Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB, 3141-3145 [2018-01153]
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Federal Register / Vol. 83, No. 15 / Tuesday, January 23, 2018 / Notices
FEDERAL RESERVE SYSTEM
Agency Information Collection
Activities: Announcement of Board
Approval Under Delegated Authority
and Submission to OMB
Board of Governors of the
Federal Reserve System.
SUMMARY: The Board of Governors of the
Federal Reserve System (Board) is
adopting a proposal to extend for three
years, without revision, the Reporting,
Recordkeeping, and Disclosure
Requirements Associated with the
Guidance on Response Programs for
Unauthorized Access to Customer
Information (FR 4100; OMB No. 7100–
0309).
FOR FURTHER INFORMATION CONTACT:
Federal Reserve Board Clearance
Officer—Nuha Elmaghrabi—Office of
the Chief Data Officer, Board of
Governors of the Federal Reserve
System, Washington, DC 20551 (202)
452–3829. Telecommunications Device
for the Deaf (TDD) users may contact
(202) 263–4869, Board of Governors of
the Federal Reserve System,
Washington, DC 20551.
OMB Desk Officer—Shagufta
Ahmed—Office of Information and
Regulatory Affairs, Office of
Management and Budget, New
Executive Office Building, Room 10235,
725 17th Street NW, Washington, DC
20503 or by fax to (202) 395–6974.
SUPPLEMENTARY INFORMATION: On June
15, 1984, the Office of Management and
Budget (OMB) delegated to the Board
authority under the Paperwork
Reduction Act (PRA) to approve of and
assign OMB control numbers to
collection of information requests and
requirements conducted or sponsored
by the Board. Board-approved
collections of information are
incorporated into the official OMB
inventory of currently approved
collections of information. Copies of the
Paperwork Reduction Act Submission,
supporting statements and approved
collection of information instrument(s)
are placed into OMB’s public docket
files. The Federal Reserve may not
conduct or sponsor, and the respondent
is not required to respond to, an
information collection that has been
extended, revised, or implemented on or
after October 1, 1995, unless it displays
a currently valid OMB control number.
sradovich on DSK3GMQ082PROD with NOTICES
AGENCY:
Final Approval Under OMB Delegated
Authority of the Extension for Three
Years, Without Revision, of the
Following Report:
Report title: Reporting,
Recordkeeping, and Disclosure
Requirements Associated with the
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Guidance on Response Programs for
Unauthorized Access to Customer
Information.
Agency form number: FR 4100.
OMB control number: 7100–0309.
Frequency: On occasion.
Respondents: State member banks
(SMBs), bank holding companies
(BHCs), affiliates and certain non-bank
subsidiaries of bank holding companies,
uninsured state agencies and branches
of foreign banks, commercial lending
companies owned or controlled by
foreign banks, and Edge and agreement
corporations.
Estimated number of respondents:
Develop response program: 1; Incident
notification: 412.
Estimated average hours per response:
Develop response program: 24; Incident
notification: 36.
Estimated annual burden hours:
Develop response program: 24; Incident
notification: 14,832.
General description of report: The IDTheft Guidance is the information
collection associated with the
Interagency Guidance on Response
Programs for Unauthorized Access to
Customer Information and Customer
Notice (security guidelines), which was
published in the Federal Register in
March 2005.1 Trends in customer
information theft and the accompanying
misuse of that information led to the
issuance of these security guidelines
applicable to financial institutions. The
security guidelines are designed to
facilitate timely and relevant
notification to affected customers and
the appropriate regulatory authority
(ARA) of the financial institutions. The
security guidelines provide specific
direction regarding the development of
response programs and customer
notifications.
