1, 2015. The 
Board proposed to require GECC to file the FR Y-14A on April 5, 2016, 
and the FR Y-14Q and Y-14M reports as of one calendar year before the 
as-of date of its first supervisory and company-run stress test under 
the Board's stress test rules. In comments on the proposed order, GECC 
requested that, for those subsidiaries that would be unwound or sold as 
part of the divestiture plan, GECC be permitted to defer the quarterly 
and annual reporting of standalone financial statements until the first 
quarter of 2018. As is discussed more fully below, the Board is 
adopting reporting requirements that align with the effective dates of 
the Phase I and Phase II Requirements to support the respective 
standards adopted as part of each phase.
1. Phase I Requirements
    Beginning on January 1, 2016, GECC must file the following reports 
with the Board (in accordance with the timelines set forth in the 
applicable instructions to each reporting form):
    a. FR Y-6 report (Annual Report of Holding Companies);
    b. FR Y-9C report (Consolidated Financial Statements for Holding 
Companies) and FR Y-9LP report (Parent Company Only Financial 
Statements for Large Holding Companies);
    c. FR Y-10 report (Report of Changes in Organizational Structure); 
and
    d. FR Y-11 report and FR Y-11S report (Financial Statements of U.S. 
Nonbank Subsidiaries of U.S. Holding Companies).
    GECC is already filing each of the reports listed above and must 
continue to file each of these reports in accordance with the timelines 
set forth in their respective reporting instructions for as long as 
GECC is supervised by the Board. The Board intends to confer with GECC 
on a case-by-case basis to identify any report schedules that may not 
be necessary for GECC to provide based on its risk profile, structure, 
activities, or other characteristics.\71\ In addition, if

[[Page 44122]]

GECC sells, distributes, or otherwise disposes of any of its 
subsidiaries during the applicable reporting period for a particular 
form, GECC should consult with the appropriate Reserve Bank to 
determine whether it is necessary to submit information regarding the 
subsidiary.
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    \71\ GECC is currently a savings and loan holding company 
supervised by the Board. So long as GECC remains a registered 
savings and loan holding company, GECC continues to be subject to 
all reporting requirements applicable to a savings and loan holding 
company. Consistent with section 161(a)(2) of the Dodd-Frank Act, 
the Board intends to confer with GECC as to whether the information 
requested in the required reports may be available from other 
sources, and, to the extent any reporting requirements overlap, GECC 
will not be subjected to duplicative reporting requirements as both 
a savings and loan holding company and a nonbank financial company 
supervised by the Board. 12 U.S.C. 5361(a)(2). In the event that 
GECC is deregistered as a savings and loan holding company by the 
Board, GECC would still be subject to the reporting requirements 
required in the final order.
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    The FR Y-6 (Annual Report of Holding Companies) is an annual 
information collection of financial data, an organization chart, 
verification of domestic branch data, and information about certain 
shareholders. The FR Y-9C (Consolidated Financial Statements for 
Holding Companies) and FR Y-9LP (Parent Company Only Financial 
Statements for Large Holding Companies) reports are standardized 
financial statements and consist of consolidated data from filers. The 
FR Y-9LP collects basic financial data on a consolidated, parent-only 
basis in the form of a balance sheet, an income statement, and 
supporting schedules relating to investments, cash flow, and certain 
memoranda items. The FR Y-10 (Report of Changes in Organizational 
Structure) is an event-generated information collection that captures 
changes to a filer's regulated investments and activities. The 
information in this report, in conjunction with the information in the 
FR Y-6, will capture the legal entity structure of GECC. The FR Y-11 
and FR Y-11S (Financial Statements of U.S. Nonbank Subsidiaries of U.S. 
Holding Companies) reports collect financial information for individual 
non-functionally regulated subsidiaries on a quarterly basis. These 
reports consist of a balance sheet and income statement; information on 
changes in equity capital, changes in the allowance for loan and lease 
losses, off-balance-sheet items, and loans; and a memoranda section. 
The information collected through the FR Y-11 and FR Y-11S reports 
serves to identify material legal entities.
    The Board expects to use the information collected through reports 
to monitor the financial condition and activities of GECC. This 
information will also be used by the Board to monitor the extent to 
which the activities and operations of GECC pose a threat to the 
financial stability of the United States and GECC's compliance with the 
requirements of Title I of the Dodd-Frank Act, the enhanced prudential 
standards that are imposed on GECC, and other relevant law. In 
addition, this information will be used to capture the legal entity 
structure of GECC and monitor progress by GECC in implementing its 
divestiture plan. The Board also expects to use this information to 
monitor intercompany transactions.
2. Phase II Requirements
    Except as otherwise noted below, beginning on January 1, 2018, GECC 
must file the following reports with the Board (in accordance with the 
timelines set forth in the applicable instructions to each reporting 
form):
    a. FR Y-14A, FR Y-14Q, and FR Y-14M reports (Capital Assessments 
and Stress Testing);
    b. FR Y-15 report (Banking Organization Systemic Risk Report);
    c. FR 2314 and FR 2314S reports (Financial Statements of Foreign 
Subsidiaries of U.S. Banking Organizations);
    d. FFIEC 009 report (Country Exposure Report) and FFIEC 009a report 
(Country Exposure Information Report); and
    e. FFIEC 102 report (Market Risk Regulatory Report for Institutions 
Subject to the Market Risk Capital Rule).\72\
---------------------------------------------------------------------------

