Risk-Based Capital Guidelines: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies, 20579-20582 [2016-08015]
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Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules
will be prohibited from shipping under
the systems approach until APHIS and
the NPPO of Ecuador both agree that the
pest risk has been mitigated. As
conditions warrant, the average number
of A. fraterculus per trap per day may
be raised or lowered if jointly agreed to
between APHIS and the NPPO of
Ecuador in the operational workplan.
(6) The NPPO of Ecuador must
maintain records of trap placement,
checking of traps, and any quarantine
pest captures in accordance with the
operational workplan. Trapping records
must be maintained for APHIS review
for at least 1 year.
(d) Packinghouse requirements. (1)
The NPPO of Ecuador must monitor
packinghouse operations to verify that
the packinghouses are complying with
the requirements of the systems
approach. If the NPPO of Ecuador finds
that a packinghouse is not complying
with the requirements of the systems
approach, no pitahaya fruit from the
packinghouse will be eligible for export
to the continental United States until
APHIS and the NPPO of Ecuador
conduct an investigation and both agree
that the pest risk has been mitigated.
(2) All packinghouses that participate
in the pitahaya export program must be
registered with the NPPO of Ecuador.
(3) The pitahaya fruit must be packed
within 24 hours of harvest in a pestexclusionary packinghouse. The
pitahaya must be safeguarded by an
insect-proof mesh screen or plastic
tarpaulin while in transit to the
packinghouse and while awaiting
packing. These safeguards must remain
intact until arrival in the continental
United States or the consignment will
be denied entry.
(4) During the time the packinghouse
is in use for exporting pitahaya fruit to
the continental United States, the
packinghouse may only accept pitahaya
fruit from registered production sites.
(e) Phytosanitary inspection. (1) A
biometric sample of pitahaya fruit
(jointly agreed upon by APHIS and the
NPPO) must be inspected in Ecuador by
the NPPO of Ecuador following postharvest processing. The biometric
sample must be visually inspected for
any quarantine pests, and a portion of
the fruit will be cut open to detect
internal signs of A. fraterculus.
(2) Pitahaya fruit presented for
inspection at the port of entry to the
United States must be identified in the
shipping documents accompanying
each lot of fruit to specify the
production site or sites, in which the
fruit was produced, and the packing
shed or sheds, in which the fruit was
processed, in accordance with the
requirements in the operational
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workplan. This identification must be
maintained until the fruit is released for
entry into the continental United States.
The pitahaya fruit are subject to
inspection at the port of entry for all
quarantine pests of concern, including
A. fraterculus. If a single larva of A.
fraterculus is found in a shipment from
a place of production (either by the
NPPO in Ecuador or by inspectors at the
continental United States port of entry),
the entire lot of fruit will be prohibited
from export, and the place of production
of that fruit will be suspended from the
export program until appropriate
measures agreed upon by the NPPO of
Ecuador and APHIS have been taken.
(f) Phytosanitary certificate. Each
consignment of pitahaya fruit must be
accompanied by a phytosanitary
certificate issued by the NPPO of
Ecuador bearing the additional
declaration that the consignment was
produced and prepared for export in
accordance with the requirements of
§ 319.56–76.
Done in Washington, DC, this 5th day of
April 2016.
Kevin Shea,
Administrator, Animal and Plant Health
Inspection Service.
[FR Doc. 2016–08189 Filed 4–7–16; 8:45 am]
BILLING CODE 3410–34–P
FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R–1535]
RIN 7100 AE–49
Risk-Based Capital Guidelines:
Implementation of Capital
Requirements for Global Systemically
Important Bank Holding Companies
Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Board of Governors of the
Federal Reserve System (Board) is
inviting public comment on proposed
clarifying revisions (proposed rule) to
the Board’s rule regarding risk-based
capital surcharges for U.S. based global
systemically important bank holding
companies (GSIB surcharge rule). The
proposed rule proposed rule would
modify the GSIB surcharge rule to
provide that a bank holding company
subject to the rule would continue to
calculate its method 1 and method 2
GSIB surcharge scores annually using
data as of December 31 of the previous
calendar year, even though the data will
be due quarterly beginning with the
June 30, 2016, report. In addition, the
SUMMARY:
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proposed rule would clarify that a bank
holding company subject to the GSIB
surcharge rule is required to calculate
its method 2 GSIB surcharge score using
systemic indicator amounts expressed
in billions of dollars even though the
data is reported in millions of dollars.
The preamble to the proposed rule also
provides clarifying information on how
a covered bank holding company should
calculate its short-term wholesale
funding score for purposes of
calculating its method 2 score under the
GSIB surcharge rule.
DATES: Comments must be received May
13, 2016.
ADDRESSES: When submitting
comments, please consider submitting
your comments by email or fax because
paper mail in the Washington, DC area
and at the Board may be subject to
delay. You may submit comments,
identified by Docket No. R–1535 and
RIN 7100 AE–49, by any of the
following methods:
• Agency Web site:
www.federalreserve.gov. Follow the
instructions for submitting comments at
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm.
• Federal eRulemaking Portal:
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: regs.comments@
federalreserve.gov. Include the docket
number in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Robert de V.