Legal authorization and
confidentiality: The Board has
determined that the reporting,
recordkeeping, and disclosure
requirements associated with the FR
4100 are authorized by the GrammLeach-Bliley Act and are mandatory (15
U.S.C. 6801(b)). Since the FR 4100
provides that a financial institution
regulated by the Board should notify its
designated Reserve Bank upon
becoming aware of an incident of
unauthorized access to sensitive
customer information, issues of
confidentiality may arise if the Board
were to obtain a copy of a customer
notice during the course of an
examination, a copy of a Suspicious
Activity Report (SAR), or other sensitive
customer information. In such cases, the
information would likely be exempt
1 See
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3141
from disclosure to the public under the
Freedom of Information Act (5 U.S.C
552(b)(3), (4), (6), and (8)). Also, a
federal employee is prohibited by law
from disclosing a SAR or the existence
of a SAR (31 U.S.C. 5318(g)).
Current actions: On September 12,
2017, the Federal Reserve published a
notice in the Federal Register (82 FR
42814) requesting public comment for
60 days on the extension, without
revision, of the Reporting,
Recordkeeping, and Disclosure
Requirements Associated with the
Guidance on Response Programs for
Unauthorized Access to Customer
Information. The comment period for
this notice expired on November 13,
2017. The Federal Reserve did not
receive any comments.
Board of Governors of the Federal Reserve
System, January 17, 2018.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2018–01113 Filed 1–22–18; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
Agency Information Collection
Activities: Announcement of Board
Approval Under Delegated Authority
and Submission to OMB
Board of Governors of the
Federal Reserve System.
SUMMARY: The Board of Governors of the
Federal Reserve System (Board) is
adopting a proposal to revise, without
extension, the Annual Report of Foreign
Banking Organizations (FR Y–7). The
revisions to the mandatory FR Y–7
information collection are effective
beginning with FR Y–7 reports for fiscal
year-ends that end on or after March 1,
2018.
FOR FURTHER INFORMATION CONTACT:
Federal Reserve Board Clearance
Officer—Nuha Elmaghrabi—Office of
the Chief Data Officer, Board of
Governors of the Federal Reserve
System, Washington, DC 20551 (202)
452–3829. Telecommunications Device
for the Deaf (TDD) users may contact
(202) 263–4869, Board of Governors of
the Federal Reserve System,
Washington, DC 20551.
OMB Desk Officer—Shagufta
Ahmed—Office of Information and
Regulatory Affairs, Office of
Management and Budget, New
Executive Office Building, Room 10235,
725 17th Street NW, Washington, DC
20503 or by fax to (202) 395–6974.
SUPPLEMENTARY INFORMATION: On June
15, 1984, the Office of Management and
Budget (OMB) delegated to the Board
AGENCY:
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Federal Register / Vol. 83, No. 15 / Tuesday, January 23, 2018 / Notices
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authority under the Paperwork
Reduction Act (PRA) to approve of and
assign OMB control numbers to
collection of information requests and
requirements conducted or sponsored
by the Board. Board-approved
collections of information are
incorporated into the official OMB
inventory of currently approved
collections of information. Copies of the
Paperwork Reduction Act Submission,
supporting statements and approved
collection of information instrument(s)
are placed into OMB’s public docket
files. The Federal Reserve may not
conduct or sponsor, and the respondent
is not required to respond to, an
information collection that has been
extended, revised, or implemented on or
after October 1, 1995, unless it displays
a currently valid OMB control number.
Final approval under OMB delegated
authority of the revision of the following
information collection:
Report Titles: Annual Report of
Holding Companies; Annual Report of
Foreign Banking Organizations; Report
of Changes in Organizational Structure;
Supplement to the Report of Changes in
Organizational Structure.
Agency Form Numbers: FR Y–6; FR
Y–7 (with revision); FR Y–10; FR Y–
10E.
OMB Control Number: 7100–0297.
Effective Date: Beginning with fiscal
year-ends that end and for reports
submitted on or after March 1, 2018.
Frequency: FR Y–6: Annual; 1 FR Y–
7: Annual; 2 FR Y–10: Event-generated; 3
FR Y–10E: Event-generated.4
Respondent: Bank holding companies
(BHCs) and savings and loan holding
companies, securities holding
companies, and intermediate holding
companies (collectively, holding
companies (HCs)), foreign banking
1 The FR Y–6 is submitted annually, no later than
90 calendar days after the end of the respondent’s
fiscal year. Individual respondent data are available
to the public upon request through the appropriate
Reserve Bank. Under certain circumstances,
however, respondents may request confidential
treatment.
