Amendments to the Capital Plan and Stress Test Rules, 67239-67260 [2016-23629]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Proposed Rules]
[Pages 67239-67260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23629]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 225 and 252

[Regulations Y and YY; Docket No. R-1548; RIN 7100 AE-59]


Amendments to the Capital Plan and Stress Test Rules

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Notice of proposed rulemaking with request for comment.

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SUMMARY: The Board is inviting comment on a notice of proposed 
rulemaking to revise the capital plan and stress test rules for bank 
holding companies with $50 billion or more in total consolidated assets 
and U.S. intermediate holding companies of foreign banks. Under the 
proposal, large and noncomplex firms, defined below, would no longer be 
subject to the provisions of the Board's capital plan rule whereby the 
Board may object to a capital plan on the basis of qualitative 
deficiencies in the firm's capital planning process. In connection with 
this modification, large and noncomplex firms would no longer be 
subject to the qualitative assessment in Comprehensive Capital Analysis 
and Review (CCAR), but would remain subject to a quantitative 
assessment in CCAR. The qualitative assessment of the capital plans of 
large and noncomplex firms instead would be conducted outside of CCAR 
through the supervisory review process. For purposes of the proposal, a 
bank holding company or U.S. intermediate holding company with total 
consolidated assets of $50 billion or greater but less than $250 
billion, on-balance sheet foreign exposure of less than $10 billion, 
and nonbank assets of less than $75 billion would be considered a large 
and noncomplex firm. The proposal would also modify reporting 
requirements for large and noncomplex firms to reduce burdens by 
raising materiality thresholds, reducing the scope of the data 
collection on these firms' stress test results, and reducing supporting 
documentation requirements. For all bank holding companies subject to 
the capital plan rule, the proposal would simplify the initial 
applicability provisions for the capital plan and stress test rules, 
reduce the amount of additional capital distributions that a bank 
holding company may make during a capital plan cycle without seeking 
the Board's prior approval, and extend the range of potential as-of 
dates for the trading and counterparty scenario component used in the 
stress test rules. The proposal would also amend the Parent Company 
Only Financial Statements for Large Holding Companies (FR Y-9LP) to 
include new line item 17 of PC-B Memoranda (Total nonbank assets of a 
holding company that is subject to the Federal Reserve Board's capital 
plan rule) for purposes of identifying the large and noncomplex firms. 
All other bank holding companies subject to the capital plan rule that 
are not large and noncomplex firms would remain subject to objection to 
their capital plan based on qualitative deficiencies under the rule.
    The proposal would not apply to bank holding companies with total 
consolidated assets of less than $50 billion or to any state member 
bank or savings and loan holding company.

DATES: Comments must be received by November 25, 2016.

ADDRESSES: You may submit comments, identified by Docket No. R-1548 and 
RIN 7100 AE-59 by any of the following methods:
     Agency Web site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.aspx.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.

[[Page 67240]]

     Email: regs.comments@federalreserve.gov. Include the 
docket number and RIN number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.

All public comments will be made available on the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.aspx as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room 3515, 1801 K Street NW. (between 18th and 19th 
Streets NW.), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on 
weekdays. For security reasons, the Board requires that visitors make 
an appointment to inspect comments. You may do so by calling (202) 452-
3684. Upon arrival, visitors will be required to present valid 
government-issued photo identification and to submit to security 
screening in order to inspect and photocopy comments.

FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Associate Director, (202) 
263-4833, Richard Naylor, Associate Director, (202) 728-5854, Molly 
Mahar, Deputy Associate Director, (202) 973-7360, Constance Horsley, 
Assistant Director, (202) 452-5239, Mona Touma Elliot, Manager, (202) 
912-4688, Celeste Molleur, Manager (202) 452-2783, Elizabeth MacDonald, 
Manager, (202) 475-6316, Christine Graham, Senior Supervisory Financial 
Analyst, (202) 452-3005, Seth Ruhter, Senior Supervisory Financial 
Analyst, (202) 452-3997, Joseph Cox, Supervisory Financial Analyst, 
(202) 452-3216, Kevin Tran, Supervisory Financial Analyst, (202) 452-
2309, or Hillel Kipnis, Financial Analyst, (202) 452-2924, Division of 
Banking Supervision and Regulation; Laurie Schaffer, Associate General 
Counsel, (202) 452-2272, Benjamin McDonough, Special Counsel, (202) 
452-2036, Julie Anthony, Counsel, (202) 475-6682, Brian Chernoff, 
Senior Attorney, (202) 452-2952, or Amber Hay, Attorney, (202) 973-
6997, Legal Division, Board of Governors of the Federal Reserve System, 
20th Street and Constitution Avenue NW., Washington, DC 20551. Users of 
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Description of Capital Plan and Stress Test Requirements

    Capital planning and stress testing are two key components of the 
Board's supervisory framework for large financial companies.\1\ Under 
Section 165 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act), the Board of Governors of the Federal 
Reserve System (Board) is directed to establish enhanced prudential 
standards for bank holding companies with total consolidated assets of 
$50 billion or more.\2\ As part of this requirement, the Board must 
conduct annual supervisory stress tests with respect to these bank 
holding companies and issue regulations requiring these bank holding 
companies to conduct semi-annual company-run stress tests.\3\ The Board 
adopted final rules to implement these requirements on October 12, 
2012.\4\
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    \1\ In addition to bank holding companies with total 
consolidated assets of $50 billion or more, the changes in this 
proposed rulemaking would also apply to any nonbank financial 
company supervised by the Board that becomes subject to the capital 
planning and stress test requirements pursuant to a rule or order of 
the Board and to U.S. intermediate holding companies of foreign 
banking organizations in accordance with the transition provisions 
under the capital plan rule and subpart O of the Board's Regulation 
YY (12 CFR part 252). Currently, no nonbank financial companies 
supervised by the Board are subject to the capital planning or 
stress test requirements. A U.S. intermediate holding company that 
was required to be established by July 1, 2016, and that was not 
previously subject to the Board's capital plan rule is required to 
submit its first capital plan in 2017 and will become subject to the 
Board's stress test rules beginning in 2018. References to ``bank 
holding companies'' or ``firms'' in this preamble should be read to 
include all of these companies, unless otherwise specified.
    \2\ 12 U.S.C. 5365.
    \3\ 12 U.S.C. 5365(i).
    \4\ 77 FR 62380 (October 12, 2012). See 12 CFR part 252, 
subparts E and F. On October 12, 2012, as required by section 165(i) 
of the Dodd-Frank Act, the Federal Reserve also adopted a final rule 
to impose company-run stress testing requirements for state member 
banks and savings and loan holding companies with assets of more 
than $10 billion and bank holding companies with assets of more than 
$10 billion but less than $50 billion, which is codified at subpart 
B of 12 CFR part 252. The Federal Reserve is not proposing to adjust 
the requirements in subpart B of 12 CFR part 252 at this time.
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    The Dodd-Frank Act also requires the enhanced prudential standards 
established by the Board to increase in stringency based on several 
factors, including the size and risk characteristics of the bank 
holding companies subject to the requirements.\5\ In prescribing more 
stringent prudential standards, including stress test requirements, the 
Board may differentiate among bank holding companies on an individual 
basis or by category, 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 deems appropriate.\6\
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    \5\ See 12 U.S.C. 5365(b).
    \6\ 12 U.S.C. 5363(a)(2)(A).
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B. Implementation of Capital Plan and Stress Test Requirements

    Consistent with the Dodd-Frank Act mandate, the Board conducts an 
annual assessment of the capital planning and post-stress capital 
adequacy of bank holding companies with total consolidated assets of 
$50 billion or more. All U.S. intermediate holding company subsidiaries 
of foreign banking organizations will be subject to the Board's capital 
plan rule beginning in 2017. The Board's capital planning and stress 
testing framework for these firms consists of two related programs: 
CCAR, which is conducted pursuant to the Board's capital plan rule,\7\ 
and the Dodd-Frank Act stress tests, which is conducted pursuant to the 
Board's stress test rules.\8\
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    \7\ 12 CFR 225.8.
    \8\ Subparts E and F of the Board's Regulation YY (12 CFR 252, 
subparts E and F).
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    In CCAR, the Board assesses the internal capital planning processes 
of bank holding companies and these companies' ability to maintain 
sufficient capital to continue their operations under expected and 
stressful conditions. Pursuant to the capital plan rule, each bank 
holding company must submit an annual capital plan to the Board that 
describes its capital planning processes and capital adequacy 
assessment. The capital plan must include (i) an assessment of the 
expected uses and sources of capital over the planning horizon; (ii) a 
detailed description of the bank holding company's processes for 
assessing capital adequacy; (iii) the bank holding company's capital 
policy; and (iv) a discussion of any expected changes to the bank 
holding company's business plan that could materially affect its 
capital adequacy.\9\ A bank holding company may be required to include 
other information and analysis relevant to its capital planning 
processes and internal capital adequacy assessment. The Federal Reserve 
reviews each capital plan submission and may object to a bank holding 
company's capital plan based on criteria identified in the rule.\10\ If 
the Federal Reserve objects to a bank holding company's capital plan, 
the bank holding company may not make any

[[Page 67241]]

capital distributions unless the Federal Reserve indicates in writing 
that it does not object to such distributions.\11\
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    \9\ See 12 CFR 225.8(e)(2).
    \10\ See 12 CFR 225.8(f).
    \11\ See 12 CFR 225.8(f)(2)(iv).
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    Pursuant to the Board's stress test rules, the Board conducts 
supervisory stress tests of bank holding companies with total 
consolidated assets of $50 billion or more, and these bank holding 
companies are required to conduct annual and mid-cycle company-run 
stress tests. In conducting the supervisory stress tests, the Board 
projects balance sheets, risk-weighted assets, net income, and 
resulting post-stress capital levels and regulatory capital ratios over 
a planning horizon under baseline, adverse, and severely adverse 
scenarios, incorporating capital action assumptions prescribed in the 
Board's stress test rules.\12\ Similarly, for the annual company-run 
stress tests, a bank holding company uses the same planning horizon, 
capital action assumptions, and baseline, adverse, and severely adverse 
scenarios used in the supervisory stress test.\13\
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    \12\ See 12 CFR 252.44.
    \13\ See 12 CFR 252.54. For the mid-cycle company-run stress 
tests, each bank holding company must develop and employ baseline, 
adverse, and severely adverse scenarios that are appropriate for its 
risk profile and operations. See 12 CFR 252.55(b).
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C. Review of Capital Plan and Stress Test Requirements

    The 2015 capital planning cycle marked the fifth anniversary of 
CCAR. In 2015, the Board initiated a series of meetings, including with 
a bank officials, debt and equity-side market analysts, public interest 
groups, and academics, to solicit their views on their overall 
evaluation of, and recommendations for, the CCAR program. The Board 
received a wide range of comments on the program. While meeting 
participants generally expressed the view that CCAR has been successful 
in strengthening the capital positions and improving the risk-
management capabilities of the bank holding companies subject to CCAR, 
some participants provided suggestions for improving or strengthening 
various aspects of the program.\14\ Notably, representatives from bank 
holding companies with less than $250 billion in total consolidated 
assets recommended that the Board modify CCAR to reduce burdens for 
these bank holding companies by establishing a separate capital 
planning program that would reduce the associated regulatory reporting 
requirements and extend reporting timelines.
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    \14\ In addition to the changes in this proposal, the Federal 
Reserve may propose further adjustments to CCAR in the future in 
response to these comments.
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    In December 2015, the Board released capital planning guidance in 
Supervision and Regulation (SR) Letters 15-18 and 15-19 to consolidate 
its existing expectations and clarify that the Board's expectations for 
capital planning differ depending on the size and complexity of the 
firm.\15\ The guidance provided that firms with $250 billion or more in 
total consolidated assets, firms with $10 billion or more in foreign 
exposures, and firms otherwise subject to the Large Institution 
Supervision Coordinating Committee (LISCC) supervisory framework 
(typically the largest, most internationally active bank holding 
companies) would be subject to heightened expectations in all aspects 
of capital planning, as compared to other large, but less complex 
firms. The guidance reflects an important objective of the Federal 
Reserve, which is to tailor supervisory expectations for firms with a 
lower systemic risk profile, while simultaneously protecting financial 
stability and improving the resiliency of and the availability of 
credit from the largest and most complex firms.\16\
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    \15\ Board of Governors of the Federal Reserve System, Division 
of Banking Supervision and Regulation, ``Federal Reserve Supervisory 
Assessment of Capital Planning and Positions for LISCC Firms and 
Large and Complex Firms,'' SR Letter 15-18 (December 18, 2015), 
available at www.federalreserve.gov/bankinforeg/srletters/sr1518.htm 
(``SR Letter 15-18''); Board of Governors of the Federal Reserve 
System, Division of Banking Supervision and Regulation, ``Federal 
Reserve Supervisory Assessment of Capital Planning and Positions for 
Large and Noncomplex Firms,'' SR Letter 15-19 (December 18, 2015), 
available at www.federalreserve.gov/bankinforeg/srletters/sr1519.htm 
(``SR Letter 15-19'').
    \16\ Daniel K. Tarullo (2015). ``Application of Enhanced 
Prudential Standards to Bank Holding Companies'' testimony delivered 
before the Committee on Banking, Housing and Urban Affairs, U.S. 
Senate, Washington, DC, March 19, available at: 
www.federalreserve.gov/newsevents/testimony/tarullo20150319a.htm.
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    While SR Letter 15-19 outlined tailored capital planning 
expectations for large and noncomplex firms, the high public profile of 
the CCAR qualitative review could create a risk that large and 
noncomplex firms will over-invest in stress testing and capital 
planning processes that are unnecessary to adequately capture the risks 
of these firms. In this proposal, the Board is proposing to further 
tailor its stress testing and capital planning requirements, as 
discussed below.