    \72\ GECC would become subject to the FFIEC 102 report in the 
event the company meets the aggregate trading assets and trading 
liabilities threshold for application of the Board's market risk 
capital rule. See 12 CFR 217.201(b).
---------------------------------------------------------------------------

    Submitted as part of the Board's CCAR and stress testing processes, 
the FR Y-14A, FR Y-14M, and FR Y-14Q (Capital Assessments and Stress 
Testing) reports collect detailed financial information, including 
quantitative projections of balance sheet, income, losses, and capital 
across a range of macroeconomic scenarios and qualitative information 
on methodologies used to develop internal projections of capital across 
scenarios, with certain projections and information collected on a 
semi-annual basis. The FR Y-14A report is an annual collection of 
quantitative projections of balance sheet, income, losses, and capital 
across a range of macroeconomic scenarios and qualitative information 
on methodologies used to develop internal projections of capital across 
scenarios, with certain projections and information collected on a 
semi-annual basis. The FR Y-14M report is a monthly submission that 
comprises three loan- and portfolio-level collections of data 
concerning domestic residential mortgages, domestic home equity loans 
and home equity lines of credit, and domestic credit card loans, and 
one detailed address-matching collection to supplement two of the loan- 
and portfolio-level collections. The FR Y-14Q report is a quarterly 
collection of granular data on various asset classes and pre-provision 
net revenue for the reporting period, including information pertaining 
to securities, retail loans, wholesale loans, mortgage servicing 
rights, regulatory capital instruments, operational risk, and trading, 
private equity, and other fair-value assets. Collectively, the Y-14 
data is used to assess the capital adequacy of filers using forward-
looking projections of revenue and losses, and to support supervisory 
stress test models and continuous monitoring efforts. GECC is required 
to file its first FR Y-14A submission on April 5, 2018, as part of its 
capital plan. In addition, GECC is required to submit its first FR Y-
14Q and Y-14M reports by December 31, 2017, which is one calendar year 
before the as of date of its first supervisory and company-run stress 
test under the Board's stress test rules. The FR Y-15 report (Banking 
Organization Systemic Risk Report) collects consolidated systemic risk 
data. The FR 2314 and FR 2314S (Financial Statements of Foreign 
Subsidiaries of U.S. Banking Organizations) reports collect financial 
information for non-functionally regulated direct or indirect foreign 
subsidiaries on a quarterly or annual basis. The FR 2314 and FR 2314S 
reports consist of a balance sheet and income statement; information on 
changes in equity capital, changes in the allowance for loan and lease 
losses, off-balance-sheet items, and loans; and a memoranda section. 
The FFIEC 009 (Country Exposure Report) and FFIEC 009a (Country 
Exposure Information Report) reports are quarterly information 
collections currently submitted for countries in which GECC has $30 
million or more in claims on residents of foreign countries. The FFIEC 
009 collects detailed information on the distribution, by country, of 
claims on local residents held by GECC. The FFIEC 009a is a supplement 
to the FFIEC 009 that provides specific information about GECC's 
exposures to particular countries. This information may be used to 
analyze the extent to which GECC's credit exposures pose a threat to 
the financial stability of the United States.
    The FFIEC 102 (Market Risk Regulatory Report for Institutions 
Subject to the Market Risk Capital Rule) report is designed to 
implement the reporting requirements for institutions that are subject 
to the federal banking agencies' market risk capital rule under the 
revised capital framework.\73\ The

[[Page 44123]]

reports are quarterly information collections used to assess the 
reasonableness and accuracy of a market risk institution's calculation 
of its minimum capital requirements under the market risk capital rule 
and to evaluate such an institution's capital in relation to its risks. 
Although GECC would not currently be subject to the Board's market risk 
capital rule because it does not meet the applicable aggregate trading 
assets and trading liabilities thresholds, the order requires GECC to 
submit the FFIEC 102 as a Phase II Requirement in order to determine 
whether GECC becomes subject to the Board's market risk capital rule.
---------------------------------------------------------------------------

    \73\ See 12 CFR part 217, subpart F. The Federal Financial 
Institutions Examination Council (FFIEC) is a formal interagency 
body empowered to prescribe uniform principles, standards, and 
report forms for the federal examination of financial institutions 
by the Board, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, the Office of the Comptroller 
of the Currency, and the Consumer Financial Protection Bureau and to 
make recommendations to promote uniformity in the supervision of 
financial institutions.
---------------------------------------------------------------------------

    The Board expects to use the information collected in these reports 
to assess GECC's internal assessments of its capital adequacy under a 
stressed scenario, and to conduct the Federal Reserve's supervisory 
stress tests that assess GECC's ability to withstand stress in a manner 
consistent with bank holding companies subject to the Board's capital 
plan and stress testing rules. In addition, this information will be 
used to support ongoing monitoring of changes in GECC's risk profile 
and composition. The data from the reports regarding foreign activities 
will be used to identify current and potential problems at the foreign 
subsidiaries of GECC and to monitor their activities. The information 
collected through these reports also will allow the Federal Reserve and 
GECC to monitor exposures to counterparties, the types of claim being 
reported, and credit derivative exposure.