2 All FBOs that are qualifying file the FR Y–7
annually as of the end of the FBO’s fiscal year; the
data are due no later than four months after the
report date. Individual respondent data are
available to the public upon request through the
appropriate Reserve Bank. Under certain
circumstances, however, respondents may request
confidential treatment.
3 The FR Y–10 is event-generated, and the data
are submitted within 30 calendar days of a
reportable transaction or event. Individual
respondent data are available to the public upon
request through the appropriate Reserve Bank.
Under certain circumstances, however, respondents
may request confidential treatment. Limited data
from the FR Y–10 are published on the National
Information Center’s public website.
4 The FR Y–10E is event-generated and the data
are submitted on an ad-hoc basis as needed.
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organizations (FBOs), state member
banks unaffiliated with a BHC, Edge Act
and agreement corporations, and
nationally chartered banks that are not
controlled by a BHC (with regard to
their foreign investments only).
Number of Respondents: FR Y–6
initial: 13; FR Y–6 ongoing: 4,827; FR
Y–7: 243; FR Y–10: 5,298; FR Y–10E:
5,298.
Estimated Average Hours per
Response: FR Y–6 initial: 10 hours; FR
Y–6 ongoing: 5.5 hours; FR Y–7: 6
hours; FR Y–10: 2.5 hours; FR Y–10E:
0.5 hour.
Estimated Annual Burden Hours: FR
Y–6 initial: 130 hours; FR Y–6 ongoing:
26,549 hours; FR Y–7: 1,458 hours; FR
Y–10: 39,735 hours; FR Y–10E: 2,649
hours.
General Description of Report: The FR
Y–6 is an annual information collection
submitted by top-tier domestic HCs and
FBOs that are non-qualifying. It collects
financial data, an organization chart,
verification of domestic branch data,
and information about shareholders.
The Federal Reserve uses the data to
monitor HC operations and determine
HC compliance with the provisions of
the BHC Act, Regulation Y (12 CFR
225), the Home Owners’ Loan Act
(HOLA), Regulation LL (12 CFR 238),
and Regulation YY (12 CFR 252).
The FR Y–7 is an annual information
collection submitted by FBOs that are
qualifying to update their financial and
organizational information with the
Federal Reserve. The FR Y–7 collects
financial, organizational, shareholder,
and managerial information. The
Federal Reserve uses the information to
assess an FBO’s ability to be a
continuing source of strength to its U.S.
operations and to determine compliance
with U.S. laws and regulations.
The FR Y–10 is an event-generated
information collection submitted by
FBOs; top-tier HCs; securities holding
companies as authorized under Section
618 of the Dodd-Frank Act (12 U.S.C.
1850a(c)(1)); state member banks
unaffiliated with a BHC; Edge and
agreement corporations that are not
controlled by a member bank, a
domestic BHC, or an FBO; and
nationally chartered banks that are not
controlled by a BHC (with regard to
their foreign investments only) to
capture changes in their regulated
investments and activities. The Federal
Reserve uses the data to monitor
structure information on subsidiaries
and regulated investments of these
entities engaged in banking and
nonbanking activities.
The FR Y–10E is an event-driven
supplement that may be used to collect
additional structural information
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deemed to be critical and needed in an
expedited manner.
Legal authorization and
confidentiality: These information
collections are mandatory as follows:
FR Y–6: Section 5(c)(1)(A) of the Bank
Holding Company Act (BHC Act) (12
U.S.C. 1844(c)(1)(A)); sections 8(a) and
13(a) of the International Banking Act
(IBA) (12 U.S.C. 3106(a) and 3108(a));
sections 11(a)(1), 25, and 25A of the
Federal Reserve Act (FRA) (12 U.S.C.
248(a)(1), 602, and 611a); and sections
113, 165, 312, 618, and 809 of the DoddFrank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) (12
U.S.C. 5361, 5365, 5412, 1850a(c)(1),
and 5468(b)(1)).