Frierson, Secretary, Board of Governors
of the Federal Reserve System, 20th
Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments will be made
available on the Board’s Web site at
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons.
Accordingly, comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room MP–500 of the Board’s
Martin Building (20th and C Streets
NW., Washington, DC 20551) between 9
a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Anna Lee Hewko, Associate Director,
(202) 530–6260, Constance M. Horsley,
Assistant Director, (202) 452–5239, Juan
C. Climent, Manager, (202) 872–7526, or
Holly Kirkpatrick, Supervisory
Financial Analyst, (202) 452–2796,
Division of Banking Supervision and
Regulation; or Benjamin McDonough,
Special Counsel, (202) 452–2036, Mark
Buresh, Senior Attorney, (202) 452–
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5270, or Mary Watkins, Attorney, (202)
452–3722, Legal Division. Board of
Governors of the Federal Reserve
System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing
impaired only, Telecommunications
Device for the Deaf (TDD) users may
contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Revision Related to FR Y–15 Reporting
Frequency
IV. Revision To Clarify the Method 2 Score
Calculation
V. Clarification of the Transitional ShortTerm Wholesale Funding Score
Calculation
VI. Request for Comment
VII. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Analysis
C. Riegle Community Development and
Regulatory Improvement Act of 1994
D. Plain Language
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Introduction
Section 165 of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (Dodd-Frank Act) authorizes the
Board to establish enhanced prudential
standards for bank holding companies
with $50 billion or more in total
consolidated assets and for nonbank
financial companies that the Financial
Stability Oversight Council has
designated for supervision by the
Board.1 These standards must include
risk-based capital requirements as well
as other enumerated standards. In July
2015, the Board adopted the GSIB
surcharge rule, pursuant to section 165
of the Dodd-Frank Act, to identify global
systemically important bank holding
companies and impose a risk-based
capital surcharge on those institutions.2
II. Background
The GSIB surcharge rule works to
mitigate the potential risk that the
material financial distress or failure of a
GSIB could pose to U.S. financial
stability by increasing the stringency of
capital standards for GSIBs, thereby
increasing the resiliency of these firms.
The GSIB surcharge rule takes into
consideration the nature, scope, size,
scale, concentration,
interconnectedness, and mix of
activities of each company subject to the
rule. These factors are reflected in the
GSIB surcharge rule’s method 1 and
method 2 scores, which use quantitative
metrics reported on the FR Y 15
reporting form to measure the firm’s
1 See
2 80
12 U.S.C. 5365.
FR 49082 (August 14, 2015).
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systemic footprint. A bank holding
company whose method 1 score exceeds
a defined threshold is identified as a
GSIB. Bank holding companies that are
identified as GSIBs under the GSIB
surcharge rule must calculate their
method 1 and method 2 scores each year
using data reported on a firm’s FR Y–
15 as of December 31 of the prior year.
GSIB surcharges are established using
these scores, and GSIBs with higher
scores are subject to higher GSIB
surcharges.
Method 1 uses five equally-weighted
categories that are correlated with
systemic importance—size,
interconnectedness, cross-jurisdictional
activity, substitutability, and
complexity—and these categories are
subdivided into twelve systemic
indicators.3 For each systemic indicator,
a firm divides its own measure of the
systemic indicator by an aggregate
global indicator amount. Each resulting
value is then weighted and put onto a
standard scale. The firm’s method 1
score is the sum of its weighted
systemic indicator scores. Method 2
uses similar inputs to those used in
method 1, but replaces the
substitutability category with a measure
of a firm’s use of short-term wholesale
funding.4 The GSIB surcharge for the
firm is the higher of the two surcharges
determined under method 1 and method
2.5 Method 2 is calibrated differently
from method 1 and method 2 generally
results in a higher GSIB surcharge.
The FR Y–15 reporting form collects
systemic risk data from U.S. bank
holding companies and covered savings
and loan holding companies 6 with total
consolidated assets of $50 billion or
more. The Federal Reserve primarily
uses the FR Y–15 data to monitor, on an
ongoing basis, the systemic risk profile
of the institutions that are subject to
enhanced prudential standards under
section 165 of the Dodd-Frank Act. The
information reported on the FR Y–15 is
also used in the calculation of a bank
holding company’s method 1 and
method 2 scores under the GSIB
surcharge rule. Currently, the FR Y–15
requires reporting of the components
used in calculating the method 1 and
method 2 scores on the FR Y–15, but
3 12
CFR 217.404.
CFR 217.405.
5 12 CFR 217.403.
6 Covered savings and loan holding companies
are those which are not substantially engaged in
insurance or commercial activities. For more
information, see the definition of ‘‘covered savings
and loan holding company’’ provided in 12 CFR
217.2.
4 12
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does not require reporting of the scores
themselves.7
III. Revisions Related to FR Y–15
Reporting Frequency
The FR Y–15, as implemented on
December 31, 2012, is an annual report
that collects data regarding a firm’s
systemic risk.8 The Board recently
adopted revisions to the FR Y–15 that
include requiring the FR Y–15 to be
filed on a quarterly basis, beginning
with the report as of June 30, 2016.9
Under the GSIB surcharge rule, bank
holding companies are required to
calculate their method 1 and method 2
scores using data from the most recent
FR Y–15.10 At the time the GSIB
surcharge rule was adopted, these
calculations were intended to be
conducted annually consistent with the
frequency of the FR Y–15 and using data
as of December 31 of the prior calendar
year.