II. Proposed Revisions to the Capital Plan and Stress Test Rules

A. Overview

    This proposal would revise the standards that the Board uses to 
review capital plans for bank holding companies that have total 
consolidated assets of at least $50 billion but less than $250 billion, 
on-balance sheet foreign exposure of less than $10 billion, and nonbank 
assets of less than $75 billion (each, a large and noncomplex firm). 
Specifically, these large and noncomplex firms under the proposal would 
no longer be subject to the provisions of the Board's capital plan rule 
whereby the Board may object to a firm's capital plan based on 
unresolved supervisory issues or concerns with the assumptions, 
analysis, and methodologies in the firm's capital plan (qualitative 
objection criteria, as described further in section II.D of this 
preamble below). In connection with this change, large and noncomplex 
firms would remain subject to a quantitative assessment in CCAR and 
would no longer be subject to the qualitative assessment in CCAR. The 
proposal would also amend the Parent Company Only Financial Statements 
for Large Holding Companies (FR Y-9LP) to include a new line item for 
purposes of identifying the large and noncomplex firms. All other bank 
holding companies subject to the capital plan rule (a LISCC firm, if 
the bank holding company is subject to the LISCC supervisory framework, 
\17\ or large and complex firm, if the bank holding company otherwise 
has total consolidated assets of $250 billion or more, on-balance sheet 
foreign exposure of $10 billion or more, or nonbank assets of $75 
billion or more) would remain subject to objection to their capital 
plan based on qualitative deficiencies under the rule.
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    \17\ Based on the current population of bank holding companies, 
all LISCC firms have total consolidated assets of $250 billion or 
more, on-balance sheet foreign exposure of $10 billion or more, or 
nonbank assets of $75 billion or more.
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    The proposal would also modify associated regulatory reporting 
requirements for large and noncomplex firms to collect less detailed 
information on these firms' stress test results and raise the 
materiality threshold for reporting on specific portfolios. Under the 
proposal, large and noncomplex firms would no longer be subject to the 
qualitative assessment in CCAR beginning with the 2017 CCAR cycle, and 
a large and noncomplex firm would be able to implement the modified 
reporting requirements either immediately or after a six-month delay.
    In addition, the proposal would simplify the timing of the initial 
applicability of the capital plan and stress test rules for all bank 
holding companies that cross the $50 billion asset threshold to become 
subject to these rules. These revisions are

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intended to reduce compliance burdens associated with the capital plan 
and stress test rules.
    The proposal would also revise the de minimis exception threshold 
for capital distributions under the capital plan rule. As noted, as 
part of CCAR, the Federal Reserve evaluates the planned capital 
distributions, such as dividends or repurchases of common stock, that 
were included in a capital plan. Under the capital plan rule, a bank 
holding company may make the capital distributions that were included 
in the capital plan, provided that the Federal Reserve does not object 
to the plan.\18\ Generally, a bank holding company must obtain the 
Federal Reserve's prior approval before making additional capital 
distributions above the dollar amount described in its capital 
plan.\19\ However, a bank holding company that is well capitalized, as 
defined in 12 CFR 225.2(r), may make additional capital distributions 
above such dollar amount without seeking the Board's prior approval if 
certain other requirements are met. These include the requirement that 
the total distribution amount not exceed 1.00 percent of the bank 
holding company's tier 1 capital for the year-period following the 
Federal Reserve's action on the bank holding company's capital plan 
(the de minimis exception).\20\
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    \18\ See 12 CFR 225.8.
    \19\ See 12 CFR 225.8(g)(1).
    \20\ See 12 CFR 225.8(g)(2).
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    The proposal would amend the de minimis exception in two ways for 
all bank holding companies subject to the capital plan rule. First, the 
proposal would establish a one-quarter ``blackout period'' while the 
Federal Reserve is conducting CCAR (the second quarter of a calendar 
year), during which bank holding companies would not be able to submit 
a notice to use the de minimis exception. Second, the proposal would 
lower the de minimis limitation from 1.00 percent to 0.25 percent of a 
bank holding company's tier 1 capital, beginning April 1, 2017.
    The proposal includes an additional blackout period for additional 
capital distribution requests that require prior approval from the 
Federal Reserve. This additional blackout period would also apply 
during the calendar quarter in which the Federal Reserve conducts the 
CCAR exercise. The proposed blackout periods for both the de minimis 
exception and prior approval requests are expected to be effective 
during the second quarter of 2017, in which the Federal Reserve will be 
conducting CCAR 2017.
    The last proposed change to the capital plan rule relates to the 
trading and counterparty component of the stress test. Under the 
Board's stress test rules, the Board may require a bank holding company 
with significant trading activity to include a trading and counterparty 
component (global market shock) in its adverse and severely adverse 
scenarios for its company-run stress tests.\21\ Currently, the Board 
must select a date between January 1 and March 1 of the calendar year 
of the current stress test cycle for the ``as-of'' date for the data 
used as part of the global market shock components of the bank holding 
company's adverse and severely adverse scenarios.\22\ For the reasons 
described in section III.B of this preamble, the proposal would extend 
the range of dates from which the Board may select the as-of date for 
the global market shock to October 1 of the calendar year preceding the 
year of the stress test cycle to March 1 of the calendar year of the 
stress test cycle.
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    \21\ See 12 CFR 252.14(b)(2).
    \22\ Id.
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    As described in section III.C of this preamble, the proposal would 
also remove transition provisions in the capital plan and stress test 
rules that are no longer operative.

B. Identifying Large and Noncomplex Firms

    Under the proposal, a bank holding company would be considered 
large and noncomplex if, as of December 31 of the calendar year prior 
to the capital plan cycle, it has average total consolidated assets of 
$50 billion or greater but less than $250 billion,\23\ total on-balance 
sheet foreign exposure of less than $10 billion,\24\ and average total 
nonbank assets of less than $75 billion.
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    \23\ The proposal would not amend the existing methodology for 
determining average total consolidated assets under the capital plan 
rule. Under the rule, average total consolidated assets equals the 
amount of total assets reported on the bank holding company's 
Consolidated Financial Statements for Holding Companies (FR Y-9C), 
measured as an average over the preceding four quarters. If a bank 
holding company has not filed the FR Y-9C for each of the four most 
recent consecutive quarters, its total consolidated assets are 
measured as the average of its total consolidated assets, as 
reported on the FR Y-9C, for the most recent quarter or consecutive 
quarters, as applicable. See 12 CFR 225.8(b)(2).
    \24\ Consolidated total on-balance sheet foreign exposure would 
be based on a calculation of a bank holding company's total foreign 
countries cross-border claims on an ultimate-risk basis, plus total 
foreign countries claims on local residents on an ultimate-risk 
basis, plus total foreign countries fair value of foreign exchange 
and derivative products, calculated at the most recent year-end in 
accordance with the Federal Financial Institutions Examination 
Council (FFIEC) 009 Country Exposure Report.
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    The proposed thresholds of $250 billion in average total 
consolidated assets and $10 billion in foreign exposure identify the 
largest and most internationally active bank holding companies, whose 
failure or distress could pose significant risks to U.S. financial 
stability. The proposed thresholds of $250 billion in total 
consolidated assets and $10 billion in foreign exposure identify the 
largest and most internationally active bank holding companies, the 
failure or distress of which could pose significant risks to U.S. 
financial stability. These thresholds would be consistent with 
thresholds used in the Board's capital and liquidity requirements to 
identify companies that may present elevated risk because of their size 
and the amount of their cross-border exposure.\25\
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    \25\ See, e.g., 12 CFR 217.100(b), 12 CFR 249.1(b).
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    In addition to thresholds based on a bank holding company's average 
total consolidated assets and total on-balance sheet foreign exposure, 
the Board is proposing an additional threshold to identify a bank 
holding company as large and noncomplex based on the amount of its 
total nonbank assets. The proposed nonbank asset threshold of $75 
billion would separate out bank holding companies that are 
significantly engaged in activities outside the business of banking, 
which have the potential to generate additional systemic risk and 
therefore warrant heightened capital planning standards. The proposed 
threshold would also facilitate heightened supervisory oversight with 
respect to the capital planning practices for a bank holding company 
that engages in activities through legal entities that are not subject 
to direct regulation and supervision applicable to a regulated banking 
entity, which may involve a broader range of risks and more complex 
structure requiring more sophisticated risk management.
    As discussed in more detail below, under the proposal, a LISCC or 
large and complex firm would remain subject to the qualitative 
objection criteria, the CCAR qualitative review process, and the 
current more detailed reporting requirements. The qualitative objection 
criteria, CCAR qualitative review process, and more detailed reporting 
requirements would continue to provide for greater supervisory 
oversight to ensure that these LISCC firms and large and complex firms 
are effectively identifying and managing risks that may arise in 
connection with their greater size, international activity, or 
nonbanking operations. For bank holding companies with significant 
nonbanking activities in particular, the

[[Page 67243]]

CCAR qualitative assessment supplements the existing regulatory capital 
framework by incorporating a comprehensive review of a bank holding 
company's processes to identify, aggregate, and measure risks from all 
of its activities, including nonbanking activities. The added scrutiny 
of the qualitative CCAR review helps to ensure that such LISCC firms 
and large and complex firms are effectively identifying and managing 
their combined risks on a consolidated basis.
    In developing the proposal, the Federal Reserve considered a range 
of nonbank asset thresholds between $50 billion and $125 billion. The 
proposed $75 billion threshold was chosen based on historical failures 
and bankruptcies of large financial firms and the risk profile of the 
current population of bank holding companies.
    At the low end of the range, a $50 billion nonbank asset threshold 
would be analogous to the total asset threshold used in section 165 of 
the Dodd-Frank Act for applying enhanced prudential standards to a bank 
holding company.\26\ However, based on the current population of bank 
holding companies, a $50 billion nonbank asset threshold appeared to be 
too low, as many bank holding companies at this level conduct primarily 
traditional bank-like activities (such as mortgage lending) through 
nonbank subsidiaries. At the high end of the range, the Board 
considered a nonbank asset threshold of $125 billion, which would scope 
in bank holding companies with at least a majority of their assets as 
nonbank assets, indicating a potentially greater complexity of 
structure or activities and therefore greater risk.\27\ Based on the 
current population of firms, a nonbank asset threshold of $125 billion 
would include the most complex U.S. bank holding companies with the 
largest derivatives trading and capital markets activities, but may 
exclude some bank holding companies with risk profiles that are 
significantly concentrated in riskier activities, particularly U.S. 
intermediate holding companies of foreign banking organizations that 
engage in significant capital markets activities. In particular, a 
threshold of $125 billion in nonbank assets would exclude companies 
that engage in equities trading, prime brokerage, and investment 
banking activities, and therefore have risk profiles that are more 
similar to those of the most complex U.S. financial firms than to the 
risk profiles of the smaller, less complex bank holding companies.
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    \26\ 12 U.S.C. 5365.
    \27\ A firm with total consolidated assets of $250 billion or 
more would have been included by the total consolidated assets 
threshold, so $125 billion or more in nonbank assets would 
constitute at least 50 percent of the assets of a bank holding 
company with total consolidated assets less than $250 billion.
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    The potential complexity and interconnectedness of a bank holding 
company with significant nonbank assets heightens the need for such a 
bank holding company to be subject to an intensive annual review of its 
capital planning processes and risk management based on its 
idiosyncratic risk profile, through the CCAR qualitative assessment and 
qualitative objection criteria (as defined below).The proposed nonbank 
asset threshold of $75 billion would be slightly below the midpoint of 
the $50-to-$125 billion range of potential nonbank asset thresholds 
considered. Based on the current population of bank holding companies, 
this proposed threshold would include large firms with complex capital 
markets activities, but would not include firms with less complex 
structures or activities. This result would be consistent with the 
proposal's objective of focusing supervisory resources and more 
detailed reporting requirements on firms with elevated risk profiles.
    The Board invites comment on whether the proposed thresholds 
identify firms for which the proposed relief would be most appropriate 
in light of the goals and purposes of the CCAR exercises.
    Question 1: What other standards, such as revenue related to 
nonbanking activities, should the Board consider to identify large and 
noncomplex firms?

C. Measurement and Reporting of Average Total Nonbank Assets

1. Measurement for CCAR 2017
    In order to determine whether a bank holding company meets the $75 
billion average total nonbank asset threshold for CCAR 2017, average 
total nonbank assets under the proposal would equal (i) total combined 
nonbank assets of nonbank subsidiaries, as reported on line 15a of 
Schedule PC-B of the Parent Company Only Financial Statements for Large 
Holding Companies (FR Y-9LP) as of December 31, 2016; plus (ii) the 
total amount of equity investments in nonbank subsidiaries and 
associated companies as reported on line 2a of Schedule PC-A of the FR 
Y-9LP as of December 31, 2016, (except that any investments reflected 
in (i) may be eliminated); plus (iii) assets of each Edge and Agreement 
Corporation, as reported on the Consolidated Report of Condition and 
Income for Edge and Agreement Corporations (FR 2886b) as of December 
31, 2016, to the extent such corporation is designated as 
``Nonbanking'' in the box on the front page of the FR 2886b; minus (v) 
assets of each federal savings association, federal savings bank, or 
thrift subsidiary, as reported on the Call Report as of December 31, 
2016.
    Question 2: What, if any, additional burdens would the proposed 
measurement of nonbank assets create for firms for the December 31, 
2016, measurement date? What steps should the Board take to address any 
such burdens (for example, should the Board permit firms to net 
intercompany exposures among all nonbank subsidiaries for purposes of 
the December 31, 2016, report)?
2. Measurement for Capital Plan Cycles After 2017
    For purposes of capital plan cycles after 2017, the $75 billion 
average total nonbank asset threshold would be the average of the total 
nonbank assets of a holding company, calculated in accordance with the 
instructions to the FR Y-9LP, for the four most recent consecutive 
quarters or, if the bank holding company has not filed the FR Y-9LP for 
each of the four most recent consecutive quarters, for the most recent 
quarter or consecutive quarters, as applicable.
    The proposal would amend the FR Y-9LP to include new line item 17 
of PC-B Memoranda (Total nonbank assets of a holding company that is 
subject to the capital plan rule) for purposes of identifying large and 
noncomplex firms. Under the proposal, a bank holding company with total 
consolidated assets of $50 billion or more would be required to report 
on the FR Y-9LP the average dollar amount of its total nonbank assets 
of consolidated nonbank subsidiaries, whether held directly or 
indirectly or held through lower-tier holding companies, and its direct 
investments in unconsolidated nonbank subsidiaries, associated nonbank 
companies, and those nonbank corporate joint ventures over which the 
bank holding company exercises significant influence (collectively, 
``nonbank companies'').\28\
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    \28\ For purposes of the FR Y-9LP, (i) a subsidiary is a company 
in which the reporting bank holding company directly or indirectly 
owns more than 50 percent of the outstanding voting stock; (ii) an 
associated company is a corporation in which the reporting bank 
holding company, directly or indirectly, owns 20 to 50 percent of 
the outstanding voting stock and over which the reporting bank 
holding company exercises significant influence; and (iii) a 
corporate joint venture is a corporation owned and operated by a 
group of companies, no one of which has a majority interest, as a 
separate and specific business or project for the mutual benefit of 
that group of companies.

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[[Page 67244]]

    Nonbank companies, for purposes of this measure, would exclude (i) 
all national banks, state member banks, state nonmember insured banks 
(including insured industrial banks), federal savings associations, 
federal savings banks, and thrift institutions (collectively, 
``depository institutions'') and (ii) except for an Edge or Agreement 
Corporation designated as ``Nonbanking'' in the box on the front page 
of the Consolidated Report of Condition and Income for Edge and 
Agreement Corporations (FR 2886b), any subsidiary of a depository 
institution (``depository institution subsidiary'').
    For purposes of this measure, a reporting bank holding company 
should eliminate all intercompany assets and operating revenue among 
the nonbank companies, but should include assets and operating revenue 
with the reporting bank holding company; any depository institution; 
any depository institution subsidiary. For a reporting bank holding 
company that is a subsidiary of a foreign banking organization, the 
reporting bank holding company should include assets and operating 
revenue with any branch or agency of the foreign banking organization 
or any non-U.S. subsidiary, non-U.S. associated company, or non-U.S. 
corporate joint venture of the foreign banking organization that is not 
held through the reporting bank holding company, should be included. 
For example, a reporting bank holding company should eliminate the 
loans made by one nonbank company to a second nonbank company, but 
should not eliminate loans made by one nonbank company to the reporting 
bank holding company; depository institution; depository institution 
subsidiary; or for a reporting bank holding company that is a 
subsidiary of a foreign banking organization, any branch or agency of 
the foreign banking organization or any non-U.S. subsidiary, non-U.S. 
associated company, or non-U.S. corporate joint venture of the foreign 
banking organization that is not held through the reporting bank 
holding company.
    The proposed line item would require a firm to report nonbank 
assets based on an average over the quarter, as calculated on either a 
daily, weekly, or monthly basis. Using an average would further the 
integrity of the nonbank assets measure by ensuring that it is not 
unduly influenced by end-of-quarter fluctuations in nonbank assets; 
however, requiring a daily or weekly average may impose undue burden on 
firms to perform this calculation. The Board is therefore seeking 
comment as to whether a daily, weekly, or monthly average would be most 
appropriate for this calculation. This new line item is expected to be 
effective for the reporting period as of March 31, 2017.
    Question 3: What are the costs and benefits of using a daily, 
weekly, or monthly average for purposes of calculating nonbank assets?
    Question 4: What other measures for identifying large and 
noncomplex firms should the Board consider? For instance, should the 
Board consider evaluating the percent of revenues from nonbank 
activities to total revenue, in addition to the asset measure?