FR Y–7: Sections 8(a) and 13(a) of the
IBA (12 U.S.C. 3106(a) and 3108(a));
sections 113, 165, 312, 618, and 809 of
the Dodd-Frank Act (12 U.S.C. 5361,
5365, 5412, 1850a(c)(1), and 5468(b)(1)).
FR Y–10 and FR Y–10E: Sections 4(k)
and 5(c)(1)(A) of the BHC Act (12 U.S.C.
1843(k), and 1844(c)(1)(A)); section 8(a)
of the IBA (12 U.S.C. 3106(a)); sections
11(a)(1), 25(7), and 25A of the FRA (12
U.S.C. 248(a)(1), 321, 601, 602, 611a,
615, and 625); sections 113, 165, 312,
618, and 809 of the Dodd-Frank Act (12
U.S.C. 5361, 5365, 5412, 1850a(c)(1),
and 5468(b)(1)); and section 10(c)(2)(H)
of the Home Owners’ Loan Act (HOLA)
(12 U.S.C. 1467a(c)(2)(H)).
Except as discussed below, the data
collected in the FR Y–6, FR Y–7, FR Y–
10, and FR Y–10E are generally not
considered confidential. With regard to
information that a banking organization
may deem confidential, the institution
may request confidential treatment of
such information under one or more of
the exemptions in the Freedom of
Information Act (FOIA) (5 U.S.C. 552).
The most likely case for confidential
treatment will be based on FOIA
exemption 4, which permits an agency
to exempt from disclosure ‘‘trade secrets
and commercial or financial information
obtained from a person and privileged
and confidential’’ (5 U.S.C. 552(b)(4)).
To the extent an institution can
establish the potential for substantial
competitive harm, such information
would be protected from disclosure
under the standards set forth in
National Parks & Conservation
Association v. Morton, 498 F.2d 765
(D.C. Cir. 1974). In particular, the
disclosure of the responses to the
certification questions on the FR Y–7
may interfere with home country
regulators’ administration, execution,
and disclosure of their stress test regime
and its results, and may cause
substantial competitive harm to the FBO
providing the information, and thus this
information may be protected from
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disclosure under FOIA exemption 4.
Exemption 6 of FOIA might also apply
with regard to the respondents’
submission of non-public personal
information of owners, shareholders,
directors, officers and employees of
respondents. Exemption 6 covers
‘‘personnel and medical files and
similar files the disclosure of which
would constitute a clearly unwarranted
invasion of personal privacy’’ (5 U.S.C.
552(b)(6)). All requests for confidential
treatment would need to be reviewed on
a case-by-case basis and in response to
a specific request for disclosure.
Current Actions: On December 2,
2015, the Board published a notice in
the Federal Register (80 FR 75457)
requesting public comment for 60 days
on the proposal to revise, with
extension, of the FR Y–6, FR Y–7, FR Y–
10, and FR Y–10E. In the notice, the
Board proposed revisions to the FR Y–
7 reporting form to require an FBO to
indicate its compliance with Regulation
YY by certifying that it meets, does not
meet, or is not subject to the relevant
U.S. risk committee certification
requirement and to indicate that it
meets, does not meet, or is not subject
to the relevant home country stress
testing requirement. The notice also
included revisions to the instructions to
the FR Y–7 reporting form to describe
the requirements and the scope of
applicability of the report to FBOs. The
comment period for this notice expired
on February 1, 2016. The Federal
Reserve received two comment letters,
one from an industry association and
one from a banking organization. One
comment letter requested clarification
on certain of the requirements of
Regulation YY, including the
requirement to form a U.S. risk
committee, while the other comment
letter requested clarification on the
instructions for the FR Y–6 and the FR
Y–10 reports. The Board is adopting the
revisions as proposed except that (i) the
Board is extending the effective date to
be effective beginning with FR Y–7
reports submitted for fiscal year-ends
that end on or after March 1, 2018, and
(ii) the Board is not adopting the
proposed extensions of the FR Y–6, FR
Y–7, FR Y–10, and FR Y–10E. The
Board is also clarifying several of the
issues raised by commenters in response
to the December 2, 2015, Federal
Register notice, as further discussed
below.