The proposed rule would revise the
GSIB surcharge rule to require
continued use of a December 31 as-of
date for purposes of a bank holding
company’s calculation of its method 1
and method 2 scores. In particular, the
proposed rule would revise sections
217.404 and 217.405 of the GSIB
surcharge rule, which are the sections
that describe the methodology for
calculating a firm’s method 1 and
method 2 scores, respectively. The
revisions to sections 217.404 and
217.405 would clarify that the systemic
indicator amount used in the
calculations would be drawn from a
firm’s FR Y–15 as of December 31 of the
previous calendar year even after the FR
Y–15 becomes a quarterly report.
IV. Revision To Clarify the Method 2
Score Calculation
The proposed rule would revise
section 217.405 of the Board’s
Regulation Q to clarify that, for
purposes of calculating its method 2
score, a GSIB should convert its
systemic indicator amounts as reported
on the FR Y–15 in millions of dollars to
billions of dollars. The FR Y–15 requires
these data to be reported in millions of
dollars, while the fixed coefficients used
in the calculation of a firm’s method 2
score were determined using aggregate
data expressed in billions of dollars.11
7 Beginning on January 1, 2016, a bank holding
company that is subject to a GSIB surcharge is
required to report its applicable GSIB surcharge on
line 67 of the FFIEC 101 report.
8 See 77 FR 76487 (December 28, 2012). The
Board subsequently revised the FR Y–15 in
December 2013. See 78 FR 77128 (December 20,
2013).
9 80 FR 77344 (December 14, 2015).
10 80 FR 49082 (August 14, 2015).
11 See 80 FR 49082, 49088.
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Therefore, to properly use the fixed
coefficients in the method 2 score
methodology, a firm should reflect its
systemic indicator amounts used in the
method 2 score calculation in billions of
dollars.
V. Clarification of the Short-Term
Wholesale Funding Method 2 Score
Calculation
A firm subject to the GSIB surcharge
rule must calculate a short-term
wholesale funding score in order to
calculate the denominator of its method
2 GSIB surcharge, if any.12 Some firms
subject to the GSIB surcharge rule have
requested clarification on what the
appropriate denominator should be for
determining the short-term wholesale
funding score during the transitional
period before the GSIB surcharge
becomes fully phased in. Consistent
with the definition in the GSIB
surcharge rule, the draft Federal
Register notice would state that, for
purposes of calculating this
denominator during the transitional
period, the average risk-weighted assets
used in determining a firm’s short-term
wholesale funding score is the fourquarter average of total risk-weighted
assets associated with the lower of the
firm’s common equity tier 1 capital
ratios, as reported on the firm’s FR Y–
9C for each quarter of the previous
calendar year.13
As it relates to the numerator used in
the short-term wholesale funding score
calculation, the GSIB surcharge rule
contains a transition provision that
directs firms identified as GSIBs to
determine the average of their weighted
short-term wholesale funding amounts
20581
for the GSIB surcharge in effect
beginning January 1, 2016, and January
1, 2017, by averaging their weighted
short-term wholesale funding amounts
on July 31, 2015, August 24, 2015, and
September 30, 2015.14 These transition
arrangements relate only to the
calculation of a firm’s average weighted
short-term wholesale funding amount
that is used as a component of the
calculation of a firm’s short-term
wholesale funding score for the GSIB
surcharges in effect during calendar year
2016 and calendar year 2017. These
transition arrangements do not affect
any other amount used in the
calculation of a firm’s short-term
wholesale funding score, method 2
score, method 1 score, or GSIB
surcharge. This is described further in
the table below.
GSIB SURCHARGE CALCULATION DURING THE TRANSITIONAL PERIOD
Surcharges
calculated in:
Using indicator data
reported on the FR
Y–15 as of:
December 2015 ..
December 31, 2014
December 2016 ..
December 31, 2015
December 2017 ..
December 2018 ..
December [Year]
December 31, 2016
December 31, 2017
December 31,
[Year¥1].
Using short-term wholesale
funding calculated as the average
of the weighted amounts for the
following days
(numerator):
July 31, August 24, and September
30, 2015.
July 31, August 24, and September
30, 2015.
2016 daily values ............................
2017 daily values ............................
[Year¥1] daily values .....................
VI. Request for Comment
The Board seeks comment on all
aspects of the proposed revisions to the
GSIB surcharge rule.
VII. Regulatory Analysis
A. Paperwork Reduction Act (PRA)
There is no new collection of
information pursuant to the PRA (44
U.S.C. 3501 et seq.) contained in this
proposed rule.
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B. Regulatory Flexibility Act Analysis
The Board is providing an initial
regulatory flexibility analysis with
respect to this proposed rule. The
Regulatory Flexibility Act, 5 U.S.C. 601
et seq. (RFA), generally requires that an
12 12
CFR 217.401(c).
CFR 217.401(c).