III. Paperwork Reduction Act

    Certain provisions of the Board's final order contain ``collection 
of information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the Board 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 Board reviewed the final order under the 
authority delegated to the Board by OMB. The Board received no comments 
on the PRA section of the proposed order.
    The final order contains reporting requirements subject to the PRA 
and would require GECC to submit the following reporting forms in the 
same manner as a bank holding company:
    (1) Country Exposure Report and Country Exposure Information Report 
(FFIEC 009 and FFIEC 009a; OMB No. 7100-0035);
    (2) Market Risk Regulatory Report for Institutions Subject to the 
Market Risk Capital Rule (FFIEC 102; OMB No. 7100-0365);
    (3) Financial Statements of Foreign Subsidiaries of U.S. Banking 
Organizations; and Abbreviated Financial Statements of Foreign 
Subsidiaries of U.S. Banking Organizations (FR 2314 and FR 2314S; OMB 
No. 7100-0073);
    (4) Annual Report of Holding Companies (FR Y-6; OMB No. 7100-0297);
    (5) Consolidated Financial Statements for Holding Companies (FR Y-
9C; OMB No. 7100-0128);
    (6) Parent Company Only Financial Statements for Large Holding 
Companies (FR Y-9LP; OMB No. 7100-0128);
    (7) Report of Changes in Organizational Structure (FR Y-10; OMB No. 
7100-0297);
    (8) Financial Statements of U.S. Nonbank Subsidiaries of U.S. 
Holding Companies; and Abbreviated Financial Statements of U.S. Nonbank 
Subsidiaries of U.S. Holding Companies (FR Y-11 and FR Y-11S; OMB No. 
7100-0244);
    (9) Capital Assessments and Stress Testing (FR Y-14A, FR Y-14M, and 
FR Y-14Q; OMB No. 7100-0341); and
    (10) Banking Organization Systemic Risk Report (FR Y-15; OMB No. 
7100-0352).
    The final order contains reporting, recordkeeping, or disclosure 
requirements subject to the PRA and would require GECC to comply with 
the following information collections in the same manner as a bank 
holding company:
    (1) Funding and Liquidity Risk Management Guidance (FR 4198; OMB 
No. 7100-0326). See the Enhanced Prudential Standards for Bank Holding 
Companies and Foreign Banking Organizations final rule (79 FR 17239) 
published on March 27, 2014.
    (2) Risk-Based Capital Standards: Advanced Capital Adequacy 
Framework Information Collection (FR 4200; OMB No. 7100-0313). See the 
Regulatory Capital Rules final rule (78 FR 62017) published on October 
11, 2013, and the Regulatory Capital Rules final rule (79 FR 57725) 
published on September 26, 2014.
    (3) Risk-Based Capital Guidelines: Market Risk (FR 4201; OMB No. 
7100-0314). See the Regulatory Capital Rules final rule (78 FR 62017) 
published on October 11, 2013.
    (4) Recordkeeping and Reporting Requirements Associated with 
Regulation Y (Capital Plans) (Reg. Y-13; OMB No. 7100-0342). See the 
Capital Plans final rule (76 FR 74631) published on December 1, 2011, 
the Supervisory and Company-Run Stress Test Requirements for Covered 
Companies final rule (77 FR 62377) published on October 12, 2012, and 
the Capital Plan and Stress Test Rules final rule (79 FR 64025) 
published on October 27, 2014.
    (5) Reporting and Recordkeeping Requirements Associated with 
Regulation WW (Liquidity Coverage Ratio: Liquidity Risk Measurement, 
Standards, and Monitoring) (Reg. WW; OMB No. 7100-0367). See the 
Liquidity Coverage Ratio final rule (79 FR 61439) published on October 
10, 2014.
    (6) Reporting, Recordkeeping, and Disclosure Requirements 
Associated with Regulation YY (Enhanced Prudential Standards) (Reg. YY; 
OMB No. 7100-0350). See the Supervisory and Company-Run Stress Test 
Requirements for Covered Companies final rule (77 FR 62377) published 
on October 12, 2012, and the Enhanced Prudential Standards for Bank 
Holding Companies and Foreign Banking Organizations final rule (79 FR 
17239) published on March 27, 2014.
    The Board has a continuing interest in the public's opinions of 
collections of information. At any time, comments regarding the burden 
estimate, or any other aspect of this collection of information, 
including suggestions for reducing the burden, may be sent to: 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551; and to the Office of Management and 
Budget, Paperwork Reduction Project, Washington, DC 20503.

IV. Final Order

FEDERAL RESERVE SYSTEM

General Electric Capital Corporation Norwalk, Connecticut
Order Imposing Enhanced Prudential Standards and Reporting Requirements

I. Background

    In July 2013, the Financial Stability Oversight Council (Council) 
determined that material financial distress at General Electric Capital 
Corporation (GECC) could pose a threat to U.S. financial stability and 
that GECC should be subject to supervision by the Board of Governors of 
the Federal Reserve

[[Page 44124]]