D. Elimination of CCAR Qualitative Assessment and Objection for Large 
and Noncomplex Firms

    Capital planning is a core aspect of financial and risk management 
for all bank holding companies that helps ensure the financial strength 
and resilience of a firm. Strong forward-looking capital planning 
processes ensure that a bank holding company with total consolidated 
assets of $50 billion or more has sufficient capital to absorb losses 
and continue to lend to creditworthy businesses and consumers, 
including during times of stress. The Board expects all bank holding 
companies with total consolidated assets of $50 billion or more to 
maintain sound capital planning processes on an ongoing basis.
    The Board has different expectations for sound capital planning and 
capital adequacy depending on the size, scope of operations, activity, 
and systemic risk profile of a firm. Consistent with those different 
expectations, under the proposal, large and noncomplex firms would no 
longer be subject to the provisions of the Board's capital plan rule 
whereby the Board may object to a capital plan on the basis of 
deficiencies in the firm's capital planning process or unresolved 
supervisory issues, that is, large and noncomplex firms would no longer 
be subject to the CCAR qualitative assessment.
    In the current CCAR process, the Federal Reserve conducts a 
qualitative assessment of the strength of each bank holding company's 
internal capital planning process and a quantitative assessment of each 
bank holding company's capital adequacy in the calendar quarter in 
which the bank holding company submits a capital plan. In the 
qualitative assessment, the Federal Reserve evaluates the extent to 
which the analysis underlying each bank holding company's capital plan 
comprehensively captures and addresses potential risks stemming from 
company-wide activities. In addition, the Federal Reserve evaluates the 
reasonableness of a bank holding company's capital plan, the 
assumptions and analysis underlying the plan, and the robustness of the 
bank holding company's capital planning process. Under the capital plan 
rule, the Board may object to a bank holding company's capital plan if 
the Board determines that (1) the bank holding company has material 
unresolved supervisory issues, including but not limited to issues 
associated with its capital adequacy process; (2) the assumptions and 
analysis underlying the bank holding company's capital plan, or the 
bank holding company's methodologies for reviewing its capital adequacy 
process, are not reasonable or appropriate; \29\ or (3) the bank 
holding company's capital planning process or proposed capital 
distributions otherwise constitute an unsafe or unsound practice, or 
would violate any law, regulation, Board order, directive, or condition 
imposed by, or written agreement with, the Board or the appropriate 
Federal Reserve Bank (together, qualitative objection criteria).\30\ 
The Board may also object to a bank holding company's capital plan if 
the bank holding company has not demonstrated an ability to maintain 
capital above each minimum regulatory capital ratio on a pro forma 
basis under expected and stressful conditions throughout the planning 
horizon (that is, based on a quantitative assessment).\31\ In the past 
CCAR exercises, the Board has publicly announced its decision to object 
to a bank holding company's capital plan, along with the basis for the 
decision.\32\
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    \29\ As discussed in section II.E of this preamble below, the 
proposal would revise this criterion to permit objection where the 
Board determines that the assumptions and analysis underlying the 
bank holding company's capital plan, or the bank holding company's 
methodologies and practices that support its capital planning 
process, are not reasonable or appropriate.
    \30\ See 12 CFR 225.8(f)(2)(ii)(A), (B), and (D).
    \31\ See 12 CFR 225.8(f)(2)(ii)(C).
    \32\ See 12 CFR 225.8(f)(v).
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    In the feedback meetings that the Board held on CCAR, participants 
from large and noncomplex firms expressed the view that the CCAR 
qualitative assessment was unduly burdensome because, in their view, it 
required the development of large amounts of documentation and 
sophisticated stress test models to the same degree as the largest 
firms in order to avoid a public objection to their capital plan. 
Consistent with this feedback, further tailoring of regulatory 
requirements for large and noncomplex firms would avoid creating a 
risk, based on the high

[[Page 67245]]

public profile of the CCAR qualitative review, that large and 
noncomplex firms will over-invest in stress testing and capital 
planning processes that are unnecessary to adequately capture the risks 
of these firms.
    In general, large and noncomplex firms present less systemic risk 
than LISCC firms and large and complex firms. Furthermore, large and 
noncomplex firms are generally engaged in traditional banking 
activities and have a more limited geographical scope than LISCC firms 
and large and complex firms; accordingly, there is less variation in 
key risks across these firms relative to key risks of LISCC firms and 
large and complex firms. The strength of each large and noncomplex 
firm's capital planning process may be assessed through normal 
supervisory reviews supplemented with targeted, horizontal reviews of 
aspects of capital planning. Consequently, the Federal Reserve proposes 
to conduct its supervisory assessment of a large and noncomplex firm's 
risk-management and capital planning practices through the regular 
supervisory process and targeted, horizontal assessments of particular 
aspects of capital planning, rather than the intensive CCAR qualitative 
horizontal assessment. Further, the Board would not object to the 
capital plans of large and noncomplex firms due to qualitative 
deficiencies in their capital planning process, but rather would 
incorporate an assessment of these practices into regular, ongoing 
supervision.
    As compared to CCAR, the proposed review process for large and 
noncomplex firms is expected to be more limited in scope, include 
targeted horizontal evaluations of specific areas of the capital 
planning process, and focus on the standards set forth in the capital 
plan rule and SR Letter 15-19. Before the start of the supervisory 
review process, the Federal Reserve would send a supervisory 
communication to each large and noncomplex firm describing the scope of 
the year's review. The review would likely occur in the quarter 
following the CCAR qualitative assessment for LISCC firms and large and 
complex firms.
    Under the proposal, the Board would continue to perform the annual 
quantitative assessment of capital plans of the large and noncomplex 
firms and publicly announce a decision to object or not object to a 
firm's capital plan on this basis. The quantitative assessment ensures 
that firms maintain sufficient capital to continue operations 
throughout times of economic and financial market stress. While an 
individual large and noncomplex firm is likely to have a lower systemic 
risk profile than a LISCC firm or large and complex firm, its 
activities or distress still could pose some degree of risk to 
financial stability. Moreover, large and noncomplex firms collectively 
represent over $2 trillion in total assets and nearly $1.3 trillion in 
loans and leases as of June 30, 2016. A common weakness or insufficient 
capitalization across a group of large and noncomplex firms could still 
represent a significant threat to the U.S. economy and to specific 
regions where the firms' operations or activities are concentrated. 
Accordingly, the proposal would maintain the current quantitative 
analysis framework for these firms and the possible basis for objection 
to a firm's capital plan based on the results of the quantitative 
assessment, in order to appropriately ensure the capital adequacy of 
all bank holding companies subject to the capital plan rule.
    As under the current capital plan rule, nothing in the proposal 
would limit the authority of the Federal Reserve to issue a capital 
directive, such as a directive to reduce capital distributions, or take 
any other supervisory enforcement action, including an action to 
address unsafe or unsound practices or conditions or violations of law, 
such as an unsafe and unsound capital planning process.\33\
---------------------------------------------------------------------------

    \33\ See 12 CFR 225.8(b)(4).
---------------------------------------------------------------------------

E. Continued Application of CCAR for LISCC Firms and Large and Complex 
Firms

    For LISCC firms and large and complex firms, the proposal would 
maintain the current comprehensive assessment of capital planning 
processes in the CCAR qualitative assessment. The comprehensive 
assessment of capital planning processes in the CCAR qualitative 
assessment produces significant safety and soundness benefits for LISCC 
firms and large and complex firms and financial stability benefits for 
the financial system as a whole. As the Board noted when it adopted the 
capital plan rule in 2011, the analytical techniques and other 
requirements set forth in the capital plan rule enable a firm to 
identify, measure, and monitor its risks and promote the stability of 
the U.S. financial system.\34\
---------------------------------------------------------------------------

    \34\ 76 FR 74631, 74632 (December 1, 2011).
---------------------------------------------------------------------------

    Expectations for LISCC firms and large and complex firms are 
elevated relative to large and noncomplex firms because material 
distress or failure of a LISCC firm or large and complex firm is more 
likely to pose a threat to U.S. financial stability as compared to a 
large and noncomplex firm, heightening the need to ensure the 
resiliency of these firms. Furthermore, LISCC firms and large and 
complex firms engage in more diverse activities and have a larger 
overall size and geographical scope than large and noncomplex firms. 
This larger size and greater diversity leads to greater variation in 
the material risks at these firms, which may not be fully captured by a 
standardized supervisory stress scenario.
    The intensive, comprehensive assessment provided by the CCAR 
qualitative process enables the Federal Reserve to assess whether a 
LISCC firm or large and complex firm has sufficient capital and strong 
capital planning processes in light of the scope and diversity of its 
activities, including risks that are idiosyncratic to each firm. The 
systemic footprint of these firms and the damage that their failure 
could pose to the financial system makes it critical that a 
comprehensive assessment occur on an annual basis, to ensure that the 
capital planning processes of LISCC firms and large and complex firms 
are sufficiently dynamic to reflect changes in economic or financial 
conditions, as well as changes to the risk profile of the firm.
    The public nature of the CCAR process and disclosure of the results 
of the Federal Reserve's qualitative assessment helps to ensure that 
LISCC firms and large and complex firms maintain focus on ensuring that 
their practices are consistent with the Federal Reserve's capital 
planning expectations articulated in SR Letter 15-18.\35\ Additionally, 
the public profile of the CCAR qualitative assessment improves 
incentives for firms to ensure the strength of their capital planning 
processes. The additional scrutiny and market discipline provided by 
the CCAR process is all the more important in light of the systemic 
risk presented by LISCC firms and large and complex firms.
---------------------------------------------------------------------------

    \35\ See SR Letter 15-18.
---------------------------------------------------------------------------

    The proposal includes a modification to the capital plan rule's 
qualitative objection criteria for LISCC firms and large and complex 
firms to better align with the Federal Reserve's focus during the CCAR 
supervisory assessment. Specifically, the proposal provides that the 
Board may object to a the capital plan of a LISCC firm or large and 
complex firm if, among other factors, the methodologies and practices 
that support the bank holding company's capital planning process are 
not reasonable or appropriate (emphasis added). The current rule 
instead provides a basis for objection if the bank holding company's 
methodologies for

[[Page 67246]]

reviewing its capital adequacy process, are not reasonable or 
appropriate (emphasis added). This modification is intended to clarify 
the current scope of the CCAR qualitative review and the areas of the 
focus in the review of the capital plan of a LISCC firm or a large and 
complex firm.

F. Implementation of Modified Reporting Requirements

    The Capital Assessments and Stress Testing Report (FR Y-14 series 
of reports; OMB No. 7100-0341) collects data used to support 
supervisory stress testing models and continuous monitoring efforts for 
bank holding companies with total consolidated assets of $50 billion or 
more. The FR Y-14 consists of three reports: The semi-annual FR Y-14A, 
the quarterly FR Y-14Q, and monthly FR Y-14M. Each report contains 
multiple schedules, several of which are reported only by bank holding 
companies that meet specified materiality thresholds.
    In discussions on CCAR, several large and noncomplex firms 
recommended that the Board revise the FR Y-14 series of reports to 
reduce reporting burdens for these firms. For instance, these large and 
noncomplex firms suggested that the Board raise the materiality 
threshold for the FR Y-14 reports and reduce the detail required in the 
supporting documentation requirements. Additionally, these firms 
indicated that in some cases where a portfolio met the criteria to be 
considered immaterial, the firm voluntarily reported data on the 
portfolio due to the Federal Reserve's practice of applying a 75th 
percentile loss rate to immaterial portfolios in the supervisory stress 
test. The proposal would reduce burdens associated with reporting the 
FR Y-14 schedules for large and noncomplex firms in three ways: By 
raising the materiality threshold, reducing the supporting 
documentation requirements, removing several sub-schedules from the FR 
Y-14A Summary Schedule, and using the median loss rate for immaterial 
portfolios.
    The proposal would increase the materiality thresholds for filing 
schedules on the FR Y-14Q report and the FR Y-14M report for large and 
noncomplex firms. The FR Y-14 instructions currently define material 
portfolios as those with asset balances greater than $5 billion or 
asset balances greater than five percent of tier 1 capital on average 
for the four quarters preceding the reporting quarter.\36\ The proposal 
would revise the FR Y-14's definition of a ``material portfolio'' for 
large and noncomplex firms to mean a portfolio with asset balances 
greater than either (1) $5 billion or (2) 10 percent of tier 1 capital, 
both measured as an average for the four quarters preceding the 
reporting quarter.\37\ As a result of this change, respondents would be 
able to exclude certain portfolios from reporting and in some cases may 
not be required to report certain schedules at all. In modeling losses 
on these portfolios for large and noncomplex firms, the Federal Reserve 
intends to apply the median, rather than 75th percentile, loss rate 
from supervisory projections based on the firms that reported data, so 
as not to discourage firms from using the increased threshold for 
materiality.
---------------------------------------------------------------------------

    \36\ Respondents have the option to complete the data schedules 
for immaterial portfolios.
    \37\ The four quarter average percent of tier 1 capital is 
calculated as the sum of the firm's preceding four quarters of 
balances subject to the particular materiality threshold divided by 
the sum of the firm's proceeding four quarters of tier 1 capital.
---------------------------------------------------------------------------

    The proposal also would reduce the supporting documentation a large 
and noncomplex firm would be required to be submit with its capital 
plan. Appendix A of the FR Y-14A report outlines qualitative 
information that a bank holding company should submit in support of its 
projections, including descriptions of the methodologies used to 
develop the internal projections of capital across scenarios and other 
analyses that support the bank holding company's comprehensive capital 
plans. The proposal would revise the instructions to Appendix A of the 
FR Y-14A to remove the requirement that a large and noncomplex firm 
include in its capital plan submission certain documentation regarding 
its models, including any model inventory mapping document, methodology 
documentation, model technical documents, and model validation 
documentation. Large and noncomplex firms would still be required to be 
able to produce these materials upon request by the Federal Reserve, 
and all or a subset of these firms may be required to provide this 
documentation depending on the focus of the supervisory review of large 
and noncomplex firm capital plans. Removing the requirement that a 
large and noncomplex firm submit this information in connection with 
its capital plan should reduce the resources needed to prepare the plan 
for submission and alleviate concerns of an adverse supervisory finding 
that a capital plan is incomplete based on the failure to provide 
documentation.
    Under the proposal, large and noncomplex firms would no longer be 
required to complete several elements of the FR Y-14A Schedule A 
(Summary), including the Securities OTTI methodology sub-schedule, 
Securities Market Value source sub-schedule, Securities OTTI by 
security sub-schedule, the Retail repurchase sub-schedule, the Trading 
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\38\ The revised instructions for the FR Y-14A Summary 
schedule reporting form are available on the Board's public Web site. 
Removing these elements should reduce burdens associated with 
collecting and validating this data, responding to follow-up inquiries, 
and implementing and maintaining technical systems. Under the proposal, 
a large and noncomplex firm may adopt these changes for the FR Y-14A 
report as of December 31, 2016, or as of June 30, 2017. The Federal 
Reserve continues to review the details required to be reported in the 
FR Y-14 series of reports, and may propose additional changes in the 
future to further reduce burdens associated with these reporting 
requirements.
---------------------------------------------------------------------------

    \38\ A large and noncomplex firm would be required to report 
line item 138 of the income statement, as that line item is 
currently derived from the retail repurchase sub-schedule.
---------------------------------------------------------------------------