14 12 CFR 217.400(b)(3). The funding sources
were defined using terminology from the Liquidity
Coverage Ratio rule (12 CFR part 249) and aligned
13 12
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Using RWAs
in the shortterm wholesale funding
metric
calculated as
the
4-quarter
average over
the year
(denominator):
Resulting in a GSIB
surcharge in effect
on:
If the surcharge
decreases, then it is
in effect on:
2015
January 1, 2016 .......
January 1, 2017.
January 1, 2018 .......
January 1, 2017
2016
2017
[Year¥1]
January 1, 2019 .......
January 1, 2020 .......
January 1, [Year + 2]
January 1, 2018
January 1, 2019
January 1, [Year + 1]
2014
agency prepare and make available an
initial regulatory flexibility analysis in
connection with a notice of proposed
rulemaking. Under regulations issued by
the Small Business Administration, a
small entity includes a depository
institution, bank holding company, or
savings and loan holding company with
assets of $550 million or less (small
banking organizations).15 As of
December 31, 2014, there were
approximately 3,833 small bank holding
companies.
The proposed rule would apply only
to advanced approaches bank holding
companies, which, generally, are bank
holding companies with total
consolidated assets of $250 billion or
more, that have total consolidated on-
balance sheet foreign exposures of $10
billion or more, that have subsidiary
depository institutions that are
advanced approaches institutions, or
that elect to use the advanced
approaches framework.16 Bank holding
companies that are subject to the
proposed rule therefore are expected to
substantially exceed the $550 million
asset threshold at which a banking
entity would qualify as a small bank
holding company.
Because the proposed rule is not
likely to apply to any bank holding
company with assets of $550 million or
less, if adopted in final form, it is not
expected to apply to any small bank
holding company for purposes of the
RFA. The Board does not believe that
with items that are reported on the Board’s
Complex Institution Liquidity Monitoring Report on
Form FR 2052a.
15 See 13 CFR 121.201. Effective July 14, 2014, the
Small Business Administration revised the size
standards for banking organizations to $550 million
in assets from $500 million in assets. 79 FR 33647
(June 12, 2014).
16 See 12 CFR 217.100.
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Federal Register / Vol. 81, No. 68 / Friday, April 8, 2016 / Proposed Rules
the proposed rule duplicates, overlaps,
or conflicts with any other Federal
rules. In light of the foregoing, the Board
does not believe that the proposed rule,
if adopted in final form, would have a
significant economic impact on a
substantial number of small entities.
Nonetheless, the Board seeks comment
on whether the proposed rule would
impose undue burdens on, or have
unintended consequences for, small
organizations, and whether there are
ways such potential burdens or
consequences could be minimized in a
manner consistent with the purpose of
the proposed rule.
• Would a different format (grouping and
order of sections, use of headings,
paragraphing) make the regulation easier to
understand? If so, what changes would
achieve that?
• Is the section format adequate? If not,
which of the sections should be changed and
how?
• What other changes can the Board
incorporate to make the regulation easier to
understand?
C. Riegle Community Development and
Regulatory Improvement Act of 1994
In determining the effective date and
administrative compliance requirements
for new regulations that impose
additional reporting, disclosure, or other
requirements on state member banks,
the Board is required to consider,
consistent with the principles of safety
and soundness and the public interest,
any administrative burdens that such
regulations would place on depository
institutions, and the benefits of such
regulations.17 In addition, new
regulations that impose additional
reporting disclosures or other new
requirements on insured depository
institutions generally must take effect
on the first day of a calendar quarter
which begins on or after the date on
which the regulations are published in
final form.18
The proposed revision to the Board’s
GSIB surcharge rule are only applicable
to advanced approaches bank holding
companies. Therefore, these
requirements are not applicable to this
proposed rule.
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
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D. Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Board to use
plain language in all proposed and final
rules published after January 1, 2000.
The Board has sought to present the
proposed rule in a simple
straightforward manner, and invites
comment on the use of plain language.
For example:
• Has the Board organized the material to
suit your needs? If not, how could the Board
present the proposed rule more clearly?
• Are the requirements in the proposed
rule clearly stated? If not, how could the
proposed rule be more clearly stated?
• Do the regulations contain technical
language or jargon that is not clear? If so,
which language requires clarification?
17 See Section 302 of the Riegle Community
Development and Regulatory Improvement Act of
1994 (‘‘RCDRIA’’), 12 U.S.C. 4802.
18 12 U.S.C. 4802(b).
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List of Subjects in 12 CFR Part 217
Administrative practice and
procedure, Banks, Banking, Holding
companies, Reporting and
recordkeeping requirements, Securities.
(b) Systemic indicator score. A global
systemically important BHC’s score for
a systemic indicator is equal to:
(1) The amount of the systemic
indicator, as reported by the bank
holding company as of December 31 of
the previous calendar year, expressed in
billions of dollars;
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, April 4, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016–08015 Filed 4–7–16; 8:45 am]
BILLING CODE P
DEPARTMENT OF TRANSPORTATION
12 CFR CHAPTER II
Authority and Issuance
Federal Aviation Administration
For the reasons set forth in the
preamble, the Board proposes to amend
chapter II of title 12 of the Code of
Federal Regulations as follows:
14 CFR Part 71
PART 217—CAPITAL ADEQUACY OF
BANK HOLDING COMPANIES,
SAVINGS AND LOAN HOLDING
COMPANIES, AND STATE MEMBER
BANKS (REGULATION Q)
1. The authority citation for part 217
continues to read as follows:
■
Authority: 12 U.S.C. 248(a), 321–338a,
481–486, 1462a, 1467a, 1818, 1828, 1831n,
1831o, 1831p–l, 1831w, 1835, 1844(b), 1851,
3904, 3906–3909, 4808, 5365, 5368, 5371.