System (Board) and to enhanced prudential standards.\1\ The Council's 
basis for its final determination noted GECC's interconnections with 
financial intermediaries through its financing activities and its 
funding model as well as a large portfolio of on-balance-sheet assets 
comparable to those of the largest U.S. bank holding companies. In 
particular, the Council noted GECC's significant use of wholesale 
funding, including short-term wholesale funding (commercial paper), and 
use of long-term debt and securitization debt, which could expose other 
large financial institutions to GECC's distress, among other reasons 
for its determination.\2\ GECC became subject to the Board's 
supervision immediately upon the Council's final determination.
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    \1\ Financial Stability Oversight Council, Basis of the 
Financial Stability Oversight Council's Final Determination 
Regarding General Electric Capital Corporation, Inc. (July 8, 2013) 
(GECC Determination). The GECC Determination did not conclude that 
GECC was experiencing material financial distress. Rather, 
consistent with the statutory standard for determinations by the 
Council under section 113 of the Dodd-Frank Act, the Council 
determined that material financial distress at GECC, if it were to 
occur, could pose a threat to U.S. financial stability.
    \2\ Id., at pp. 2, 6-8.
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    Since July 2013, the Board's supervisory program for GECC has been 
based on previously published supervisory guidance for consolidated 
supervision of large financial institutions (SR 12-17).\3\ The SR 12-17 
framework provides core areas of focus (capital, liquidity, governance, 
and recovery and resolution) and supervisory expectations that enhance 
the resiliency of large financial institutions and reduce the impact on 
the financial system and the broader economy of a large financial 
institution's failure or material financial distress. Consistent with 
the SR 12-17 framework, the supervision of GECC has focused on capital 
and liquidity planning and positions, corporate governance, recovery 
planning, and resolution planning. The Board also maintains a GECC-
dedicated supervisory team that regularly meets with senior management 
and the boards of directors of General Electric Company (GE) and GECC, 
reviews management information systems, and engages in a broad range of 
continuous monitoring efforts.
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    \3\ See Supervision and Regulation Letter 12-17, Consolidated 
Supervision Framework for Large Financial Institutions (December 12, 
2012) (SR 12-17), available at: https://www.federalreserve.gov/bankinforeg/srletters/sr1217.htm.
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    In April 2015, GE and GECC announced plans to sell or otherwise 
distribute much of GECC's commercial lending and leasing operations and 
all of its consumer lending businesses, including the entirety of its 
U.S. depository institution operations. GECC plans to retain only those 
businesses directly related to GE's core industrial businesses.\4\ The 
divestitures are subject to a detailed plan with a definitive timeline. 
GECC has begun executing the plan and has made demonstrable progress. 
GE also announced an intent to further reduce GECC's use of commercial 
paper to $5 billion by the end of 2015 and amended its income 
maintenance agreement with GECC to guarantee all tradable senior and 
subordinated debt securities and all commercial paper issued or 
guaranteed by GECC.\5\ The Board is closely monitoring the asset sales 
and other proposed changes under the divestiture and reorganization 
plans and any impact they may have on GECC's systemic footprint and the 
Board's supervision of GECC and its subsidiaries.
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    \4\ GE Press Release, April 10, 2014 (GE Announcement), 
available at: https://www.genewsroom.com/press-releases/ge-create-simpler-more-valuable-industrial-company-selling-most-ge-capital-assets.
    \5\ Id.
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    Related to the divestiture plan and other announced changes, GECC 
has indicated that it will seek rescission of the Council's designation 
in 2016. In light of the reorganization plan currently underway at GECC 
and the amount of resources and systems necessary to implement enhanced 
prudential standards, the Board is implementing the enhanced prudential 
standards in two phases--Phase I and Phase II.
    In Phase I, beginning January 1, 2016, in order to ensure that GECC 
has adequate capital and liquidity to support its current operations 
and mitigate the risk to financial stability that may occur if GECC 
were to experience material financial distress while implementing its 
divestiture plan, GECC shall comply with certain capital, liquidity, 
and reporting standards (Phase I Requirements). The Phase I 
Requirements require GECC to comply with the standardized risk-based 
capital requirements and the balance-sheet leverage requirement in the 
Board's regulatory capital framework, as described further below, as 
well as with the liquidity coverage ratio rule (LCR rule) applicable to 
bank holding companies with $250 billion or more in total consolidated 
assets or $10 billion or more in on-balance-sheet foreign exposures 
(advanced approaches banking organizations). GECC is also required to 
file certain reports that support the Phase I Requirements and the 
Board's supervision of GECC.
    In Phase II, beginning January 1, 2018, GECC shall comply with 
certain additional standards, including risk management, capital, 
capital planning, stress testing, liquidity risk management, and 
restrictions on intercompany transactions (Phase II Requirements). GECC 
is required to file certain additional reports with the Board, 
generally beginning January 1, 2018, that support the Phase II 
requirements.

II. Enhanced prudential standards

a. Phase I Requirements

    GECC shall comply with the following requirements beginning January 
1, 2016.

Capital

    To ensure that GECC continues to maintain sufficient capital and 
has internal processes for assessing its capital adequacy that 
appropriately account for the company's risks, GECC shall comply with 
the Board's capital framework, set forth in 12 CFR part 217 (Regulation 
Q), including the deductions required under 12 CFR 248.12, as 
applicable, as if GECC were a bank holding company that calculates 
risk-weighted assets solely under the standardized approach (subpart D 
to 12 CFR part 217), including the leverage ratio in 12 CFR 
217.10(b)(4).
    At this time, GECC's activities, risk profile, and balance sheet 
are similar to those of large bank holding companies supervised by the 
Board. Accordingly, requiring GECC to comply with the Board's 
Regulation Q will help ensure that GECC holds capital that is 
commensurate with its risk profile and activities, can meet its 
obligations to creditors and other counterparties, can continue to 
serve as a financial intermediary through periods of financial and 
economic stress, and meets capital standards that help prevent or 
mitigate the risk to U.S. financial stability that could arise from the 
material financial distress or failure of GECC.