G. Simplify Initial Application of Capital Plan and Stress Test Rules 
and Regulatory Reporting Requirements

    The proposal would simplify the applicability provisions for the 
capital plan and stress test rules that apply to bank holding companies 
with $50 billion or more in total consolidated assets (subparts E and F 
of the Board's Regulation YY, hereafter subparts E and F) and provide 
additional time before the application of these requirements for bank 
holding companies that cross the $50 billion asset threshold close to 
the April 5 capital plan submission and stress test date. Under the 
current rules, a bank holding company that crosses the $50 billion 
asset threshold on or before December 31 of a calendar year must submit 
a capital plan by April 5 of the following year. Under the proposal, 
the cutoff date for the capital plan rule would be moved to September 
30, so that a firm that crosses the $50 billion asset threshold in the 
fourth quarter of a calendar year would not have to submit a capital 
plan until April 5 of the second year after it crosses the threshold.
    The proposal would also align the cutoff date for initial 
application of the stress test rules in subparts E and F with the 
proposed September 30 cutoff date for the initial application of the 
capital plan rule. A bank holding company

[[Page 67247]]

would become subject to these stress test rules in subparts E and F in 
the year following the first year in which the bank holding company 
submitted a capital plan. Under the current stress test rules, a bank 
holding company that crosses the $50 billion asset threshold before 
March 31 of a given year becomes subject to the stress test rules under 
subparts E and F beginning in the following year, and accordingly, may 
have only nine months before its first stress test under these 
subparts. Under the proposal, a firm would have at least a year before 
it would be subject to its initial stress tests under subparts E and F. 
This revision would simplify the application of the capital plan and 
stress test rules and allow for a more orderly onboarding process for 
new FR Y-14 filers, which will improve the quality of data used in the 
supervisory stress tests.\39\
---------------------------------------------------------------------------

    \39\ Providing this extension would also have the effect of 
allowing firms that cross the $50 billion in the fourth quarter of a 
given year as much as a year and a half before they are required to 
submit their first capital plan, and two and a half years before 
they are subject to the stress tests under subparts E and F. This 
extended period would allow for the significant investments firms 
must make to meet these requirements and account for the fact that 
these firms would continue to be subject to prudential supervision 
during the transition period.
---------------------------------------------------------------------------

    The proposal would also provide an extended onboarding period for 
regulatory reporting requirements to a bank holding company after it 
first crosses the $50 billion asset threshold. Currently, a bank 
holding company that crosses the $50 billion asset threshold must 
prepare FR Y-14M reports as of the end of the month in which it crosses 
the threshold, and must submit its first FR Y-14M within 90 days after 
the end of the month (at which time, data for the three intervening 
months is due). The proposal would require a bank holding company to 
begin preparing its initial FR Y-14M as of the end of the third month 
after the bank holding company first meets the $50 billion asset 
threshold (rather than as of the month in which the bank holding 
company crosses the threshold) and must submit its first FR Y-14M 
within 90 days after the end of that month (at which time, data for the 
three intervening months would be due). For example, a bank holding 
company that crosses the $50 billion asset threshold as of September 
30, 2016, would be required to prepare its initial FR Y-14M report as 
of December 2016, and file its FR Y-14M reports for December 2016, 
January 2017, and February 2017 in March 2017. A bank holding company 
would continue to prepare its FR Y-14Q report as of the end of the 
first quarter after it initially crosses the threshold. The additional 
onboarding time should facilitate communications between the Federal 
Reserve and a bank holding company and better prepare the bank holding 
company to comply with FR Y-14 reporting requirements. Generally, a 
bank holding company does not begin the onboarding process, including 
dialogue with the data aggregators who collect the FR Y-14M data, until 
after the Federal Reserve confirms that the bank holding company has 
exceeded the asset threshold. Accordingly, providing for an extended 
onboarding period should help bank holding companies become better 
prepared to comply with the FR Y-14 reporting requirements when they 
take effect, which will improve data quality for initial reporting 
periods and reduce burdens and costs for reporting bank holding 
companies.

III. Other Amendments to the Capital Plan and Stress Test Rules

A. Lowering the de minimis Exception Threshold for All Bank Holding 
Companies

    As noted, a bank holding company subject to the capital plan rule 
must request prior approval for a capital distribution that has not 
explicitly been approved by the Board. However, in the event that a 
bank holding company received a notice of non-objection to its capital 
plan, the bank holding company may make a capital distribution that 
exceeds the amount described in the capital plan if: (1) The bank 
holding company remains well capitalized after the distribution,\40\ 
(2) the bank holding company's performance and capital levels following 
the distribution are consistent with its projections under the expected 
conditions in the bank holding company's capital plan, (3) the bank 
holding company provides 15 days' notice prior to execution and the 
Board does not object within that time period; and (4) the aggregate 
dollar amount of all capital distributions during the capital planning 
cycle (the period beginning on July 1 of a calendar year and ending on 
June 30 of the following year) would not exceed the total amount 
described in the bank holding company's capital plan by more than 1.00 
percent of the bank holding company's tier 1 capital as reported in the 
bank holding company's first quarter FR Y-9C.\41\
---------------------------------------------------------------------------

    \40\ As defined by 12 CFR 225.2(r).
    \41\ See 12 CFR 225.8(g)(2).
---------------------------------------------------------------------------

    The purpose of this de minimis exception is to provide flexibility 
for well-capitalized bank holding companies to distribute small, 
additional amounts of capital without the need for a complete re-
assessment of the bank holding company's capital plan. Prior to the 
2015 capital planning cycle, requests to make distributions under the 
de minimis exception were generally small and typically related to 
unanticipated events that improved a bank holding company's capital 
levels (such as tax rebates or litigation settlements). Over time, the 
Board has observed a pattern of certain bank holding companies using 
the de minimis exception to increase their common stock repurchases by 
the maximum amount allowed under the exception. This pattern risks 
treating the de minimis exception as an automatic add-on to approved 
common stock distributions under a bank holding company's capital plan 
rather than for its intended use for unanticipated events. Based on 
planned net common stock distributions (i.e., planned common stock 
dividends and repurchases less planned common stock issuances) for the 
CCAR 2016 approval period, the current level of the de minimis 
threshold would imply that bank holding companies could increase their 
net common stock capital distributions by 32 percent on average (median 
of 13 percent).\42\
---------------------------------------------------------------------------

    \42\ Net common stock distributions is calculated as planned 
common stock dividends and repurchases less planned common stock 
issuances. This analysis excludes firms that had no or negative net 
planned common stock distributions in their 2016 capital plans.
---------------------------------------------------------------------------

    The proposal would reduce the de minimis exception from 1.00 
percent to 0.25 percent of a bank holding company's tier 1 capital in 
order to ensure that a de minimis distribution would represent a 
smaller percentage of the bank holding company's approved capital 
distributions and tier 1 capital. Based on data from CCAR 2016, a 0.25 
percent de minimis threshold would enable bank holding companies to 
increase their planned net common stock distributions by 8 percent on 
average (median of 3 percent).
    The expected aggregate capital impact of this proposed change to 
the de minimis exception threshold can be evaluated on both a 
prospective and historical basis. On a prospective basis, a comparison 
can be made between the total de minimis capital distributions that 
could be made across all bank holding companies subject to CCAR 
(assuming all applicable conditions were met) under the proposal and 
under the current rule, by taking the difference between 1.00 percent 
and 0.25 percent of tier 1 capital across all firms. Based on data as 
of the first quarter of 2016, this difference equals $9.8 billion, 
equivalent to 0.10 percent of the total

[[Page 67248]]

risk-weighted assets of bank holding companies subject to CCAR in 
2016.\43\ On a historical basis, if a 0.25 percent de minimis 
limitation had applied during the CCAR 2015 cycle rather than a 1.00 
percent limitation, $2.3 billion of distributions actually made during 
the CCAR 2015 period would not have been permitted without prior 
approval, equivalent to 0.02 percent of total risk-weighted assets of 
bank holding companies subject to CCAR in 2015.
---------------------------------------------------------------------------

    \43\ Total risk-weighted assets across bank holding companies 
subject to CCAR in 2016 equaled $9.6 trillion.
---------------------------------------------------------------------------

    A smaller de minimis limitation would not prohibit these additional 
distributions. Instead, it would require the bank holding company to 
include the distributions in its next annual capital plan.
    In addition, with the proposed revision to the de minimis rule, 
bank holding companies would still be able to seek approval to make 
capital distributions not included in their capital plans, consistent 
with section 225.8(g) of the capital plan rule. Any bank holding 
company making such a request must provide adequate information 
regarding any changes to its risk profile, financial condition, and 
corporate structure since the previous CCAR exercise. In many cases, 
the Federal Reserve expects to request additional information from bank 
holding companies that request approval for additional capital 
distributions, which will likely include revised stress test results 
using updated data and scenarios. One exception is where a bank holding 
company replaces the foregone capital with capital of equal or higher 
quality prior to or concurrently with the incremental distribution.
    One important factor in the Board's decision on a capital 
distribution request is the size and complexity of the bank holding 
company making the request. All else equal, a capital distribution 
request from a LISCC or large and complex firm would likely require 
stronger justification than a request from a large and noncomplex firm. 
For instance, a request from a LISCC or large and complex firm directly 
related to an unforeseeable event at the time of the last capital plan 
submission that has a positive expected impact on current or future 
capital ratios would likely require more supporting evidence (for 
instance, updated stress test results) than a similar request from a 
large and noncomplex firm. This difference reflects the Federal 
Reserve's elevated expectations for capital planning at LISCC and large 
and complex firms, where any revision to a firm's capital plan to 
increase capital distributions following the CCAR qualitative 
assessment requires strong evidence and support.

B. Blackout Period for the de minimis Exception and Requests for 
Approval To Make Additional Distributions Not Included in a Bank 
Holding Company's Capital Plan

    In addition to proposing a change in the allowable size of the de 
minimis exception, the proposal would establish a one-quarter 
``blackout period'' while the Board is conducting CCAR (the second 
quarter of a calendar year) during which bank holding companies would 
not be able to submit a notice to use the de minimis exception or 
submit a request for prior approval for additional capital 
distributions that do not qualify for the de minimis exception. In the 
absence of this modification, the Federal Reserve's analysis in CCAR 
may not in all cases represent a comprehensive evaluation of the bank 
holding company's capital adequacy and the appropriateness of the bank 
holding company's planned capital actions in CCAR. Under the proposal, 
a bank holding company seeking to make capital distributions in the 
second quarter in excess of the amount described in the capital plan 
for which a non-objection was issued pursuant to the de minimis 
exception or prior approval process, when the CCAR exercise is 
underway, would be required submit a notice to use the de minimis 
exception by March 15 or submit a request for prior approval for 
incremental capital distributions that do not qualify for the de 
minimis exception by March 1 and reflect the additional distributions 
in its capital plan. The proposed blackout periods are expected to be 
effective for CCAR 2017.

C. Revisions to the Time Period From Which the Market Shock ``as-of'' 
Date May Be Selected

    Under the Board's stress test rules, the Board may require a bank 
holding company with significant trading activity to include a trading 
and counterparty component (``global market shock'') in its adverse and 
severely adverse scenarios for its company-run stress tests. Currently, 
the Board must select a date between January 1 and March 1 of the 
calendar year of the stress test cycle. However, in order to provide 
bank holding companies with as much time as possible to conduct their 
company-run stress tests and prepare their capital plans, the Board has 
typically specified the as-of date for the global market shock as early 
as possible in January. As such, the Board has a narrow window to 
select the as-of date for the market shock, effectively sometime very 
early in January. The narrow window creates the possibility for bank 
holding companies to artificially reduce the risk of their portfolios 
around the time of the market shock date. In addition, limiting the as-
of date for the market shock to the first weeks of the calendar year 
does not account for seasonality in trading activity--for example, 
trading activity typically slows towards the end of the calendar year 
and gradually picks up in the new calendar year.
    The proposal would allow the Board to select any date between 
October 1 of the prior year and March 1 of the year of the stress test 
cycle for the as-of date of the global market shock. Bank holding 
companies subject to the trading and counterparty component would be 
notified within two weeks of the selected as-of date for the global 
market shock, to enable the bank holding company to preserve trading 
and counterparty exposure data from the as-of date. This change would 
help ensure that the stress tests capture representative trading 
exposure for bank holding companies with significant trading activity, 
for example, by avoiding effects caused by unusual trading conditions 
around year-end. Moreover, the change would provide additional time for 
both bank holding companies and supervisors to implement the global 
market shock scenario in a well-controlled manner. Under the proposal, 
this change would take effect for the 2018 stress test cycle.

D. Removal of Obsolete Provisions

    In 2014, the Federal Reserve adjusted the capital planning and 
stress test cycles from an October 1 as-of date to a January 1 as-of 
date. The capital plan and stress test rules currently include several 
provisions reflecting the previous October 1 as-of date, as well as 
obsolete transition provisions for foreign banking organizations that 
previously relied on SR Letter 01-01,\44\ and for the application of 
the supplementary leverage ratio. The proposal would remove these 
provisions, as they are no longer operative.
---------------------------------------------------------------------------

    \44\ SR Letter 01-01 (January 5, 2001), available at 
www.federalreserve.gov/boarddocs/srletters/2001/sr0101.htm.
---------------------------------------------------------------------------

IV. Administrative Law Matters

A. Paperwork Reduction Act

    In accordance with section 3512 of the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3521) (PRA), the Board

[[Page 67249]]

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 OMB control 
numbers are 7100-0128, 7100-0341, and 7100-0342 for this information 
collection. The Board reviewed the proposed rule under the authority 
delegated to the Board by OMB.
    The proposed rule contains requirements subject to the PRA. The 
reporting requirements are found in sections 12 CFR 225.8.
    Comments are invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the Federal Reserve's functions, including 
whether the information has practical utility;
    b. The accuracy or the estimate of the burden of the information 
collections, including the validity of the methodology and assumptions 
used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comment will become a matter of public record. Comments on 
aspects of this notice that may affect reporting, recordkeeping, or 
disclosure requirements and burden estimates should be sent to: 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551. A copy of the comments may also be 
submitted to the OMB desk officer by mail to U.S. Office of Management 
and Budget, 725 17th Street NW., #10235, Washington, DC 20503 or by 
facsimile to 202-3955806, Attention, Agency Desk Officer.
    Proposed Revisions, With Extension for Three Years, of the 
Following Information Collections:
    (1) Title of Information Collection: Parent Company Only Financial 
Statements for Large Holding Companies.
    Agency Form Number: FR Y-9C; FR Y-9LP; FR Y-9SP; FR Y-9ES; FR Y-
9CS.
    OMB Control Number: 7100-0128.
    Frequency of Response: Quarterly, semi-annually, and annually.
    Affected Public: Businesses or other for-profit.
    Respondents: Bank holding companies (BHCs), savings and loan 
holding companies (SLHCs), securities holding companies (SHCs), and 
U.S. intermediate holding companies (IHCs), (collectively, ``holding 
companies'').
    Abstract: The FR Y-9LP serves as standardized financial statements 
for large parent holding companies. The FR Y-9 family of reporting 
forms continues to be the primary source of financial data on holding 
companies that examiners rely on in the intervals between on-site 
inspections. Financial data from these reporting forms are used to 
detect emerging financial problems, to review performance and conduct 
pre-inspection analysis, to monitor and evaluate capital adequacy, to 
evaluate holding company mergers and acquisitions, and to analyze a 
holding company's overall financial condition to ensure the safety and 
soundness of its operations.
    Current Actions: The proposal would amend the FR Y-9LP to include 
new line item 17 of PC-B Memoranda (Total nonbank assets of a holding 
company subject to the Federal Reserve Board's capital plan rule) for 
purposes of identifying large and noncomplex firms subject to the 
capital plan rule. Under the proposal, a top-tier holding company that 
is subject to the Board's capital plan rule would be required to report 
on the FR Y-9LP the average dollar amount for the calendar quarter (as 
calculated on either a daily, weekly, or monthly basis during the 
calendar quarter) of its total nonbank assets of consolidated nonbank 
subsidiaries, whether held directly or indirectly or held through 
lower-tier holding companies, and its direct investments in 
unconsolidated nonbank subsidiaries, associated nonbank companies, and 
those nonbank corporate joint ventures over which the bank holding 
company exercises significant influence (collectively, ``nonbank 
companies'').\45\ As noted in section II.C.2 of this preamble, the 
Board seeks comment as to whether a daily, weekly, or monthly average 
would be most appropriate for this calculation. This proposed amendment 
would be effective as of March 31, 2017.
---------------------------------------------------------------------------