2. In § 217.404, paragraph (b)(1) is
revised to read as follows:
■
§ 217.404
Method 1 score.
*
*
*
*
*
(b) Systemic indicator score. (1)
Except as provided in paragraph (b)(2)
of this section, the systemic indicator
score in basis points for a given
systemic indicator is equal to:
(i) The ratio of:
(A) The amount of that systemic
indicator, as reported by the bank
holding company as of December 31 of
the previous calendar year; to
(B) The aggregate global indicator
amount for that systemic indicator
published by the Board in the fourth
quarter of that year;
(ii) Multiplied by 10,000; and
(iii) Multiplied by the indicator
weight corresponding to the systemic
indicator as set forth in Table 1 of this
section.
*
*
*
*
*
■ 3. In § 217.405, paragraph (b)(1) is
revised to read as follows:
§ 217.405
*
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Method 2 score.
*
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Proposed Modification of the San
Diego, CA, Class B Airspace Area;
Public Meetings
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of meetings.
AGENCY:
This notice announces three
fact-finding informal airspace meetings
to solicit information from airspace
users and others concerning a proposal
to amend the Class B airspace area at
San Diego, CA. The purpose of these
meetings is to provide interested parties
an opportunity to present views,
recommendations, and comments on the
proposal. All comments received during
these meetings will be considered prior
to any revision or issuance of a notice
of proposed rulemaking.
DATES: The meetings will be held on
Tuesday, June 28, 2016, at 6:00 p.m.;
Wednesday, June 29, 2016, at 6:00 p.m.;
and Thursday, June 30, 2016, at 6:00
p.m. Doors open 30 minutes prior to the
beginning of each meeting. Comments
must be received on or before August
15, 2016.
ADDRESSES: All meetings will be held at
San Diego International Airport,
Commuter Airport Terminal, 3225
North Harbor Drive, San Diego, CA
92101.
Comments: Send comments on the
proposal, in triplicate, to: Tracey
Johnson, Manager, Operations Support
Group, Western Service Center, Air
Traffic Organization Federal Aviation
Administration, 1601 Lind Avenue SW.,
Renton, WA 98057, or by fax to (425)
203–4505.
FOR FURTHER INFORMATION CONTACT:
Brian Fagan, FAA Support Manager,
Southern California TRACON, 9175
SUMMARY:
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]]>Agencies
[Federal Register Volume 81, Number 68 (Friday, April 8, 2016)]
[Proposed Rules]
[Pages 20579-20582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08015]
=======================================================================
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FEDERAL RESERVE SYSTEM
12 CFR Part 217
[Regulation Q; Docket No. R-1535]
RIN 7100 AE-49
Risk-Based Capital Guidelines: Implementation of Capital
Requirements for Global Systemically Important Bank Holding Companies
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is inviting public comment on proposed clarifying revisions (proposed
rule) to the Board's rule regarding risk-based capital surcharges for
U.S. based global systemically important bank holding companies (GSIB
surcharge rule). The proposed rule proposed rule would modify the GSIB
surcharge rule to provide that a bank holding company subject to the
rule would continue to calculate its method 1 and method 2 GSIB
surcharge scores annually using data as of December 31 of the previous
calendar year, even though the data will be due quarterly beginning
with the June 30, 2016, report. In addition, the proposed rule would
clarify that a bank holding company subject to the GSIB surcharge rule
is required to calculate its method 2 GSIB surcharge score using
systemic indicator amounts expressed in billions of dollars even though
the data is reported in millions of dollars. The preamble to the
proposed rule also provides clarifying information on how a covered
bank holding company should calculate its short-term wholesale funding
score for purposes of calculating its method 2 score under the GSIB
surcharge rule.
DATES: Comments must be received May 13, 2016.
ADDRESSES: When submitting comments, please consider submitting your
comments by email or fax because paper mail in the Washington, DC area
and at the Board may be subject to delay. You may submit comments,
identified by Docket No. R-1535 and RIN 7100 AE-49, by any of the
following methods:
Agency Web site: www.federalreserve.gov. Follow the
instructions for submitting comments at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: www.regulations.gov. Follow
the instructions for submitting comments.
Email: regs.comments@federalreserve.gov. Include the
docket number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Address to Robert de V. Frierson, Secretary, Board
of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue NW., Washington, DC 20551.
All public comments will be made available on the Board's Web site
at www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, comments
will not be edited to remove any identifying or contact information.