Section 165 of the Dodd-Frank Act
directs the Board to establish enhanced
prudential standards for BHCs and
FBOs with total consolidated assets of
$50 billion or more and nonbank
financial companies that the Financial
Stability Oversight Council has
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designated for supervision by the Board.
In addition, the Dodd-Frank Act directs
the Board to issue regulations applying
certain standards to BHCs and FBOs
with total consolidated assets of $10
billion or more. In particular, the Board
is directed to require publicly traded
BHCs and FBOs with total consolidated
assets of $10 billion or more to establish
risk committees.5 In addition, section
165 requires the Board to issue
regulations imposing company-run
stress test requirements on BHCs, FBOs,
state member banks, and savings and
loan holding companies with total
consolidated assets of more than $10
billion.6
In February of 2014, the Board
adopted enhanced prudential standards
for FBOs, including risk committee and
stress testing requirements for FBOs
with total consolidated assets of more
than $10 billion. These standards are
contained in the Board’s Regulation YY,
which applies different requirements to
FBOs depending on their asset size. The
risk committee and stress testing
requirements are located in the
following subparts:
• Subpart L establishes stress testing
requirements for FBOs with total
consolidated assets of more than $10
billion;
• Subpart M establishes risk
committee requirements for publicly
traded FBOs with total consolidated
assets between $10–$50 billion;
• Subpart N establishes enhanced
prudential standards (including risk
committee and stress testing
requirements) for FBOs with total
consolidated assets of $50 billion or
more but combined U.S. assets of less
than $50 billion; and
• Subpart O establishes enhanced
prudential standards (including risk
committee and stress testing
requirements) for FBOs with total
consolidated assets of $50 billion or
more and combined U.S. assets of $50
billion or more.
With regard to risk committee
requirements, an FBO subject to subpart
M or N of Regulation YY is required to
certify that it has a risk committee that
oversees the risk management practices
of the combined U.S. operations of the
company and has at least one member
with appropriate risk expertise.7 This
certification must be filed on an annual
basis with the Board concurrently with
the FR Y–7. An FBO subject to subpart
O of Regulation YY is subject to
5 See
12 CFR 252.132(a) and 252.144(a).
6 See 12 U.S.C. 5365(i).
7 The combined U.S. operations of an FBO
include its U.S. branches and agencies and U.S.
subsidiaries (other than any company held under
section 2(h)(2) of the BHC Act, if applicable).
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3143
additional U.S. risk committee
requirements that are more prescriptive
and must employ a U.S. chief risk
officer in the United States.8
With regard to stress testing, an FBO
subject to subpart L, N, or O of
Regulation YY must be subject to a
consolidated capital stress testing
regime administered or reviewed by the
FBO’s home country supervisor, meet
the home country supervisor’s
minimum standards, and, in some cases,
provide information to the Board about
the results of home country stress
testing or face additional requirements
in the United States. In particular, the
U.S. branches and agencies of the FBO
become subject to an asset maintenance
requirement, and the FBO generally
must conduct an annual stress test of its
U.S. subsidiaries. An FBO subject to
subpart O also must stress test any U.S.
IHC.
The revisions to the FR Y–7
implement the U.S. risk committee
certification requirement in Regulation
YY and provide FBOs with a
standardized way to indicate
compliance with the home country
stress testing requirements (and thus,
avoid being subject to additional
requirements in the U.S.). The revisions
to the FR Y–7 also better describe the
risk committee requirements in
Regulation YY and the scope of
applicability of the report to FBOs.
Detailed Discussion of Public
Comments
The following is a detailed discussion
of the two comments received regarding
the FR Y–7 proposal and the responses
related to the changes in the FR Y–7
proposal. Although no comments were
received on the reporting burden
estimates, the Board has reconsidered
the estimates given the clarifications
provided to Regulation YY. Thus, the
Board increased the estimated hourly
burden from 4 hours to 6 hours per
response.