    \45\ For purposes of the FR Y-9LP, (i) a subsidiary is a company 
in which the reporting bank holding company directly or indirectly 
owns more than 50 percent of the outstanding voting stock; (ii) an 
associated company is a corporation in which the reporting bank 
holding company, directly or indirectly, owns 20 to 50 percent of 
the outstanding voting stock and over which the reporting bank 
holding company exercises significant influence; and (iii) a 
corporate joint venture is a corporation owned and operated by a 
group of companies, no one of which has a majority interest, as a 
separate and specific business or project for the mutual benefit of 
that group of companies.
---------------------------------------------------------------------------

    Nonbank companies, for purposes of this measure, would exclude (i) 
all national banks, state member banks, state nonmember insured banks 
(including insured industrial banks), federal savings associations, 
federal savings banks, thrift institutions (collectively for purposes 
of this proposed item 17, ``depository institutions'') and (ii) except 
for an Edge or Agreement Corporation designated as ``Nonbanking'' in 
the box on the front page of the Consolidated Report of Condition and 
Income for Edge and Agreement Corporations (FR 2886b), any subsidiary 
of a depository institution (for purposes of this proposed item 17, 
``depository institution subsidiary'').
    All intercompany assets and operating revenue among the nonbank 
companies should be eliminated, but assets and operating revenue with 
the reporting holding company; any depository institution; any 
depository institution subsidiary; and for a reporting holding company 
that is a subsidiary of a foreign banking organization, any branch or 
agency of the foreign banking organization or any non-U.S. subsidiary, 
non-U.S. associated company, or non-U.S. corporate joint venture of the 
foreign banking organization that is not held through the reporting 
holding company, should be included. For example, eliminate the loans 
made by one nonbank company to a second nonbank company, but do not 
eliminate loans made by one nonbank company to the parent holding 
company; depository institution; depository institution subsidiary; or 
for a reporting holding company that is a subsidiary of a foreign 
banking organization, any branch or agency of the foreign banking 
organization or any non-U.S. subsidiary, non-U.S. associated company, 
or non-U.S. corporate joint venture of the foreign banking organization 
that is not held through the reporting holding company.
    While the FR Y-9LP collects another measure of nonbank assets (line 
item 15 of PC-B Memoranda (Total combined nonbank assets of nonbank 
subsidiaries)), the proposed nonbank assets measure differs in several 
important ways. Specifically, proposed line item 17 excludes assets of 
an insured industrial bank, federal savings association, federal 
savings bank, or thrift institution and includes assets of an Edge or 
Agreement Corporation designated as ``Nonbanking'' in the box on the 
front page of the Consolidated Report of Condition and Income for Edge 
and Agreement Corporations (FR 2886b). It also includes the value of an 
investment in an unconsolidated

[[Page 67250]]

nonbank company that is held directly by the holding company. While 
these elements may be sourced from other reporting forms, the new line 
item is necessary to reflect the elimination of intercompany 
transactions among these nonbank companies, as described above.
    Number of Respondents: Proposed revision would apply to top-tier 
holding companies subject to the Board's capital plan rule (BHCs and 
IHCs with total consolidated assets of $50 billion or more), for a 
total of 38 of the existing 792 FR Y-9LP respondents. FR Y-9C (non-
Advanced Approaches holding companies or other respondents): 654; FR Y-
9C (Advanced Approaches holding companies or other respondents): 13; FR 
Y-9SP: 4,122; FR Y-9ES: 88; FR Y-9CS: 236.
    Estimated Average Hours per Response: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 50.17 hours; FR Y-
9C (Advanced Approaches holding companies or other respondents): 52.42 
hours; FR Y-9LP: 5.25 hours; FR Y-9SP: 5.4 hours; FR Y-9ES: 0.5 hours; 
FR Y-9CS: 0.5 hours.
    Current Estimated Annual Burden Hours: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 131,245 hours; FR 
Y-9C (Advanced Approaches holding companies or other respondents): 
2,674 hours; FR Y-9LP: 16,632 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR 
Y-9CS: 472.
    Proposed Revisions only change in Estimated Annual Burden Hours: FR 
Y-9LP: 76 hours (0.5 hours per quarter for the 38 impacted FR Y-9LP 
respondents).
    Proposed Total Estimated Annual Burden Hours: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 131,245 hours; FR 
Y-9C (Advanced Approaches holding companies or other respondents): 
2,674 hours; FR Y-9LP: 16,651 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR 
Y-9CS: 472.
    (2) Title of Information Collection: Capital Assessments and Stress 
Testing information collection.
    Agency Form Number: FR Y-14A/Q/M.
    OMB Control Number: 7100-0341.
    Frequency of Response: Annually, semi-annually, quarterly, and 
monthly.
    Affected Public: Businesses or other for-profit.
    Respondents: The respondent panel consists of any top-tier bank 
holding company (BHC) or intermediate holding company (IHC) that has 
$50 billion or more in total consolidated assets, as determined based 
on: (i) The average of the firm's total consolidated assets in the four 
most recent quarters as reported quarterly on the firm's Consolidated 
Financial Statements for Bank Holding Companies (FR Y-9C) (OMB No. 
7100-0128); or (ii) the average of the firm's total consolidated assets 
in the most recent consecutive quarters as reported quarterly on the 
firm's FR Y-9Cs, if the firm has not filed an FR Y-9C for each of the 
most recent four quarters. Reporting is required as of the first day of 
the quarter immediately following the quarter in which it meets this 
asset threshold, unless otherwise directed by the Board.
    Abstract: The data collected through the FR Y-14A/Q/M schedules 
provide the Board with the additional information and perspective 
needed to help ensure that large BHCs and IHCs have strong, 
firm[hyphen]wide risk measurement and management processes supporting 
their internal assessments of capital adequacy and that their capital 
resources are sufficient given their business focus, activities, and 
resulting risk exposures. The annual CCAR exercise is also complemented 
by other Board supervisory efforts aimed at enhancing the continued 
viability of large firms, including continuous monitoring of firms' 
planning and management of liquidity and funding resources and regular 
assessments of credit, market and operational risks, and associated 
risk management practices. Information gathered in this data collection 
is also used in the supervision and regulation of these financial 
institutions. In order to fully evaluate the data submissions, the 
Board may conduct follow-up discussions with or request responses to 
follow up questions from respondents, as needed.
    The Capital Assessments and Stress Testing information collection 
consists of the FR Y-14A, Q, and M reports. The semi-annual FR Y-14A 
collects 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.\46\ The quarterly FR Y-14Q collects granular 
data on various asset classes, including loans, securities, and trading 
assets, and pre-provision net revenue (PPNR) for the reporting period. 
The monthly FR Y-14M comprises three retail portfolio- and loan-level 
collections, and one detailed address matching collection to supplement 
two of the portfolio and loan-level collections.
---------------------------------------------------------------------------

    \46\ A BHC that must re-submit its capital plan generally also 
must provide a revised FR Y-14A in connection with its resubmission.
---------------------------------------------------------------------------

    Current Actions: The Capital Assessments and Stress Testing Report 
(FR Y-14 series of reports; OMB No. 7100-0341) collects data used to 
support supervisory stress testing models and continuous monitoring 
efforts for bank holding companies with total consolidated assets of 
$50 billion or more. The FR Y-14 consists of three reports, the semi-
annual FR Y-14A, the quarterly FR Y-14Q, and monthly FR Y-14M. Each 
report contains multiple schedules, several of which are reported only 
by bank holding companies that meet specified materiality thresholds. 
In discussions on CCAR, several large and noncomplex firms recommended 
that the Board revise the FR Y-14 series of reports to reduce the 
reporting burden on these firms. For instance, these large and 
noncomplex firms suggested that the Board raise the materiality 
threshold for the FR Y-14 reports and reduce the detail required in the 
supporting documentation requirements. The proposal would reduce 
burdens associated with reporting the FR Y-14 schedules for large and 
noncomplex firms by raising the materiality threshold, reducing 
supporting documentation requirements, removing several sub-schedules 
from the FR Y-14A Summary Schedule, and using the median loss rate for 
immaterial portfolios.
    The proposal would increase the materiality thresholds for filing 
schedules on the FR Y-14Q report and the FR Y-14M report for large and 
noncomplex firms. The FR Y-14 instructions currently define material 
portfolios as those with asset balances greater than $5 billion or 
asset balances greater than five percent of tier 1 capital, both 
measured as an average for the four quarters preceding the reporting 
quarter.\47\ The proposal would revise the FR Y-14's definition of a 
``material portfolio'' for large and noncomplex firms to mean a 
portfolio with asset balances greater than either (1) $5 billion or (2) 
10 percent of tier 1 capital on average for the four quarters preceding 
the reporting quarter.\48\ As a result of this change, respondents 
would be able to exclude certain portfolios from reporting and in some 
cases may

[[Page 67251]]

not be required to report certain schedules at all.
---------------------------------------------------------------------------

    \47\ Respondents have the option to complete the data schedules 
for immaterial portfolios.
    \48\ The four quarter average percent of tier 1 capital is 
calculated as the sum of the firm's preceding four quarters of 
balances subject to the particular materiality threshold divided by 
the sum of the firm's proceeding four quarters of tier 1 capital.
---------------------------------------------------------------------------

    In addition, the proposal would reduce the supporting documentation 
a large and noncomplex firm would be required to be submit with its 
capital plan. Appendix A of the FR Y-14A report outlines qualitative 
information that a bank holding company should submit in support of its 
projections, including descriptions of the methodologies used to 
develop the internal projections of capital across scenarios and other 
analyses that support the bank holding company's comprehensive capital 
plans. The proposal would revise the instructions to Appendix A of the 
FR Y-14A to remove the requirement that a large and noncomplex firm 
include in its capital plan submission certain documentation regarding 
its models, including any model inventory mapping document, methodology 
documentation, model technical documents, and model validation 
documentation. Large and noncomplex firms would still be required to be 
able to produce these materials upon request by the Federal Reserve, 
and all or a subset of these firms may be required to provide this 
documentation depending on the focus of the supervisory review of large 
and noncomplex firm capital plans. Removing the requirement that a 
large and noncomplex firm submit this information in connection with 
its capital plan should reduce the resources needed to prepare the plan 
for submission and alleviate concerns of an adverse supervisory finding 
that a capital plan is incomplete based on the failure to provide 
documentation.
    Under the proposal, large and noncomplex firms would no longer be 
required to complete several elements of the FR Y-14A Schedule A 
(Summary), including the Securities OTTI methodology sub-schedule, 
Securities Market Value source sub-schedule, Securities OTTI by 
security sub-schedule, the Retail repurchase sub-schedule, the Trading 
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\49\ The revised instructions for the FR Y-14A Summary 
schedule reporting form are available on the Board's public Web site. 
Removing these elements should reduce burdens associated with 
collecting and validating this data, responding to follow-up inquiries, 
and implementing and maintaining technical systems. Under the proposal, 
a large and noncomplex firm may adopt these changes for the FR Y-14A 
report as of December 31, 2016, or as of June 30, 2017. The Federal 
Reserve continues to review the details required to be reported in the 
FR Y-14 series of reports, and may propose additional changes in the 
future to further reduce burdens associated with these reporting 
requirements.
---------------------------------------------------------------------------

    \49\ A large and noncomplex firm would be required to report 
line item 138 of the income statement, as that line item is 
currently derived from the retail repurchase sub-schedule.
---------------------------------------------------------------------------

    These changes are expected to decrease burden for the information 
collection by 56,454 hours. This includes a decrease in the average 
hours per response for the FR Y-14A due to the elimination of the 
requirement for large and noncomplex firms to file four Summary sub-
schedules and a reduction in the supporting documentation requirements, 
resulting in a decrease of 6,346 hours. The modification to the 
materiality threshold for the FR Y-14Q and FR Y-14M reports would be 
anticipated to reduce the number of firms filing certain schedules on 
the FR Y-14Q and FR Y-14M reports. Specifically, this would result in a 
decrease of 1,088 hours on the FR Y-14Q report and 49,020 hours for the 
FR Y-14M report.
    Number of Respondents: 38.
    Estimated Average Hours per Response: FR Y-14A: Summary, 987 hours; 
Macro scenario, 31 hours; Operational Risk, 12 hours; Regulatory 
capital transitions, 23 hours; Regulatory capital instruments, 20 
hours; Retail repurchase, 20 hours; and Business plan changes, 10 
hours. FR Y-14Q: Securities risk, 13 hours; Retail risk, 16 hours; 
PPNR, 711 hours; Wholesale, 152 hours; Trading, 1,926 hours; Regulatory 
capital transitions, 23 hours; Regulatory capital instruments, 52 
hours; Operational risk, 50 hours; MSR Valuation, 24 hours; 
Supplemental, 4 hours; Retail FVO/HFS, 16 hours; CCR, 508 hours; and 
Balances, 16 hours. FR Y-14M: 1st lien mortgage, 515 hours; Home 
equity, 515 hours; and Credit card, 510 hours. FR Y-14 On-Going 
automation revisions, 480 hours; and implementation, 7,200 hours. FR Y-
14 Attestation: Implementation, 4,800 hours; and on-going revisions, 
2,560 hours.
    Current Estimated Annual Burden Hours: FR Y-14A: Summary, 75,012 
hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours; 
Regulatory capital transitions, 874 hours; Regulatory capital 
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business 
plan changes, 380 hours. FR Y-14Q: Securities risk, 2,432 hours; Retail 
risk, 1,976 hours, Pre-provision net revenue (PPNR), 108,072 hours; 
Wholesale, 23,104 hours; Trading, 46,224 hours; Regulatory capital 
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours; 
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR) 
Valuation, 1,632 hours; Supplemental, 608 hours; and Retail Fair Value 
Option/Held for Sale (Retail FVO/HFS), 1,728 hours; Counterparty, 
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage, 
228,660 hours; Home equity, 197,760 hours; and Credit card, 153,000 
hours. FR Y-14 On-going automation revisions, 18,720 hours; and 
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours; 
and on-going revisions, 23,040 hours.
    Proposed Revisions Only Change in Estimated Annual Burden Hours: FR 
Y-14A: -6,346 Hours, FR Y-14Q: -1,088 FR Y-14M: -49,020 Hours.
    Proposed Total Estimated Annual Burden Hours: FR Y-14A: Summary, 
68,780 hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours; 
Regulatory capital transitions, 760 hours; Regulatory capital 
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business 
plan changes, 380. FR Y-14Q: Securities risk, 2,280 hours; Retail risk, 
1,824 hours, Pre-provision net revenue (PPNR), 108,072 hours; 
Wholesale, 22,952 hours; Trading, 46,224 hours; Regulatory capital 
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours; 
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR) 
Valuation, 1,288 hours; Supplemental, 608 hours; and Retail Fair Value 
Option/Held for Sale (Retail FVO/HFS), 1,440 hours; Counterparty, 
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage, 
228,660 hours; Home equity, 191,580 hours; and Credit card, 110,160 
hours. FR Y-14 On-going automation revisions, 18,720 hours; and 
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours; 
and on-going revisions, 23,040 hours.
    (3) Title of Information Collection: Recordkeeping and Reporting 
Requirements Associated with Regulation Y (Capital Plans).
    Agency Form Number: Reg Y-13.
    OMB Control Number: 7100-0342.
    Frequency of Response: Annually.
    Affected Public: Businesses or other for-profit.
    Respondents: BHCs and IHCs.
    Abstract: Regulation Y (12 CFR part 225) requires large bank 
holding companies (BHCs) to submit capital plans to the Federal Reserve 
on an annual basis and to require such BHCs to request prior approval 
from the Federal Reserve under certain circumstances before making a 
capital distribution.
    Current Actions: The proposed rule contains requirements subject to 
the