Liquidity

    To ensure that GECC maintains sufficient liquidity to absorb shocks 
it may experience under stress, GECC shall comply with the LCR rule, 
set forth in 12 CFR part 249, as a covered nonbank company (as that 
term is defined in 12 CFR 249.3), pursuant to 12 CFR 249.1(b)(1)(iv) 
and 12 CFR 249.3, subject to the transition periods set forth under 12 
CFR 249.50(b). GECC shall calculate and maintain an LCR of at least 90 
percent from January 1, 2016, to December 31, 2016, and calculate and

[[Page 44125]]

maintain an LCR of at least 100 percent thereafter. Until January 1, 
2018, GECC may calculate its LCR monthly on each calculation date that 
is the last business day of the applicable calendar month, after which 
time it must calculate its LCR daily.\6\
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    \6\ See 12 CFR part 249.
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    The application of the LCR rule to GECC will help promote the 
resilience of the short-term liquidity risk profile of GECC, thereby 
improving its ability to measure and manage liquidity risk and to 
absorb shocks arising from financial and economic stress. Because the 
LCR rule applies cash outflow and inflow rates that are based on the 
particular risk profile and activities of companies like GECC, the LCR 
requirements are tailored to and appropriate for GECC's activities, 
balance sheet, and risk profile. The application of the LCR rule will 
help ensure that GECC holds a sufficient amount of high-quality liquid 
assets based on its activities to meet its net cash outflows over a 30-
calendar-day stress period.

b. Phase II Requirements

    GECC shall comply with the following requirements beginning January 
1, 2018, except as may be otherwise noted below.

Risk-Management and Risk-Committee Standards

    To reduce the likelihood of GECC experiencing material financial 
distress and to promote financial stability, beginning January 1, 2018, 
GECC shall comply with the risk-committee and risk-management standards 
under section 252.33 of the Board's Regulation YY as though it were a 
bank holding company with $50 billion or more in total consolidated 
assets.\7\ In addition, beginning January 1, 2018, GECC shall comply 
with the following additional risk-management standards: (1) GECC must 
maintain a board of directors with a majority of directors who do not 
hold management positions at either GE or GECC (independent directors); 
(2) the chair of GECC's board of directors must be an independent 
director; and (3) all members of the risk committee of the GECC board 
of directors, established pursuant to Regulation YY, must be 
independent directors. The risk-management standards in Regulation YY 
require a company subject to its provisions to implement a risk-
management framework that is commensurate with the company's capital 
structure, risk profile, complexity, activities, size, and other 
appropriate risk-related factors, and GECC is expected to tailor its 
risk-management framework accordingly.
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    \7\ 12 CFR 252.33.
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    Application of the risk-management standards in Regulation YY and 
the risk-management guidance and supervisory expectations for nonbank 
financial companies supervised by the Board \8\ will strengthen GECC's 
ability to prevent and respond to material distress or failure and 
promote financial stability. The additional measures related to GECC's 
board of directors and risk committee will help ensure that GECC's 
independent directors are able to focus appropriate attention on the 
unique businesses and complexities of GECC, that GECC's operations are 
safe and sound, and that perspectives of qualified individuals 
independent of the management of GE and GECC have a strong voice in the 
governance of GECC.
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    \8\ See SR 12-17, supra note 3.
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Risk-Based and Leverage Capital

    Beginning January 1, 2018, GECC shall comply with the Board's 
capital framework, set forth in Regulation Q, including the deductions 
required under 12 CFR 248.12, as applicable, as if GECC were a bank 
holding company that is an advanced approaches Board-regulated 
institution and a covered BHC (as each term is defined under 12 CFR 
217.2); provided, however, that notwithstanding 12 CFR 217.100(b), GECC 
is not required to comply with subpart E of 12 CFR part 217 or to 
calculate an advanced measure for market risk under 12 CFR 217.204.\9\ 
To strengthen GECC's ability to remain a going concern during times of 
stress and to minimize the likelihood that distress at GECC would 
contribute to financial instability, GECC shall maintain a 
supplementary leverage ratio in excess of 4 percent (eSLR) in order to 
avoid restrictions on capital distributions and discretionary bonus 
payments to executive officers.\10\
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    \9\ Pursuant to Regulation Q, GECC's computation of capital 
shall take into account any off-balance-sheet activities of the 
company. See 12 CFR 217.10 and 217.33; see also 12 U.S.C. 5365(k).
    \10\ 12 CFR 217.11(a)(2)(v).
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    The enhanced capital framework adopted for advanced approaches bank 
holding companies, including the requirement to recognize most elements 
of accumulated other comprehensive income in regulatory capital, is an 
appropriate capital framework for GECC because of the similarities in 
its activities, size, risk, and exposures to those of large bank 
holding companies. The 4 percent eSLR is intended to reflect GECC's 
smaller systemic footprint compared to other banking organizations 
subject to a 5 percent eSLR, while still minimizing leverage at GECC 
and reducing the likelihood that problems at GECC would cause it to 
fail in a manner that affects financial stability. The maintenance of a 
strong base of capital by GECC is particularly important because a 
capital shortfall has the potential to result in significant adverse 
economic consequences and to contribute to systemic distress.