A commenter requested a number of
clarifications regarding the provisions in
Regulation YY that require an FBO to
maintain a committee of its global board
of directors (or equivalent thereof) that
oversees the risk-management policies
of the combined U.S. operations of the
FBO.9 Each of these questions are
matters of interpretation of the
requirements of Regulation YY and are
8 FBOs subject to subpart O are not required to
certify that they have a U.S. risk committee because
the Board expects to gain sufficient information
through the supervisory process to evaluate
whether the U.S. risk committee meets the
requirements of this section.
9 See 12 CFR 252.132(a) and 252.144(a).
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not related to the reporting requirements
in the FR Y–7.
First, the commenter requested
clarification on whether the committee
that oversees U.S. risk must be
composed entirely of members of the
FBO’s global board or may be
configured in other ways that take into
account the size, scale, and complexity
of an FBO’s combined U.S. operations
and more effectively utilize the
expertise of personnel familiar with the
risk of these operations.
In response to this comment, to certify
compliance with sections 252.132(a)
and 252.144(a), the FBO is not required
to form a special U.S. risk committee
comprised of members of the FBO’s
board of directors. Rather, the FBO must
ensure that the FBO’s board of directors
or a committee comprised of members
of the FBO’s board of directors has
primary responsibility for oversight of
the risks of the combined U.S.
operations. The committee that oversees
U.S. risk for an FBO subject to
Regulation YY is not required to (though
it may) directly administer the FBO’s
U.S. risk management policies; rather,
the FBO may designate specific senior
management officials from the FBO’s
U.S. operations to be responsible for
administering the U.S. risk management
policies and for providing regular
reports directly to the FBO’s board of
directors or risk committee.10 The rule
is intended to allow an FBO flexibility
in establishing its oversight function so
long as the FBO’s board of directors is
informed about and provides the
appropriate level of guidance about the
risks of the combined U.S. operations of
the FBO. However the FBO designs its
oversight function, the FBO must also
take appropriate measures to ensure that
the risk management policies for its
combined U.S. operations are
implemented and that the risk
committee is provided sufficient
information on the combined U.S.
operations to allow it to carry out its
responsibilities.11
The same commenter requested
clarification regarding how the
requirement in Regulation YY for an
FBO to have a committee that oversees
U.S. risk would apply to an FBO with
a two-tier board structure. The two-tier
board structure is a common feature of
FBOs in European countries, and
generally consists of a supervisory board
independent from management that sets
the direction of the company and
oversees the company’s senior
management, and a management/
executive board that implements the
10 See
11 See
79 FR 17284 (March 27, 2014).
12 CFR 252.132(c) and 252.144(c).
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company’s strategies and risk
management. The purpose of the risk
committee requirements in Regulation
YY is to ensure that the FBO parent is
aware of and takes responsibility for the
oversight of the risks of its combined
U.S. operations. This oversight function
can be integrated into various board
structures that currently exist in
different foreign countries. In a two-tier
board structure, a committee of either
the supervisory board or the
management/executive board (or a
combination thereof) could be
considered a committee of the FBO
board of directors for purposes of
complying with the requirement under
Regulation YY for an FBO to maintain
a committee that oversees U.S. risk.
Both tiers of a two-tier board are
typically involved in evaluating risk
management at an FBO with the same
goals as those of a single board of
directors in the United States.
The same commenter requested
clarification regarding various
requirements in Regulation YY relating
to capital stress testing and liquidity
stress testing.12 To be exempt from
additional U.S. capital stress testing
requirements, Regulation YY requires an
FBO to be subject on a consolidated
basis to an annual capital stress testing
regime in its home country that meets
certain requirements and to actually
meet any minimum stress testing
standards set by the FBO’s home
country supervisor.13 In reporting Item
5 of the FR Y–7, an FBO is expected to
evaluate the stress testing regime to
which it is subject and make a
reasonable conclusion about whether
this regime meets the home country
stress testing criteria in Regulation YY.