[[Page 67252]]

PRA. The collection of information revised by this final rule is found 
in section 225.8 of Regulation Y (12 CFR part 225). Under section 
225.8(f)(2) of the proposal, large and noncomplex firms would no longer 
be subject to the provisions of the Board's capital plan rule whereby 
the Board can object to a capital plan on the basis of qualitative 
deficiencies in the firm's capital planning process. In feedback 
meetings that the Board held on CCAR, participants from large and 
noncomplex firms expressed the view that the provision of the rule 
permitting the Board to object to a capital plan on the basis of 
qualitative deficiencies, in their view, required a large and 
noncomplex firm to develop a large amount of documentation and stress 
test models to the same degree as the largest firms in order to avoid 
risk of a public objection to its capital plan. Accordingly, this 
revision to section 225.8(f)(2) is expected to reduce the recordkeeping 
requirements for large and noncomplex firms by approximately 25 
percent, or 3,000 hours for large and noncomplex firms.
    The proposed rule defines a large and noncomplex bank holding 
company as a bank holding company with average total consolidated 
assets of $50 billion or more but less than $250 billion, consolidated 
total on-balance sheet foreign exposure of less than $10 billion, and 
average total nonbank assets of less than $75 billion. While the total 
consolidated assets and on-balance sheet foreign exposure measures are 
calculated for purposes of other regulatory requirements, the proposed 
average total nonbank assets threshold is not otherwise calculated for 
purposes of a regulatory requirement.
    For the first calculation date (December 31, 2016), firms will be 
required to calculate nonbank assets by aggregating items reported on 
other reporting forms. Specifically, nonbank assets would be calculated 
as (A) total combined nonbank assets of nonbank subsidiaries, as 
reported on line 15a of Schedule PC-B of the Parent Company Only 
Financial Statements for Large Holding Companies (FR Y-9LP) as of 
December 31, 2016; plus (B) the total amount of equity investments in 
nonbank subsidiaries and associated companies as reported on line 2a of 
Schedule PC-A of the FR Y-9LP as of December 31, 2016; plus (C) assets 
of each Edge and Agreement Corporation, as reported on the Consolidated 
Report of Condition and Income for Edge and Agreement Corporations (FR 
2886b) as of December 31, 2016, to the extent such corporation is 
designated as ``Nonbanking'' in the box on the front page of the FR 
2886b; minus (D) assets of a federal savings association, federal 
savings bank, or thrift subsidiary, as reported on the Report of 
Condition and Income (Call Report) as of December 31, 2016. Performing 
this calculation is expected to require 1 hour per firm.
    As noted above, for calculation dates following the initial 
calculation date, the Federal Reserve is adding a new line item to the 
FR Y-9LP (Parent Company Only Financial Statements for Large Holding 
Companies) to collect average total nonbank assets; however, for the 
December 31, 2016 calculation date, a firm will be required to 
calculate the line item based on existing line items. The burden 
associated with this line item will be reflected in that collection.
    Number of Respondents: 38.
    Estimated Average Hours per Response: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 11,920 hours; annual capital planning 
reporting (225.8(e)(1)(ii)), 80 hours; annual capital planning 
recordkeeping (225.8(e)(1)(iii)), 100 hours; data collections reporting 
((225.8(e)(3)(i)-(vi)), 1,005 hours; data collections reporting 
(225.8(e)(4)), 100 hours; review of capital plans by the Federal 
Reserve reporting (225.8(f)(3)(i)), 16 hours; prior approval request 
requirements reporting (225.8(g)(1), (3), & (4)), 100 hours; prior 
approval request requirements exceptions (225.8(g)(3)(iii)(A)), 16 
hours; prior approval request requirements reports (225.8(g)(6)), 16 
hours.
    Current Estimated Annual Burden Hours: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 452,960 hours; annual capital planning 
reporting (225.8(e)(1)(ii)), 2,240 hours; annual capital planning 
recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data collections 
reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data collections 
reporting (225.8(e)(4)), 1,000 hours; review of capital plans by the 
Federal Reserve reporting (225.8(f)(3)(i)), 32 hours; prior approval 
request requirements reporting (225.8(g)(1), (3), & (4)), 2,600 hours; 
prior approval request requirements exceptions (225.8(g)(3)(iii)(A)), 
32 hours; prior approval request requirements reports (225.8(g)(6)), 32 
hours.
    Proposed Revisions Only Change in Estimated Average Hours per 
Response: For large and noncomplex firms: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 8,920 hours.
    Proposed Revisions Only Change in Estimated Annual Burden Hours: 
Annual capital planning reporting (225.8(e)(1)(ii)): -54,000 hours.
    Proposed Total Estimated Annual Burden Hours: Annual capital 
planning recordkeeping (225.8(e)(1)(i)) (LISCC and large and complex 
firms), 238,400 hours; Annual capital planning recordkeeping 
(225.8(e)(1)(i) (large and noncomplex firms), 160,560 hours; annual 
capital planning reporting (225.8(e)(1)(ii)), 2,240 hours; annual 
capital planning recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data 
collections reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data 
collections reporting (225.8(e)(4)), 1,000 hours; review of capital 
plans by the Federal Reserve reporting (225.8(f)(3)(i)), 32 hours; 
prior approval request requirements reporting (225.8(g)(1), (3), & 
(4)), 2,600 hours; prior approval request requirements exceptions 
(225.8(g)(3)(iii)(A)), 32 hours; prior approval request requirements 
reports (225.8(g)(6)), 32 hours.

B. Regulatory Flexibility Act

    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., 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 
(``SBA''), a small entity includes a depository institution, bank 
holding company, or savings and loan holding company with total assets 
of $550 million or less (a small banking organization).\50\ As of June 
30, 2016, there were approximately 594 small state member banks, 3,203 
small bank holding companies and 162 small savings and loan holding 
companies. The proposed rule would apply only to bank holding companies 
with total consolidated asset of $50 billion or more. Companies that 
would be subject to the proposed rule therefore substantially exceed 
the $550 million total asset threshold at which a company is considered 
a small company under SBA regulations. Therefore, there are no 
significant alternatives to the proposed rule that would have less 
economic impact on small banking organizations. As discussed above, the 
projected reporting, recordkeeping, and other compliance requirements 
of the rule are expected to be small. The Board does not believe that 
the rule duplicates, overlaps, or conflicts with any other Federal 
rules. In light of the foregoing, the Board does not believe that the 
final rule would have a significant economic

[[Page 67253]]

impact on a substantial number of small entities.
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    \50\ 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 Board welcomes comment on all aspects of its analysis. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.

C. Solicitation of Comments of Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies 
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 and straightforward manner, and invites comment on the use of 
plain language.
    For example:
     Have we organized the material to suit your needs? If not, 
how could the rule be more clearly stated?
     Are the requirements in the rule clearly stated? If not, 
how could the rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would make the regulation easier to 
understand?
     Would more, but shorter, sections be better? If so, which 
sections should be changed?
     What else could we do to make the regulation easier to 
understand?

List of Subjects

12 CFR Part 225

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Holding companies, Reporting and recordkeeping requirements, 
Securities, Stress testing.

12 CFR Part 252

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Federal Reserve System, Holding companies, Reporting and 
recordkeeping requirements, Securities, Stress testing.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, the Board 
of Governors of the Federal Reserve System proposes to amend 12 CFR 
chapter II as follows:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
1. The authority citation for part 225 continues to read as follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906, 
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.

Subpart A--General Provisions

0
2. Section 225.8 is revised to read as follows:


Sec.  225.8  Capital planning.

    (a) Purpose. This section establishes capital planning and prior 
notice and approval requirements for capital distributions by certain 
bank holding companies.
    (b) Scope and reservation of authority--(1) Applicability. Except 
as provided in paragraph (c) of this section, this section applies to:
    (i) Any top-tier bank holding company domiciled in the United 
States with average total consolidated assets of $50 billion or more 
($50 billion asset threshold);
    (ii) Any other bank holding company domiciled in the United States 
that is made subject to this section, in whole or in part, by order of 
the Board;
    (iii) Any U.S. intermediate holding company subject to this section 
pursuant to 12 CFR 252.153; and
    (iv) Any nonbank financial company supervised by the Board that is 
made subject to this section pursuant to a rule or order of the Board.
    (2) Average total consolidated assets. For purposes of this 
section, average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
for the four most recent consecutive quarters. If the bank holding 
company has not filed the FR Y-9C for each of the four most recent 
consecutive quarters, average total consolidated assets means the 
average of the company's total consolidated assets, as reported on the 
company's FR Y-9C, for the most recent quarter or consecutive quarters, 
as applicable. Average total consolidated assets are measured on the 
as-of date of the most recent FR Y-9C used in the calculation of the 
average.
    (3) Ongoing applicability. A bank holding company (including any 
successor bank holding company) that is subject to any requirement in 
this section shall remain subject to such requirements unless and until 
its total consolidated assets fall below $50 billion for each of four 
consecutive quarters, as reported on the FR Y-9C and effective on the 
as-of date of the fourth consecutive FR Y-9C.
    (4) Reservation of authority. Nothing in this section shall limit 
the authority of the Federal Reserve to issue a capital directive or 
take any other supervisory or enforcement action, including an action 
to address unsafe or unsound practices or conditions or violations of 
law.
    (5) Rule of construction. Unless the context otherwise requires, 
any reference to bank holding company in this section shall include a 
U.S. intermediate holding company and shall include a nonbank financial 
company supervised by the Board to the extent this section is made 
applicable pursuant to a rule or order of the Board.
    (c) Transitional arrangements. (1) Transition periods for certain 
bank holding companies. (i) A bank holding company that meets the $50 
billion asset threshold (as measured under paragraph (b) of this 
section) on or before September 30 of a calendar year must comply with 
the requirements of this section beginning on January 1 of the next 
calendar year, unless that time is extended by the Board in writing.
    (ii) A bank holding company that meets the $50 billion asset 
threshold after September 30 of a calendar year must comply with the 
requirements of this section beginning on January 1 of the second 
calendar year after the bank holding company meets the $50 billion 
asset threshold, unless that time is extended by the Board in writing.
    (iii) The Board or the appropriate Reserve Bank with the 
concurrence of the Board, may require a bank holding company described 
in paragraph (c)(1)(i) or (ii) of this section to comply with any or 
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of 
this section if the Board or appropriate Reserve Bank with concurrence 
of the Board, determines that the requirement is appropriate on a 
different date based on the company's risk profile, scope of operation, 
or financial condition and provides prior notice to the company of the 
determination.
    (2) Transition periods for subsidiaries of certain foreign banking 
organizations. (i) U.S. intermediate holding companies. (A) A U.S. 
intermediate holding company required to be established or designated 
pursuant to 12 CFR 252.153 on or before September 30 of a calendar year 
must comply with the requirements of this section beginning on January 
1 of the next calendar year, unless that time is extended by the Board 
in writing.

[[Page 67254]]

    (B) A U.S. intermediate holding company required to be established 
or designated pursuant to 12 CFR 252.153 after September 30 of a 
calendar year must comply with the requirements of this section 
beginning on January 1 of the second calendar year after the U.S. 
intermediate holding company is required to be established, unless that 
time is extended by the Board in writing.
    (C) The Board or the appropriate Reserve Bank with the concurrence 
of the Board, may require a U.S. intermediate holding company described 
in paragraph (c)(2)(i)(A) or (B) of this section to comply with any or 
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of 
this section if the Board or appropriate Reserve Bank with concurrence 
of the Board, determines that the requirement is appropriate on a 
different date based on the company's risk profile, scope of operation, 
or financial condition and provides prior notice to the company of the 
determination.
    (ii) Bank holding company subsidiaries of U.S. intermediate holding 
companies required to be established by July 1, 2016. (A) 
Notwithstanding any other requirement in this section, a bank holding 
company that is a subsidiary of a U.S. intermediate holding company 
(or, with the mutual consent of the company and Board, another bank 
holding company domiciled in the United States) shall remain subject to 
paragraph (e) of this section until December 31, 2017, and shall remain 
subject to the requirements of paragraphs (f) and (g) of this section 
until the Board issues an objection or non-objection to the capital 
plan of the relevant U.S. intermediate holding company.
    (B) After the time periods set forth in paragraph (c)(2)(ii)(A) of 
this section, this section will cease to apply to a bank holding 
company that is a subsidiary of a U.S. intermediate holding company, 
unless otherwise determined by the Board in writing.
    (d) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Advanced approaches means the risk-weighted assets calculation 
methodologies at 12 CFR part 217, subpart E, as applicable, and any 
successor regulation.
    (2) Average total nonbank assets means:
    (i) For purposes of the capital plan cycle beginning January 1, 
2017:
    (A) Total combined nonbank assets of nonbank subsidiaries, as 
reported on line 15a of Schedule PC-B of the Parent Company Only 
Financial Statements for Large Holding Companies (FR Y-9LP) as of 
December 31, 2016; plus
    (B) The total amount of equity investments in nonbank subsidiaries 
and associated companies as reported on line 2a of Schedule PC-A of the 
FR Y-9LP as of December 31, 2016 (except that any investments reflected 
in (A) may be eliminated); plus
    (C) Assets of each Edge and Agreement Corporation, as reported on 
the Consolidated Report of Condition and Income for Edge and Agreement 
Corporations (FR 2886b) as of December 31, 2016, to the extent such 
corporation is designated as ``Nonbanking'' in the box on the front 
page of the FR 2886b; minus
    (D) Assets of each federal savings association, federal savings 
bank, or thrift subsidiary, as reported on the Report of Condition and 
Income (Call Report) as of December 31, 2016.
    (ii) For purposes of any capital plan cycles beginning on or after 
January 1, 2018, the average of the total nonbank assets of a holding 
company subject to the Federal Reserve Board's capital plan rule, 
calculated in accordance with the instructions to the FR Y-9LP, for the 
four most recent consecutive quarters or, if the bank holding company 
has not filed the FR Y-9LP for each of the four most recent consecutive 
quarters, for the most recent quarter or consecutive quarters, as 
applicable.
    (3) BHC stress scenario means a scenario designed by a bank holding 
company that stresses the specific vulnerabilities of the bank holding 
company's risk profile and operations, including those related to the 
company's capital adequacy and financial condition.
    (4) Capital action means any issuance or redemption of a debt or 
equity capital instrument, any capital distribution, and any similar 
action that the Federal Reserve determines could impact a bank holding 
company's consolidated capital.
    (5) Capital distribution means a redemption or repurchase of any 
debt or equity capital instrument, a payment of common or preferred 
stock dividends, a payment that may be temporarily or permanently 
suspended by the issuer on any instrument that is eligible for 
inclusion in the numerator of any minimum regulatory capital ratio, and 
any similar transaction that the Federal Reserve determines to be in 
substance a distribution of capital.
    (6) Capital plan means a written presentation of a bank holding 
company's capital planning strategies and capital adequacy process that 
includes the mandatory elements set forth in paragraph (e)(2) of this 
section.
    (7) Capital plan cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
    (8) Capital policy means a bank holding company's written 
assessment of the principles and guidelines used for capital planning, 
capital issuance, capital usage and distributions, including internal 
capital goals; the quantitative or qualitative guidelines for capital 
distributions; the strategies for addressing potential capital 
shortfalls; and the internal governance procedures around capital 
policy principles and guidelines.
    (9) Large and noncomplex bank holding company means any bank 
holding company subject to this section that has, as of December 31 of 
the calendar year prior to the capital plan cycle:
    (i) Average total consolidated assets of less than $250 billion;
    (ii) Consolidated total on-balance sheet foreign exposure at the 
most recent year-end equal to less than $10 billion (where total on-
balance sheet foreign exposure equals total foreign countries cross-
border claims on an ultimate-risk basis, plus total foreign countries 
claims on local residents on an ultimate-risk basis, plus total foreign 
countries fair value of foreign exchange and derivative products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report); and
    (iii) Average total nonbank assets of less than $75 billion.
    (10) Minimum regulatory capital ratio means any minimum regulatory 
capital ratio that the Federal Reserve may require of a bank holding 
company, by regulation or order, including the bank holding company's 
tier 1 and supplementary leverage ratios as calculated under 12 CFR 
part 217, including the deductions required under 12 CFR 248.12, as 
applicable, and the bank holding company's common equity tier 1, tier 
1, and total risk-based capital ratios as calculated under 12 CFR part 
217, including the deductions required under 12 CFR 248.12 and the 
transition provisions at 12 CFR 217.1(f)(4) and 217.300; except that 
the bank holding company shall not use the advanced approaches to 
calculate its regulatory capital ratios.
    (11) Nonbank financial company supervised by the Board means a 
company that the Financial Stability Oversight Council has determined 
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be 
supervised by the Board and for which such determination is still in 
effect.