Capital Planning

    For the capital plan cycle beginning January 1, 2018, GECC shall 
comply with the capital plan rule set forth in 12 CFR 225.8 (capital 
plan rule) as a nonbank financial company supervised by the Board (as 
that term is defined in 12 CFR 225.8(d)(9)), pursuant to 12 CFR 
225.8(b)(1)(iv).
    The recent financial crisis highlighted a need for certain 
financial institutions, such as GECC, to incorporate into their capital 
planning forward-looking assessments of capital adequacy under stressed 
conditions. The capital plan rule will help ensure that GECC has robust 
systems and processes that incorporate forward-looking projections of 
revenue and losses to monitor and maintain its internal capital 
adequacy.
    The capital plan rule requires GECC to submit an annual capital 
plan to the Board describing its planned capital actions and 
demonstrating its ability to meet a 5 percent tier 1 common capital 
ratio and to maintain capital ratios above the Board's minimum 
regulatory capital requirements under both baseline and stressed 
conditions over a forward-looking planning horizon.\11\ GECC's capital 
plan must include an assessment of the company's sources and expected 
uses of capital that reflects the size, complexity, risk profile, and 
scope of operations, assuming both expected and stressed conditions. In 
addition, GECC must describe its process for assessing capital adequacy 
and its capital policy and must provide a discussion of any expected 
changes to the company's business plan that are likely to have a 
material impact on its capital adequacy.
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    \11\ See 12 CFR 225.8.
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    Under the capital plan rule, the Board will annually evaluate 
GECC's capital adequacy and capital planning practices and the 
comprehensiveness of the capital plan, including the strength of the 
underlying analysis. The Comprehensive Capital Analysis and Review 
(CCAR) is the Board's supervisory process for reviewing capital plans 
submitted by companies under the capital plan rule. As part of CCAR, 
the Board conducts a quantitative assessment of each company's capital 
adequacy under an

[[Page 44126]]

assumption of stressed conditions and conducts a qualitative assessment 
of the company's internal capital planning practices, each of which can 
provide a basis on which the Board may object to a company's capital 
plan.
    The Federal Reserve conducts its quantitative assessment of a 
company's capital plan based on the supervisory stress test conducted 
under the Board's rules implementing the stress tests required under 
the Dodd-Frank Act combined with the company's planned capital actions 
under the baseline scenario. This assessment will help determine 
whether GECC would be capable of meeting supervisory expectations for 
its regulatory capital ratios even if stressed conditions emerge and 
the company does not reduce planned capital distributions. The Board 
will evaluate GECC's risk-identification, risk-measurement, and risk-
management practices supporting the capital planning process, including 
estimation practices used to produce stressed loss, revenue, and 
capital ratios, as well as the governance and controls around these 
practices. In reviewing GECC's capital plan, the Board will consider 
the comprehensiveness of the capital plan, the reasonableness of the 
company's assumptions and analysis underlying the capital plan, and the 
company's methodologies for reviewing the robustness of its capital 
adequacy process.

Stress Testing

    To ensure that GECC develops the necessary systems and processes to 
evaluate its capital adequacy on an ongoing basis, starting with the 
stress testing cycle beginning on January 1, 2019, GECC shall comply 
with the stress testing requirements set forth in subparts E and F of 
Regulation YY (12 CFR part 252, subparts E and F) (together, the stress 
test rules) as a nonbank financial company supervised by the Board (as 
that term is defined in 12 CFR 252.42(i) and 252.52(j), respectively), 
pursuant to 12 CFR 252.43(a)(1)(iii) and 12 CFR 252.53(a)(1)(iii).
    The Board is applying its stress test rules to GECC in the same 
manner that it applies them to large bank holding companies due to the 
similarity in activities, risk profiles, and balance sheets between 
GECC and large bank holding companies. Moreover, because the Board's 
supervisory stress tests are conducted on the basis of standardized 
scenarios and capital assumptions, application of the Board's stress 
test rules to GECC allows the Board to compare GECC's capital adequacy 
against that of large bank holding companies that have comparable 
activities, risk profiles, and balance sheets. The stress tests 
conducted under the Board's stress test rules are complementary to the 
Board's review of GECC's capital plan in CCAR.

Liquidity

    Beginning January 1, 2018, GECC shall comply with the liquidity 
requirements, set forth in sections 252.34 and 252.35 of the Board's 
Regulation YY,\12\ as though it were a bank holding company with $50 
billion or more in total consolidated assets. GECC shall also comply 
with the Board's supervisory guidance on funding and liquidity risk 
management (SR 10-6).\13\ The liquidity risk management and stress 
testing requirements of Regulation YY complement the LCR requirements 
and require a company subject to its provisions to tailor compliance to 
the company's size, complexity, structure, risk profile, and 
activities. In complying with Regulation YY, GECC is expected to tailor 
its liquidity risk-management framework to suit the organization's 
structure. Additionally, as discussed above, GECC will be required to 
calculate its LCR daily beginning January 1, 2018.
---------------------------------------------------------------------------

    \12\ 12 CFR 252.34 and 252.35.
    \13\ Board of Governors of the Federal Reserve System, Division 
of Banking Supervision and Regulation (2010), ``Interagency Policy 
Statement on Funding and Liquidity Risk Management,'' Supervision 
and Regulation Letter SR 10-6 (March 17, 2010); 75 FR 13656 (March 
22, 2010); available at: https://www.federalreserve.gov/boarddocs/srletters/2010/sr1006.pdf.
---------------------------------------------------------------------------