Public comments may also be viewed electronically or in paper in Room
MP-500 of the Board's Martin Building (20th and C Streets NW.,
Washington, DC 20551) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Anna Lee Hewko, Associate Director,
(202) 530-6260, Constance M. Horsley, Assistant Director, (202) 452-
5239, Juan C. Climent, Manager, (202) 872-7526, or Holly Kirkpatrick,
Supervisory Financial Analyst, (202) 452-2796, Division of Banking
Supervision and Regulation; or Benjamin McDonough, Special Counsel,
(202) 452-2036, Mark Buresh, Senior Attorney, (202) 452-
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5270, or Mary Watkins, Attorney, (202) 452-3722, Legal Division. Board
of Governors of the Federal Reserve System, 20th and C Streets NW.,
Washington, DC 20551. For the hearing impaired only, Telecommunications
Device for the Deaf (TDD) users may contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Revision Related to FR Y-15 Reporting Frequency
IV. Revision To Clarify the Method 2 Score Calculation
V. Clarification of the Transitional Short-Term Wholesale Funding
Score Calculation
VI. Request for Comment
VII. Regulatory Analysis
A. Paperwork Reduction Act
B. Regulatory Flexibility Analysis
C. Riegle Community Development and Regulatory Improvement Act
of 1994
D. Plain Language
Introduction
Section 165 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) authorizes the Board to establish
enhanced prudential standards for bank holding companies with $50
billion or more in total consolidated assets and for nonbank financial
companies that the Financial Stability Oversight Council has designated
for supervision by the Board.\1\ These standards must include risk-
based capital requirements as well as other enumerated standards. In
July 2015, the Board adopted the GSIB surcharge rule, pursuant to
section 165 of the Dodd-Frank Act, to identify global systemically
important bank holding companies and impose a risk-based capital
surcharge on those institutions.\2\
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\1\ See 12 U.S.C. 5365.
\2\ 80 FR 49082 (August 14, 2015).
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II. Background
The GSIB surcharge rule works to mitigate the potential risk that
the material financial distress or failure of a GSIB could pose to U.S.
financial stability by increasing the stringency of capital standards
for GSIBs, thereby increasing the resiliency of these firms. The GSIB
surcharge rule takes into consideration the nature, scope, size, scale,
concentration, interconnectedness, and mix of activities of each
company subject to the rule. These factors are reflected in the GSIB
surcharge rule's method 1 and method 2 scores, which use quantitative
metrics reported on the FR Y 15 reporting form to measure the firm's
systemic footprint. A bank holding company whose method 1 score exceeds
a defined threshold is identified as a GSIB. Bank holding companies
that are identified as GSIBs under the GSIB surcharge rule must
calculate their method 1 and method 2 scores each year using data
reported on a firm's FR Y-15 as of December 31 of the prior year. GSIB
surcharges are established using these scores, and GSIBs with higher
scores are subject to higher GSIB surcharges.
Method 1 uses five equally-weighted categories that are correlated
with systemic importance--size, interconnectedness, cross-
jurisdictional activity, substitutability, and complexity--and these
categories are subdivided into twelve systemic indicators.\3\ For each
systemic indicator, a firm divides its own measure of the systemic
indicator by an aggregate global indicator amount. Each resulting value
is then weighted and put onto a standard scale. The firm's method 1
score is the sum of its weighted systemic indicator scores. Method 2
uses similar inputs to those used in method 1, but replaces the
substitutability category with a measure of a firm's use of short-term
wholesale funding.\4\ The GSIB surcharge for the firm is the higher of
the two surcharges determined under method 1 and method 2.\5\ Method 2
is calibrated differently from method 1 and method 2 generally results
in a higher GSIB surcharge.
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\3\ 12 CFR 217.404.
\4\ 12 CFR 217.405.
\5\ 12 CFR 217.403.
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The FR Y-15 reporting form collects systemic risk data from U.S.
bank holding companies and covered savings and loan holding companies
\6\ with total consolidated assets of $50 billion or more. The Federal
Reserve primarily uses the FR Y-15 data to monitor, on an ongoing
basis, the systemic risk profile of the institutions that are subject
to enhanced prudential standards under section 165 of the Dodd-Frank
Act. The information reported on the FR Y-15 is also used in the
calculation of a bank holding company's method 1 and method 2 scores
under the GSIB surcharge rule. Currently, the FR Y-15 requires
reporting of the components used in calculating the method 1 and method
2 scores on the FR Y-15, but does not require reporting of the scores
themselves.\7\
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\6\ Covered savings and loan holding companies are those which
are not substantially engaged in insurance or commercial activities.
For more information, see the definition of ``covered savings and
loan holding company'' provided in 12 CFR 217.2.
\7\ Beginning on January 1, 2016, a bank holding company that is
subject to a GSIB surcharge is required to report its applicable
GSIB surcharge on line 67 of the FFIEC 101 report.
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III. Revisions Related to FR Y-15 Reporting Frequency
The FR Y-15, as implemented on December 31, 2012, is an annual
report that collects data regarding a firm's systemic risk.\8\ The
Board recently adopted revisions to the FR Y-15 that include requiring
the FR Y-15 to be filed on a quarterly basis, beginning with the report
as of June 30, 2016.\9\ Under the GSIB surcharge rule, bank holding
companies are required to calculate their method 1 and method 2 scores
using data from the most recent FR Y-15.\10\ At the time the GSIB
surcharge rule was adopted, these calculations were intended to be
conducted annually consistent with the frequency of the FR Y-15 and
using data as of December 31 of the prior calendar year.