[[Page 67255]]

    (12) Planning horizon means the period of at least nine consecutive 
quarters, beginning with the quarter preceding the quarter in which the 
bank holding company submits its capital plan, over which the relevant 
projections extend.
    (13) Tier 1 capital has the same meaning as under 12 CFR part 217.
    (14) U.S. intermediate holding company means the top-tier U.S. 
company that is required to be established pursuant to 12 CFR 252.153.
    (e) General requirements. (1) Annual capital planning. (i) A bank 
holding company must develop and maintain a capital plan.
    (ii) A bank holding company must submit its complete capital plan 
to the Board and the appropriate Reserve Bank by April 5 of each 
calendar year, or such later date as directed by the Board or by the 
appropriate Reserve Bank with concurrence of the Board.
    (iii) The bank holding company's board of directors or a designated 
committee thereof must at least annually and prior to submission of the 
capital plan under paragraph (e)(1)(ii) of this section:
    (A) Review the robustness of the bank holding company's process for 
assessing capital adequacy,
    (B) Ensure that any deficiencies in the bank holding company's 
process for assessing capital adequacy are appropriately remedied; and
    (C) Approve the bank holding company's capital plan.
    (2) Mandatory elements of capital plan. A capital plan must contain 
at least the following elements:
    (i) An assessment of the expected uses and sources of capital over 
the planning horizon that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions, including:
    (A) Estimates of projected revenues, losses, reserves, and pro 
forma capital levels, including any minimum regulatory capital ratios 
(for example, leverage, tier 1 risk-based, and total risk-based capital 
ratios) and any additional capital measures deemed relevant by the bank 
holding company, over the planning horizon under expected conditions 
and under a range of scenarios, including any scenarios provided by the 
Federal Reserve and at least one BHC stress scenario;
    (B) A discussion of the results of any stress test required by law 
or regulation, and an explanation of how the capital plan takes these 
results into account; and
    (C) A description of all planned capital actions over the planning 
horizon.
    (ii) A detailed description of the bank holding company's process 
for assessing capital adequacy, including:
    (A) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital 
ratios, and serve as a source of strength to its subsidiary depository 
institutions;
    (B) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain sufficient capital to 
continue its operations by maintaining ready access to funding, meeting 
its obligations to creditors and other counterparties, and continuing 
to serve as a credit intermediary;
    (iii) The bank holding company's capital policy; and
    (iv) A discussion of any expected changes to the bank holding 
company's business plan that are likely to have a material impact on 
the bank holding company's capital adequacy or liquidity.
    (3) Data collection. Upon the request of the Board or appropriate 
Reserve Bank, the bank holding company shall provide the Federal 
Reserve with information regarding:
    (i) The bank holding company's financial condition, including its 
capital;
    (ii) The bank holding company's structure;
    (iii) Amount and risk characteristics of the bank holding company's 
on- and off-balance sheet exposures, including exposures within the 
bank holding company's trading account, other trading-related exposures 
(such as counterparty-credit risk exposures) or other items sensitive 
to changes in market factors, including, as appropriate, information 
about the sensitivity of positions to changes in market rates and 
prices;
    (iv) The bank holding company's relevant policies and procedures, 
including risk management policies and procedures;
    (v) The bank holding company's liquidity profile and management;
    (vi) The loss, revenue, and expense estimation models used by the 
bank holding company for stress scenario analysis, including supporting 
documentation regarding each model's development and validation; and
    (vii) Any other relevant qualitative or quantitative information 
requested by the Board or by the appropriate Reserve Bank to facilitate 
review of the bank holding company's capital plan under this section.
    (4) Re-submission of a capital plan. (i) A bank holding company 
must update and re-submit its capital plan to the appropriate Reserve 
Bank within 30 calendar days of the occurrence of one of the following 
events:
    (A) The bank holding company determines there has been or will be a 
material change in the bank holding company's risk profile, financial 
condition, or corporate structure since the bank holding company last 
submitted the capital plan to the Board and the appropriate Reserve 
Bank under this section; or
    (B) The Board or the appropriate Reserve Bank with concurrence of 
the Board, directs the bank holding company in writing to revise and 
resubmit its capital plan for any of the following reasons:
    (1) The capital plan is incomplete or the capital plan, or the bank 
holding company's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been, or will likely be, a material change in the 
bank holding company's risk profile (including a material change in its 
business strategy or any risk exposure), financial condition, or 
corporate structure;
    (3) The BHC stress scenario(s) are not appropriate for the bank 
holding company's business model and portfolios, or changes in 
financial markets or the macro-economic outlook that could have a 
material impact on a bank holding company's risk profile and financial 
condition require the use of updated scenarios; or
    (4) The capital plan or the condition of the bank holding company 
raise any of the issues described in paragraph (f)(2)(ii) of this 
section.
    (ii) A bank holding company may resubmit its capital plan to the 
Federal Reserve if the Board or the appropriate Reserve Bank objects to 
the capital plan.
    (iii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this 
section for up to an additional 60 calendar days, or such longer period 
as the Board or the appropriate Reserve Bank, with concurrence of the 
Board, determines, in its discretion, appropriate.
    (iv) Any updated capital plan must satisfy all the requirements of 
this section; however, a bank holding company may continue to rely on 
information submitted as part of a previously submitted capital plan to 
the extent that the information remains accurate and appropriate.
    (5) Confidential treatment of information submitted. The

[[Page 67256]]

confidentiality of information submitted to the Board under this 
section and related materials shall be determined in accordance with 
applicable exemptions under the Freedom of Information Act (5 U.S.C. 
552(b)) and the Board's Rules Regarding Availability of Information (12 
CFR part 261).
    (f) Review of capital plans by the Federal Reserve; publication of 
summary results. (1) Considerations and inputs. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will consider 
the following factors in reviewing a bank holding company's capital 
plan:
    (A) The comprehensiveness of the capital plan, including the extent 
to which the analysis underlying the capital plan captures and 
addresses potential risks stemming from activities across the firm and 
the company's capital policy;
    (B) The reasonableness of the bank holding company's capital plan, 
the assumptions and analysis underlying the capital plan, and the 
robustness of its capital adequacy process; and
    (C) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio on a pro forma basis under 
expected and stressful conditions throughout the planning horizon, 
including but not limited to any scenarios required under paragraphs 
(e)(2)(i)(A) and (e)(2)(ii) of this section.
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, will also consider the following information in reviewing a 
bank holding company's capital plan:
    (A) Relevant supervisory information about the bank holding company 
and its subsidiaries;
    (B) The bank holding company's regulatory and financial reports, as 
well as supporting data that would allow for an analysis of the bank 
holding company's loss, revenue, and reserve projections;
    (C) As applicable, the Federal Reserve's own pro forma estimates of 
the firm's potential losses, revenues, reserves, and resulting capital 
adequacy under expected and stressful conditions, including but not 
limited to any scenarios required under paragraphs (e)(2)(i)(A) and 
(e)(2)(ii) of this section, as well as the results of any stress tests 
conducted by the bank holding company or the Federal Reserve; and
    (D) Other information requested or required by the Board or the 
appropriate Reserve Bank, as well as any other information relevant, or 
related, to the bank holding company's capital adequacy.
    (2) Federal Reserve action on a capital plan. (i) Timing of action. 
The Board or the appropriate Reserve Bank with concurrence of the 
Board, will object, in whole or in part, to the capital plan or provide 
the bank holding company with a notice of non-objection to the capital 
plan:
    (A) By June 30 of the calendar year in which a capital plan was 
submitted pursuant to paragraph (e)(1)(ii) of this section; and
    (B) For a capital plan resubmitted pursuant to paragraph (e)(4) of 
this section, within 75 calendar days after the date on which a capital 
plan is resubmitted, unless the Board provides notice to the company 
that it is extending the time period.
    (ii) Objection. (A) Large and noncomplex bank holding companies. 
The Board, or the appropriate Reserve Bank with concurrence of the 
Board, may object to a capital plan submitted by a large and noncomplex 
bank holding company if it determines that the bank holding company has 
not demonstrated an ability to maintain capital above each minimum 
regulatory capital ratio on a pro forma basis under expected and 
stressful conditions throughout the planning horizon.
    (B) Bank holding companies that are not large and noncomplex bank 
holding companies. The Board or the appropriate Reserve Bank with 
concurrence of the Board, may object to a capital plan submitted by a 
bank holding company that is not a large and noncomplex bank holding 
company if it determines that:
    (1) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio on a pro 
forma basis under expected and stressful conditions throughout the 
planning horizon;
    (2) The bank holding company has material unresolved supervisory 
issues, including but not limited to issues associated with its capital 
adequacy process;
    (3) The assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies and 
practices that support its capital planning process, are not reasonable 
or appropriate; or
    (4) The bank holding company's capital planning process or proposed 
capital distributions otherwise constitute an unsafe or unsound 
practice, or would violate any law, regulation, Board order, directive, 
or condition imposed by, or written agreement with, the Board or the 
appropriate Reserve Bank. In determining whether a capital plan or any 
proposed capital distribution would constitute an unsafe or unsound 
practice, the Board or the appropriate Reserve Bank would consider 
whether the bank holding company is and would remain in sound financial 
condition after giving effect to the capital plan and all proposed 
capital distributions.
    (iii) Notification of decision. The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to object to a capital plan.
    (iv) General distribution limitation. If the Board or the 
appropriate Reserve Bank objects to a capital plan and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board, issues a non-objection to the bank holding company's capital 
plan, the bank holding company may not make any capital distribution, 
other than capital distributions arising from the issuance of a 
regulatory capital instrument eligible for inclusion in the numerator 
of a minimum regulatory capital ratio or capital distributions with 
respect to which the Board or the appropriate Reserve Bank has 
indicated in writing its non-objection.
    (v) Publication of summary results. The Board may disclose publicly 
its decision to object or not object to a bank holding company's 
capital plan under this section, along with a summary of the Board's 
analyses of that company. Any disclosure under this paragraph will 
occur by June 30 of the calendar year in which a capital plan was 
submitted pursuant to paragraph (e)(1)(ii) of this section, unless the 
Board determines that a later disclosure date is appropriate.
    (3) Request for reconsideration or hearing. (i) General. Within 15 
calendar days of receipt of a notice of objection to a capital plan by 
the Board or the appropriate Reserve Bank:
    (A) A bank holding company may submit a written request to the 
Board requesting reconsideration of the objection, including an 
explanation of why reconsideration should be granted. Within 15 
calendar days of receipt of the bank holding company's request, the 
Board will notify the company of its decision to affirm or withdraw the 
objection to the bank holding company's capital plan or a specific 
capital distribution; or
    (B) As an alternative to paragraph (f)(3)(i)(A) of this section, a 
bank holding company may request an informal hearing on the objection.
    (ii) Request for an informal hearing. (A) A request for an informal 
hearing shall be in writing and shall be submitted within 15 calendar 
days of a notice of an objection. The Board may,

[[Page 67257]]

in its sole discretion, order an informal hearing if the Board finds 
that a hearing is appropriate or necessary to resolve disputes 
regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided that 
the Board may extend this period upon notice to the requesting party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board issues a non-objection to the bank holding company's capital 
plan, the bank holding company may not make any capital distribution, 
other than those capital distributions with respect to which the Board 
or the appropriate Reserve Bank has indicated in writing its non-
objection.
    (4) Application of this section to other bank holding companies. 
The Board may apply this section, in whole or in part, to any other 
bank holding company by order based on the institution's size, level of 
complexity, risk profile, scope of operations, or financial condition.
    (g) Approval requirements for certain capital actions. (1) 
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (f)(2)(i) of this section, a bank holding 
company may not make a capital distribution (excluding any capital 
distribution arising from the issuance of a regulatory capital 
instrument eligible for inclusion in the numerator of a minimum 
regulatory capital ratio) under the following circumstances, unless it 
receives prior approval from the Board or appropriate Reserve Bank 
pursuant to paragraph (g)(5) of this section:
    (i) After giving effect to the capital distribution, the bank 
holding company would not meet a minimum regulatory capital ratio;
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, notifies the company in writing that the Federal Reserve has 
determined that the capital distribution would result in a material 
adverse change to the organization's capital or liquidity structure or 
that the company's earnings were materially underperforming 
projections;
    (iii) Except as provided in paragraph (g)(2) of this section, the 
dollar amount of the capital distribution will exceed the amount 
described in the capital plan for which a non-objection was issued 
under this section, as measured on an aggregate basis beginning in the 
third quarter of the planning horizon through the quarter at issue; or
    (iv) The capital distribution would occur after the occurrence of 
an event requiring resubmission under paragraphs (e)(4)(i)(A) or (B) of 
this section and before the Federal Reserve has acted on the 
resubmitted capital plan.
    (2) Exception for well capitalized bank holding companies. (i) A 
bank holding company may make a capital distribution for which the 
dollar amount exceeds the amount described in the capital plan for 
which a non-objection was issued under paragraph (f)(2)(i) of this 
section if the following conditions are satisfied:
    (A) The bank holding company is, and after the capital distribution 
would remain, well capitalized as defined in Sec.  225.2(r) of 
Regulation Y (12 CFR 225.2(r));
    (B) The bank holding company's performance and capital levels are, 
and after the capital distribution would remain, consistent with its 
projections under expected conditions as set forth in its capital plan 
under paragraph (f)(2)(i) of this section;
    (C) Until March 31, 2017, the annual aggregate dollar amount of all 
capital distributions in the period beginning on July 1 of a calendar 
year and ending on June 30 of the following calendar year would not 
exceed the total amounts described in the company's capital plan for 
which the bank holding company received a notice of non-objection by 
more than 1.00 percent multiplied by the bank holding company's tier 1 
capital, as reported to the Federal Reserve on the bank holding 
company's most recent first-quarter FR Y-9C;
    (D) Beginning April 1, 2017, the annual aggregate dollar amount of 
all capital distributions in the period beginning on July 1 of a 
calendar year and ending on June 30 of the following calendar year 
would not exceed the total amounts described in the company's capital 
plan for which the bank holding company received a notice of non-
objection by more than 0.25 percent multiplied by the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C;
    (E) Between July 1 of a calendar year and March 15 of the following 
calendar year, the bank holding company provides the appropriate 
Reserve Bank with notice 15 calendar days prior to a capital 
distribution that includes the elements described in paragraph (g)(4) 
of this section; and
    (F) The Board or the appropriate Reserve Bank with concurrence of 
the Board, does not object to the transaction proposed in the notice. 
In determining whether to object to the proposed transaction, the Board 
or the appropriate Reserve Bank shall apply the criteria described in 
paragraph (g)(5)(ii) of this section.
    (ii) The exception in this paragraph (g)(2) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it is ineligible for this exception.
    (3) Net distribution limitation. (i) General. Notwithstanding a 
notice of non-objection under paragraph (f)(2)(i) of this section, a 
bank holding company must reduce its capital distributions in 
accordance with paragraph (g)(3)(ii) of this section if the bank 
holding company raises a smaller dollar amount of capital of a given 
category of regulatory capital instruments than it had included in its 
capital plan, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter.
    (ii) Reduction of distributions. (A) Common equity tier 1 capital. 
If the bank holding company raises a smaller dollar amount of common 
equity tier 1 capital (as defined in 12 CFR 217.2), the bank holding 
company must reduce its capital distributions relating to common equity 
tier 1 capital such that the dollar amount of the bank holding 
company's capital distributions, net of the dollar amount of its 
capital raises, (``net distributions'') relating to common equity tier 
1 capital is no greater than the dollar amount of net distributions 
relating to common equity tier 1 capital included in its capital plan, 
as measured on an aggregate basis beginning in the third quarter of the 
planning horizon through the end of the current quarter.
    (B) Additional tier 1 capital. If the bank holding company raises a 
smaller dollar amount of additional tier 1 capital (as defined in 12 
CFR 217.2), the bank holding company must reduce its capital 
distributions relating to additional tier 1 capital (other than 
scheduled payments on additional tier 1 capital instruments) such that 
the dollar amount of the bank holding company's net distributions 
relating to additional tier 1 capital is no greater than the dollar 
amount of net distributions relating to additional tier 1 capital 
included in its capital plan, as measured on an aggregate basis 
beginning in the third quarter of the planning horizon through the end 
of the current quarter.