    GECC, like a large bank holding company, is primarily a lender and 
lessor to commercial entities and consumers and is substantially 
involved in the provision of credit in the United States. Similar to 
large bank holding companies, GECC is also an active participant in the 
capital markets and relies on wholesale funding, such as commercial 
paper, exposing the company to liquidity risks. The Board is requiring 
GECC to manage its liquidity in a manner that is comparable to a bank 
holding company subject to the LCR rule, Regulation YY, and SR 10-6 to 
ensure that GECC has sufficient liquidity to meet outflows during a 
period of significant financial stress, to improve its ability to 
withstand financial and economic stress, and to mitigate the potential 
adverse effects on other financial firms and markets.\14\
---------------------------------------------------------------------------

    \14\ See 12 CFR 252.34 and 252.35.
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Restrictions on Intercompany Transactions

    Beginning January 1, 2018, GECC shall comply with the requirements 
of section 23B of the Federal Reserve Act and the corresponding 
provisions of Regulation W (12 CFR part 223, subpart F) \15\ as if GECC 
(or any of its subsidiaries) were a member bank and GE (or any of its 
subsidiaries other than GECC and subsidiaries of GECC) were an 
affiliate (as each term is defined in section 23B of the Federal 
Reserve Act and Regulation W) for all transactions:
---------------------------------------------------------------------------

    \15\ 12 U.S.C. 371c-1; 12 CFR part 223, subpart F.
---------------------------------------------------------------------------

    1. Described in 12 U.S.C. 371c(b)(7)(A) or (E) that existed prior 
to January 1, 2018, and remain outstanding on or after January 1, 2018; 
and
    2. Described in 12 U.S.C. 371c-1(a)(2) that occur on or after 
January 1, 2018.
    This standard does not apply to any transaction between GECC and 
any person unaffiliated with GECC involving proceeds that are used for 
the benefit of, or transferred to, an affiliate of GECC, which would 
otherwise be a covered transaction under section 23A(a)(2) of the 
Federal Reserve Act and section 223.16 of Regulation W.\16\
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    \16\ 12 U.S.C. 371c(a)(2); 12 CFR 223.16.
---------------------------------------------------------------------------

Future Standards

    Nothing in this order limits the Board's authority to impose 
additional enhanced prudential standards on GECC in the future. The 
Board reserves the right to modify or supplement these standards, if 
appropriate, to ensure the safe and sound operation of GECC or to 
promote financial stability.

c. Reporting \17\
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    \17\ Reporting requirements are adopted pursuant to section 
161(a) of the Dodd-Frank Act. 12 U.S.C. 5361(a).
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Phase I Requirements

    Beginning on January 1, 2016, GECC shall file the following reports 
with the Board (in accordance with the timelines set forth in the 
applicable instructions to each reporting form):
    a. FR Y-6 report (Annual Report of Holding Companies);
    b. FR Y-9C report (Consolidated Financial Statements for Holding 
Companies) and FR Y-9LP report (Parent Company Only Financial 
Statements for Large Holding Companies);
    c. FR Y-10 report (Report of Changes in Organizational Structure); 
and
    d. FR Y-11 and FR Y-11S reports (Financial Statements of U.S. 
Nonbank Subsidiaries of U.S. Holding Companies).

Phase II Requirements

    Except as otherwise noted below, beginning on January 1, 2018, GECC 
shall file the following reports with the Board (in accordance with the 
timelines

[[Page 44127]]

set forth in the applicable instructions to each reporting form):
    a. FR Y-14A, FR Y-14Q, and FR Y-14M reports (Capital Assessments 
and Stress Testing);
    b. FR Y-15 report (Banking Organization Systemic Risk Report);
    c. FR 2314 and FR 2314S reports (Financial Statements of Foreign 
Subsidiaries of U.S. Banking Organizations);
    d. FFIEC 009 report (Country Exposure Report) and FFIEC 009a report 
(Country Exposure Information Report); and
    e. FFIEC 102 report (Market Risk Regulatory Report for Institutions 
Subject to the Market Risk Capital Rule).\18\
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    \18\ GECC shall become subject to the FFIEC 102 report in the 
event the company meets the aggregate trading assets and trading 
liabilities threshold for application of the Board's market risk 
capital rule. See 12 CFR 217.201(b).
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    The FR Y-14Q and Y-14M reports support the stress testing standard 
and must be filed by December 31, 2017. Likewise the FR Y-14A report 
supports capital planning and must be filed by April 5, 2018, as part 
of the capital plan.
    The Board intends to confer with GECC to determine whether GECC 
should modify any reporting schedules that may not be necessary for 
GECC to provide, based on its profile, structure, activities, risks, or 
other characteristics. In addition, if GECC sells, distributes, or 
otherwise disposes of any of its subsidiaries during the applicable 
reporting period for a particular form, GECC should consult with the 
Reserve Bank to determine whether it is necessary to submit information 
regarding the subsidiary.