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\8\ See 77 FR 76487 (December 28, 2012). The Board subsequently
revised the FR Y-15 in December 2013. See 78 FR 77128 (December 20,
2013).
\9\ 80 FR 77344 (December 14, 2015).
\10\ 80 FR 49082 (August 14, 2015).
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The proposed rule would revise the GSIB surcharge rule to require
continued use of a December 31 as-of date for purposes of a bank
holding company's calculation of its method 1 and method 2 scores. In
particular, the proposed rule would revise sections 217.404 and 217.405
of the GSIB surcharge rule, which are the sections that describe the
methodology for calculating a firm's method 1 and method 2 scores,
respectively. The revisions to sections 217.404 and 217.405 would
clarify that the systemic indicator amount used in the calculations
would be drawn from a firm's FR Y-15 as of December 31 of the previous
calendar year even after the FR Y-15 becomes a quarterly report.
IV. Revision To Clarify the Method 2 Score Calculation
The proposed rule would revise section 217.405 of the Board's
Regulation Q to clarify that, for purposes of calculating its method 2
score, a GSIB should convert its systemic indicator amounts as reported
on the FR Y-15 in millions of dollars to billions of dollars. The FR Y-
15 requires these data to be reported in millions of dollars, while the
fixed coefficients used in the calculation of a firm's method 2 score
were determined using aggregate data expressed in billions of
dollars.\11\
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Therefore, to properly use the fixed coefficients in the method 2 score
methodology, a firm should reflect its systemic indicator amounts used
in the method 2 score calculation in billions of dollars.
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\11\ See 80 FR 49082, 49088.
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V. Clarification of the Short-Term Wholesale Funding Method 2 Score
Calculation
A firm subject to the GSIB surcharge rule must calculate a short-
term wholesale funding score in order to calculate the denominator of
its method 2 GSIB surcharge, if any.\12\ Some firms subject to the GSIB
surcharge rule have requested clarification on what the appropriate
denominator should be for determining the short-term wholesale funding
score during the transitional period before the GSIB surcharge becomes
fully phased in. Consistent with the definition in the GSIB surcharge
rule, the draft Federal Register notice would state that, for purposes
of calculating this denominator during the transitional period, the
average risk-weighted assets used in determining a firm's short-term
wholesale funding score is the four-quarter average of total risk-
weighted assets associated with the lower of the firm's common equity
tier 1 capital ratios, as reported on the firm's FR Y-9C for each
quarter of the previous calendar year.\13\
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\12\ 12 CFR 217.401(c).
\13\ 12 CFR 217.401(c).
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As it relates to the numerator used in the short-term wholesale
funding score calculation, the GSIB surcharge rule contains a
transition provision that directs firms identified as GSIBs to
determine the average of their weighted short-term wholesale funding
amounts for the GSIB surcharge in effect beginning January 1, 2016, and
January 1, 2017, by averaging their weighted short-term wholesale
funding amounts on July 31, 2015, August 24, 2015, and September 30,
2015.\14\ These transition arrangements relate only to the calculation
of a firm's average weighted short-term wholesale funding amount that
is used as a component of the calculation of a firm's short-term
wholesale funding score for the GSIB surcharges in effect during
calendar year 2016 and calendar year 2017. These transition
arrangements do not affect any other amount used in the calculation of
a firm's short-term wholesale funding score, method 2 score, method 1
score, or GSIB surcharge. This is described further in the table below.
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\14\ 12 CFR 217.400(b)(3). The funding sources were defined
using terminology from the Liquidity Coverage Ratio rule (12 CFR
part 249) and aligned with items that are reported on the Board's
Complex Institution Liquidity Monitoring Report on Form FR 2052a.
GSIB Surcharge Calculation During the Transitional Period
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Using RWAs in
the short-term
Using short-term wholesale wholesale
Using indicator data funding calculated as the funding metric Resulting in a GSIB If the surcharge
Surcharges calculated in: reported on the FR Y- average of the weighted calculated as surcharge in effect decreases, then it is
15 as of: amounts for the following the 4-quarter on: in effect on:
days (numerator): average over
the year
(denominator):
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December 2015...................... December 31, 2014..... July 31, August 24, and 2014 January 1, 2016.......
September 30, 2015. January 1, 2017.......
December 2016...................... December 31, 2015..... July 31, August 24, and 2015 January 1, 2018....... January 1, 2017
September 30, 2015.
December 2017...................... December 31, 2016..... 2016 daily values.......... 2016 January 1, 2019....... January 1, 2018
December 2018...................... December 31, 2017..... 2017 daily values.......... 2017 January 1, 2020....... January 1, 2019
December [Year].................... December 31, [Year-1]. [Year-1] daily values...... [Year-1] January 1, [Year + 2]. January 1, [Year + 1]
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VI. Request for Comment
The Board seeks comment on all aspects of the proposed revisions to
the GSIB surcharge rule.
VII. Regulatory Analysis
A. Paperwork Reduction Act (PRA)
There is no new collection of information pursuant to the PRA (44
U.S.C. 3501 et seq.) contained in this proposed rule.