[[Page 67258]]

    (C) Tier 2 capital. If the bank holding company raises a smaller 
dollar amount of tier 2 capital (as defined in 12 CFR 217.2), the bank 
holding company must reduce its capital distributions relating to tier 
2 capital (other than scheduled payments on tier 2 capital instruments) 
such that the dollar amount of the bank holding company's net 
distributions relating to tier 2 capital is no greater than the dollar 
amount of net distributions relating to tier 2 capital included in its 
capital plan, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter.
    (iii) Exceptions. Paragraphs (g)(3)(i) and (g)(3)(ii) of this 
section shall not apply:
    (A) To the extent that the Board or appropriate Reserve Bank 
indicates in writing its non-objection pursuant to paragraph (g)(5) of 
this section, following a request for non-objection from the bank 
holding company that includes all of the information required to be 
submitted under paragraph (g)(4) of this section;
    (B) To capital distributions arising from the issuance of a 
regulatory capital instrument eligible for inclusion in the numerator 
of a minimum regulatory capital ratio that the bank holding company had 
not included in its capital plan;
    (C) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to 
employee-directed capital issuances related to an employee stock 
ownership plan;
    (D) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to a 
planned merger or acquisition that is no longer expected to be 
consummated or for which the consideration paid is lower than the 
projected price in the capital plan;
    (E) Until March 31, 2017, to the extent that the dollar amount by 
which the bank holding company's net distributions exceed the dollar 
amount of net distributions included in its capital plan in the 
category of regulatory capital instruments described in paragraph 
(g)(3)(i) of this section, as measured on an aggregate basis beginning 
in the third quarter of the planning horizon through the end of the 
current quarter, is less than 1.00 percent of the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C; between July 
1 of a calendar year and March 15 of the following calendar year, the 
bank holding company provides the appropriate Reserve Bank with notice 
15 calendar days prior to any capital distribution in that category of 
regulatory capital instruments that includes the elements described in 
paragraph (g)(4) of this section; and the Board or the appropriate 
Reserve Bank with concurrence of the Board, does not object to the 
transaction proposed in the notice. In determining whether to object to 
the proposed transaction, the Board or the appropriate Reserve Bank 
shall apply the criteria described in paragraph (g)(5)(ii) of this 
section; or
    (F) Beginning April 1, 2017, to the extent that the dollar amount 
by which the bank holding company's net distributions exceed the dollar 
amount of net distributions included in its capital plan in the 
category of regulatory capital instruments described in paragraph 
(g)(3)(i) of this section, as measured on an aggregate basis beginning 
in the third quarter of the planning horizon through the end of the 
current quarter, is less than 0.25 percent of the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C; between July 
1 of a calendar year and March 15 of the following calendar year, the 
bank holding company provides the appropriate Reserve Bank with notice 
15 calendar days prior to any capital distribution in that category of 
regulatory capital instruments that includes the elements described in 
paragraph (g)(4) of this section; and the Board or the appropriate 
Reserve Bank with concurrence of the Board, does not object to the 
transaction proposed in the notice. In determining whether to object to 
the proposed transaction, the Board or the appropriate Reserve Bank 
shall apply the criteria described in paragraph (g)(5)(ii) of this 
section.
    (iv) The exceptions in paragraph (g)(3)(iii) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it is ineligible for this exception.
    (4) Contents of request. (i) A request for a capital distribution 
under this section shall be filed between July 1 of a calendar year and 
March 1 of the following calendar year with the appropriate Reserve 
Bank and the Board and shall contain the following information:
    (A) The bank holding company's current capital plan or an 
attestation that there have been no changes to the capital plan since 
it was last submitted to the Federal Reserve;
    (B) The purpose of the transaction;
    (C) A description of the capital distribution, including for 
redemptions or repurchases of securities, the gross consideration to be 
paid and the terms and sources of funding for the transaction, and for 
dividends, the amount of the dividend(s); and
    (D) Any additional information requested by the Board or the 
appropriate Reserve Bank (which may include, among other things, an 
assessment of the bank holding company's capital adequacy under a 
revised stress scenario provided by the Federal Reserve, a revised 
capital plan, and supporting data).
    (ii) Any request submitted with respect to a capital distribution 
described in paragraph (g)(1)(i) of this section shall also include a 
plan for restoring the bank holding company's capital to an amount 
above a minimum level within 30 calendar days and a rationale for why 
the capital distribution would be appropriate.
    (5) Approval of certain capital distributions. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will act on a 
request under this paragraph (g)(5) within 30 calendar days after the 
receipt of all the information required under paragraph (g)(4) of this 
section.
    (ii) In acting on a request under this paragraph, the Board or 
appropriate Reserve Bank will apply the considerations and principles 
in paragraph (f) of this section. In addition, the Board or the 
appropriate Reserve Bank may disapprove the transaction if the bank 
holding company does not provide all of the information required to be 
submitted under paragraph (g)(4) of this section.
    (6) Disapproval and hearing. (i) The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to disapprove any proposed capital distribution. 
Within 15 calendar days after receipt of a disapproval by the Board, 
the bank holding company may submit a written request for a hearing.
    (A) The Board may, in its sole discretion, order an informal 
hearing if the Board finds that a hearing is appropriate or necessary 
to resolve disputes regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided

[[Page 67259]]

that the Board may extend this period upon notice to the requesting 
party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board, approves the capital distribution at issue, the bank holding 
company may not make such capital distribution.

PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)

0
3. The authority citation for part 252 continues to read as follows:

    Authority:  12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1, 
1844(b), 1844(c), 5361, 5365, 5366.

0
4. Section 252.42 is amended by revising paragraph (p) to read as 
follows:


Sec.  252.42  Definitions.

* * * * *
    (p) Stress test cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
* * * * *
0
5. Section 252.43 is amended by
0
a. Revising paragraph (b); and
0
b. Removing paragraph (c).
    The revision reads as follows:


Sec.  252.43  Applicability.

* * * * *
    (b) Transitional arrangements. (1) A bank holding company that 
becomes a covered company on or before September 30 of a calendar year 
must comply with the requirements of this subpart beginning on January 
1 of the second calendar year after the bank holding company becomes a 
covered company, unless that time is extended by the Board in writing.
    (2) A bank holding company that becomes a covered company after 
September 30 of a calendar year must comply with the requirements of 
this subpart beginning on January 1 of the third calendar year after 
the bank holding company becomes a covered company, unless that time is 
extended by the Board in writing.
0
6. Section 252.44 is amended by revising paragraph (b) to read as 
follows:


Sec.  252.44  Annual analysis conducted by the Board.

* * * * *
    (b) Economic and financial scenarios related to the Board's 
analysis. The Board will conduct its analysis under this section using 
a minimum of three different scenarios, including a baseline scenario, 
adverse scenario, and severely adverse scenario. The Board will notify 
covered companies of the scenarios that the Board will apply to conduct 
the analysis for each stress test cycle by no later than February 15 of 
each year, except with respect to trading or any other components of 
the scenarios and any additional scenarios that the Board will apply to 
conduct the analysis, which will be communicated by no later than March 
1 of that year.
0
7. Section 252.46 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  252.46  Review of the Board's analysis; publication of summary 
results.

* * * * *
    (b) Publication of results by the Board. (1) The Board will 
publicly disclose a summary of the results of the Board's analyses of a 
covered company by June 30 of the calendar year in which the stress 
test was conducted pursuant to 12 CFR 252.44.
* * * * *
0
8. Section 252.52 is amended by revising paragraphs (k) and (r) to read 
as follows:


Sec.  252.52  Definitions.

* * * * *
    (k) Planning horizon means the period of at least nine consecutive 
quarters, beginning on the first day of a stress test cycle over which 
the relevant projections extend.
* * * * *
    (r) Stress test cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
* * * * *
0
9. Section 252.53 is amended by revising paragraph (b) to read as 
follows:


Sec.  252.53  Applicability.

* * * * *
    (b) Transitional arrangements. (1) A bank holding company that 
becomes a covered company on or before September 30 of a calendar year 
must comply with the requirements of this subpart beginning on January 
1 of the second calendar year after the bank holding company becomes a 
covered company, unless that time is extended by the Board in writing.
    (2) A bank holding company that becomes a covered company after 
September 30 of a calendar year must comply with the requirements of 
this subpart beginning on January 1 of the third calendar year after 
the bank holding company becomes a covered company, unless that time is 
extended by the Board in writing.
0
10. Section 252.54 is amended by revising paragraphs (a), (b)(1), 
(b)(2)(i), (b)(4)(i), and (b)(4)(iii) to read as follows:


Sec.  252.54  Annual stress test.

    (a) In general. A covered company must conduct an annual stress 
test. The stress test must be conducted by April 5 of each calendar 
year based on data as of December 31 of the preceding calendar year, 
unless the time or the as-of date is extended by the Board in writing.
    (b) Scenarios provided by the Board. (1) In general. In conducting 
a stress test under this section, a covered company must, at a minimum, 
use the scenarios provided by the Board. Except as provided in 
paragraphs (b)(2) and (3) of this section, the Board will provide a 
description of the scenarios to each covered company no later than 
February 15 of the calendar year in which the stress test is performed 
pursuant to this section.
    (2) Additional components. (i) The Board may require a covered 
company with significant trading activity, as determined by the Board 
and specified in the Capital Assessments and Stress Testing report (FR 
Y-14), to include a trading and counterparty component in its adverse 
and severely adverse scenarios in the stress test required by this 
section:
    (A) For the stress test cycle beginning on January 1, 2017, the 
data used in this component must be as of a date selected by the Board 
between January 1, 2017 and March 1, 2017, and the Board will 
communicate the as-of date and a description of the component to the 
company no later than March 1, 2017; and
    (B) For the stress test cycle beginning on January 1, 2018, and for 
each stress test cycle beginning thereafter, the data used in this 
component must be as of a date selected by the Board between October 1 
of the previous calendar year and March 1 of the calendar year in which 
the stress test is performed pursuant to this section, and the Board 
will communicate the as-of date and a description of the component to 
the company no later than March 1 of the calendar year in which the 
stress test is performed pursuant to this section.
* * * * *
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a covered company to include one or more 
additional components in its adverse and severely adverse scenarios 
under paragraph (b)(2) of this section or to use one or more additional 
scenarios under paragraph (b)(3) of this section, the Board will notify 
the company in writing. The Board will provide such notification no 
later than December 31 of the preceding calendar year. The notification 
will

[[Page 67260]]

include a general description of the additional component(s) or 
additional scenario(s) and the basis for requiring the company to 
include the additional component(s) or additional scenario(s).
* * * * *
    (iii) Description of component. The Board will respond in writing 
within 14 calendar days of receipt of the company's request. The Board 
will provide the covered company with a description of any additional 
component(s) or additional scenario(s) by March 1 of the calendar year 
in which the stress test is performed pursuant to this section.
0
11. Section 252.55 is amended by revising paragraphs (a), (b)(4)(i), 
and (b)(4)(iii) to read as follows:


Sec.  252.55  Mid-cycle stress test.

    (a) Mid-cycle stress test requirement. In addition to the stress 
test required under Sec.  252.54, a covered company must conduct a mid-
cycle stress test. The stress test must be conducted by September 30 of 
each calendar year based on data as of June 30 of that calendar year, 
unless the time or the as-of date is extended by the Board in writing.
    (b) * * *
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a covered company to include one or more 
additional components in its adverse and severely adverse scenarios 
under paragraph (b)(2) of this section or one or more additional 
scenarios under paragraph (b)(3) of this section, the Board will notify 
the company in writing. The Board will provide such notification no 
later than June 30. The notification will include a general description 
of the additional component(s) or additional scenario(s) and the basis 
for requiring the company to include the additional component(s) or 
additional scenario(s).
* * * * *
    (iii) Description of component. The Board will provide the covered 
company with a description of any additional component(s) or additional 
scenario(s) by September 1 of the calendar year prior to the year in 
which the stress test is performed pursuant to this section.
0
12. Section 252.57 is amended by revising paragraph (a) to read as 
follows:


Sec.  252.57  Reports of stress test results.

    (a) Reports to the Board of stress test results. (1) A covered 
company must report the results of the stress test required under Sec.  
252.54 to the Board in the manner and form prescribed by the Board. 
Such results must be submitted by April 5 of the calendar year in which 
the stress test is performed pursuant to 12 CFR 252.54, unless that 
time is extended by the Board in writing.
    (2) A covered company must report the results of the stress test 
required under Sec.  252.55 to the Board in the manner and form 
prescribed by the Board. Such results must be submitted by October 5 of 
the calendar year in which the stress test is performed pursuant to 12 
CFR 252.55, unless that time is extended by the Board in writing.
* * * * *
0
13. Section 252.58 is amended by revising paragraph (a)(1)(ii) to read 
as follows:


Sec.  252.58  Disclosure of stress test results.

    (a) * * *
    (1) * * *
    (ii) A covered company must publicly disclose a summary of the 
results of the stress test required under Sec.  252.55. This disclosure 
must occur in the period beginning on October 5 and ending on November 
4 of the calendar year in which the stress test is performed pursuant 
to 12 CFR 252.55, unless that time is extended by the Board in writing.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, September 26, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-23629 Filed 9-29-16; 8:45 am]
 BILLING CODE 6210-01-P