III. Other requirements

    GECC remains subject to a number of other statutory and regulatory 
requirements and the Board's existing supervisory framework, 
notwithstanding the application of enhanced prudential standards 
implemented through this order pursuant to section 165 of the Dodd-
Frank Act. Nothing in this order limits the applicability of those 
requirements, rules, and authorities. These other requirements include, 
but are not limited to, the following matters:

Examinations

    Pursuant to section 161(b) of the Dodd-Frank Act, the Board has 
examination authority over nonbank financial companies supervised by 
the Board, including GECC.\19\ This examination authority is to inform 
the Board of (A) the nature of the operations and financial condition 
of the company and its subsidiaries; (B) the financial, operational, 
and other risks of the company and its subsidiaries that may pose a 
threat to the safety and soundness of the company or its subsidiaries 
or to the financial stability of the United States; (C) the systems for 
monitoring and controlling such risk; and (D) compliance by the company 
or its subsidiaries with Title I of the Dodd-Frank Act.
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    \19\ 12 U.S.C. 5361(b).
---------------------------------------------------------------------------

Resolution Planning

    Pursuant to section 165(d) of the Dodd-Frank Act, all nonbank 
financial companies supervised by the Board shall report periodically 
to the Board the plan of such company for rapid and orderly resolution 
in the event of material financial distress or failure (Resolution 
Plan).\20\ As a nonbank financial company supervised by the Board, GECC 
is required to submit a Resolution Plan for review by the Board and the 
Federal Deposit Insurance Corporation (FDIC).\21\ The Resolution Plan 
must describe GECC's strategy for rapid and orderly resolution under 
the U.S. bankruptcy code in the event of material financial distress or 
failure of the company.
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    \20\ 12 U.S.C. 5365(d). See 12 CFR part 243.
    \21\ GECC was required to submit its initial Resolution Plan to 
the Board by July 1, 2014, and did so. GECC must file subsequent 
Resolution Plan submissions by December 31 of each year. The Board 
anticipates providing feedback and guidance to GECC prior to the 
submission of its next Resolution Plan.
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Single-Counterparty Credit Limits

    Pursuant to section 165(e) of the Dodd-Frank Act, the Board has 
proposed standards that limit single-counterparty credit exposure.\22\ 
The Board continues to develop single-counterparty credit limits and 
will in the future prescribe limits that may apply to GECC.
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    \22\ 12 U.S.C. 5365(e). See 77 FR 594, 612 (January 5, 2012) 
(proposing single-counterparty credit limits pursuant to section 
165(e) of the Dodd-Frank Act); 79 FR 17240, 17243 (March 27, 2014) 
(indicating that the Board continues to study and develop single-
counterparty credit limits). The Board has previously indicated that 
it will coordinate development of credit exposure reports pursuant 
to section 165(d)(2) of the Dodd-Frank Act, 12 U.S.C. 5365(d)(2), 
with the single-counterparty credit exposure limits. See 76 FR 
67323, 67327 (November 1, 2011).
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Acquisitions of Financial Companies

    Pursuant to section 163(b) of the Dodd-Frank Act, nonbank financial 
companies supervised by the Board, including GECC, shall not acquire 
direct or indirect ownership or control of any voting shares of any 
company (other than an insured depository institution) that is engaged 
in activities described in section 4(k) of the BHC Act having total 
consolidated assets of $10 billion or more without providing prior 
written notice to the Board.\23\
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    \23\ 12 U.S.C. 5363(b). Pursuant to section 163(b)(2) of the 
Dodd-Frank Act, the prior-notice requirement does not apply to the 
acquisition of shares that would qualify for the exemptions in 
section 4(c) or section 4(k)(4)(E) of the BHC Act. See 12 U.S.C. 
5363(b)(2).
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Concentration Limits on Large Financial Companies

    Pursuant to section 622 of the Dodd-Frank Act (which amended the 
Bank Holding Company Act of 1956 (BHC Act) to add a new section 14), 
GECC is prohibited from merging or consolidating with, or acquiring, 
another company if the resulting company's liabilities upon 
consummation would exceed 10 percent of the aggregate liabilities of 
all financial companies.\24\
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    \24\ See 12 U.S.C. 1852; see also 12 CFR part 251 (the Board's 
regulation implementing section 622 of the Dodd-Frank Act and 
section 14 of the BHC Act).
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Supervisory Letter SR 12-17 (Consolidated Supervision Framework for 
Large Financial Institutions)

    GECC remains subject to the Board's risk-management guidance and 
supervisory expectations for nonbank financial companies, which include 
expectations concerning capital and liquidity planning, corporate 
governance, recovery planning, management of core business lines, and 
resolution planning.\25\
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    \25\ SR 12-17, supra note 3.
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IV. Applicability

    All references to GECC in this order include any successor to GECC, 
and if GECC is succeeded by or replaced with another company controlled 
by GE this order shall apply to that company. No further action by the 
Board will be necessary to apply these enhanced prudential standards or 
any of the Board's other statutory authorities and powers related to 
the Board's supervision of GECC to that company.
    If the Council rescinds its determination under section 113 of the 
Dodd-Frank Act that GECC should be subject to supervision by the Board 
and to enhanced prudential standards, this order shall no longer apply 
to GECC. No further action by the Board will be necessary to terminate 
the order's application to GECC (or any successor).

    By order of the Board of Governors of the Federal Reserve 
System,\26\ effective July __, 2015.
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    \26\ Voting for the action: [ ].
---------------------------------------------------------------------------

-----------------------------------------------------------------------
Robert deV. Frierson

Secretary of the Board

[[Page 44128]]


    By order of the Board of Governors of the Federal Reserve 
System, July 20, 2015.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2015-18124 Filed 7-23-15; 8:45 am]
 BILLING CODE 6210-01-P