B. Regulatory Flexibility Act Analysis
The Board is providing an initial regulatory flexibility analysis
with respect to this proposed rule. The Regulatory Flexibility Act, 5
U.S.C. 601 et seq. (RFA), generally requires that an agency prepare and
make available an initial regulatory flexibility analysis in connection
with a notice of proposed rulemaking. Under regulations issued by the
Small Business Administration, a small entity includes a depository
institution, bank holding company, or savings and loan holding company
with assets of $550 million or less (small banking organizations).\15\
As of December 31, 2014, there were approximately 3,833 small bank
holding companies.
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\15\ See 13 CFR 121.201. Effective July 14, 2014, the Small
Business Administration revised the size standards for banking
organizations to $550 million in assets from $500 million in assets.
79 FR 33647 (June 12, 2014).
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The proposed rule would apply only to advanced approaches bank
holding companies, which, generally, are bank holding companies with
total consolidated assets of $250 billion or more, that have total
consolidated on-balance sheet foreign exposures of $10 billion or more,
that have subsidiary depository institutions that are advanced
approaches institutions, or that elect to use the advanced approaches
framework.\16\ Bank holding companies that are subject to the proposed
rule therefore are expected to substantially exceed the $550 million
asset threshold at which a banking entity would qualify as a small bank
holding company.
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\16\ See 12 CFR 217.100.
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Because the proposed rule is not likely to apply to any bank
holding company with assets of $550 million or less, if adopted in
final form, it is not expected to apply to any small bank holding
company for purposes of the RFA. The Board does not believe that
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the proposed rule duplicates, overlaps, or conflicts with any other
Federal rules. In light of the foregoing, the Board does not believe
that the proposed rule, if adopted in final form, would have a
significant economic impact on a substantial number of small entities.
Nonetheless, the Board seeks comment on whether the proposed rule would
impose undue burdens on, or have unintended consequences for, small
organizations, and whether there are ways such potential burdens or
consequences could be minimized in a manner consistent with the purpose
of the proposed rule.
C. Riegle Community Development and Regulatory Improvement Act of 1994
In determining the effective date and administrative compliance
requirements for new regulations that impose additional reporting,
disclosure, or other requirements on state member banks, the Board is
required to consider, consistent with the principles of safety and
soundness and the public interest, any administrative burdens that such
regulations would place on depository institutions, and the benefits of
such regulations.\17\ In addition, new regulations that impose
additional reporting disclosures or other new requirements on insured
depository institutions generally must take effect on the first day of
a calendar quarter which begins on or after the date on which the
regulations are published in final form.\18\
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\17\ See Section 302 of the Riegle Community Development and
Regulatory Improvement Act of 1994 (``RCDRIA''), 12 U.S.C. 4802.
\18\ 12 U.S.C. 4802(b).
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The proposed revision to the Board's GSIB surcharge rule are only
applicable to advanced approaches bank holding companies. Therefore,
these requirements are not applicable to this proposed rule.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Board to use
plain language in all proposed and final rules published after January
1, 2000. The Board has sought to present the proposed rule in a simple
straightforward manner, and invites comment on the use of plain
language. For example:
Has the Board organized the material to suit your
needs? If not, how could the Board present the proposed rule more
clearly?
Are the requirements in the proposed rule clearly
stated? If not, how could the proposed rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of
sections, use of headings, paragraphing) make the regulation easier
to understand? If so, what changes would achieve that?
Is the section format adequate? If not, which of the
sections should be changed and how?
What other changes can the Board incorporate to make
the regulation easier to understand?
List of Subjects in 12 CFR Part 217
Administrative practice and procedure, Banks, Banking, Holding
companies, Reporting and recordkeeping requirements, Securities.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
12 CFR CHAPTER II
Authority and Issuance
For the reasons set forth in the preamble, the Board proposes to
amend chapter II of title 12 of the Code of Federal Regulations as
follows:
PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)
0
1. The authority citation for part 217 continues to read as follows:
Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a,
1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904,
3906-3909, 4808, 5365, 5368, 5371.
0
2. In Sec. 217.404, paragraph (b)(1) is revised to read as follows:
Sec. 217.404 Method 1 score.
* * * * *
(b) Systemic indicator score. (1) Except as provided in paragraph
(b)(2) of this section, the systemic indicator score in basis points
for a given systemic indicator is equal to:
(i) The ratio of:
(A) The amount of that systemic indicator, as reported by the bank
holding company as of December 31 of the previous calendar year; to
(B) The aggregate global indicator amount for that systemic
indicator published by the Board in the fourth quarter of that year;
(ii) Multiplied by 10,000; and
(iii) Multiplied by the indicator weight corresponding to the
systemic indicator as set forth in Table 1 of this section.
* * * * *
0
3. In Sec. 217.405, paragraph (b)(1) is revised to read as follows:
Sec. 217.405 Method 2 score.
* * * * *
(b) Systemic indicator score. A global systemically important BHC's
score for a systemic indicator is equal to:
(1) The amount of the systemic indicator, as reported by the bank
holding company as of December 31 of the previous calendar year,
expressed in billions of dollars;
* * * * *
By order of the Board of Governors of the Federal Reserve
System, April 4, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-08015 Filed 4-7-16; 8:45 am]
BILLING CODE P