Moreover, the same commenter
requested clarification as to whether an
FBO would meet the home country
stress test requirements upon a
satisfactory completion of an Internal
Capital Adequacy Assessment Process
(ICAAP). If an ICAAP satisfies the
underlying requirements for a capital
stress test, including all applicable
information requirements in Regulation
YY, satisfactory completion of the
ICAAP would be sufficient to satisfy
these requirements.
Regulation YY requires an FBO to
report on an annual basis the results of
12 See 12 CFR 252.122(a), 12 CFR 252.145(a), 12
CFR 252.146(b), and 12 CFR 252.158(b).
13 The capital stress testing regime must include:
(i) An annual supervisory capital stress test
conducted by the relevant home country supervisor
or an annual evaluation and review by the home
country supervisor of an internal capital adequacy
stress test conducted by the FBO; and (ii)
requirements for governance and controls of stress
testing practices by relevant management and the
board of directors (or equivalent thereof).
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an internal liquidity stress test for either
the consolidated operations of the FBO
or the FBO’s combined U.S. operations.
In either case, the liquidity stress test
must incorporate three specified
planning horizons. The same
commenter requested guidance on how
an FBO should report when the FBO’s
home country uses fewer or different
planning horizons.
In the event that an FBO is not
required to conduct an internal liquidity
stress test for its consolidated operations
using the three specified planning
horizons in Regulation YY or chooses
not to do so, the FBO may instead
choose to provide an internal liquidity
stress test for just the combined U.S.
operations. Under Regulation YY, if an
FBO does not comply with the internal
liquidity stress testing reporting
requirements, it must limit the net
aggregate amount owed by the parent or
other non-U.S. affiliates to the U.S.
operations to 25 percent or less of the
third party liabilities of the combined
U.S. operations.
In addition, although Regulation YY
does not prescribe the information that
must be reported to the Board regarding
the internal liquidity stress tests, given
the diversity in liquidity reporting
requirements across jurisdictions, FBOs
are expected to provide sufficient
information in the internal liquidity
stress test to allow the Board to assess
the liquidity position of the FBO.14
The same commenter requested
guidance on an FBO’s compliance with
the stress testing requirement when
annual stress testing is not required by
the FBO’s home country supervisor.
Regulation YY requires an FBO to be
subject to a stress testing regime that
includes an annual supervisory stress
test or annual supervisory evaluation of
the FBO’s internal stress test. A biannual stress test, for example, would
not satisfy this requirement.
The same commenter requested
guidance on whether an FBO would be
deemed to satisfy the requirement to
report and certify compliance with its
home country capital adequacy
requirements by completing the FR Y–
7Q. In addition, the commenter
requested confirmation of the as-of date
and frequency of the certification of the
FR Y–7Q. Regulation YY requires an
FBO to report compliance with capital
adequacy measures that are consistent
with the Basel Capital Framework (as
defined in 12 CFR 252.143(a) and
252.154(a)) concurrently with filing the
FR Y–7Q; however, Regulation YY does
not specify the frequency or the as-of
date for an FBO’s certification of
14 See
E:\FR\FM\23JAN1.SGM
79 FR 17239, 17301 (March 27, 2014).
23JAN1
sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 15 / Tuesday, January 23, 2018 / Notices
compliance with its home country
capital requirements. On December 2,
2016, the Board approved a final notice
to amend the FR Y–7Q to expand
reporting regarding an FBO’s home
country capital ratios consistent with
Regulation YY. An FBO’s completion of
the FR Y–7Q on a quarterly basis would
satisfy both the requirement to report
and the requirement to certify to the
Board its compliance with capital
adequacy measures that are consistent
with the Basel Capital Framework. If an
FBO is unable to report that it is in
compliance with such capital adequacy
measures, the Board may impose
requirements, conditions, and
restrictions relating to the U.S.
operations of the FBO.15
A second commenter requested
clarification on the definition of an
inactive company when an entity is in
the liquidation process. Respondents
should refer to the definition of
‘‘Liquidation’’ in the Banking, Savings
and Loan, and Nonbanking Schedules in
the FR Y–10 instructions on how to
classify an entity during the liquidation
process. Specifically, the instructions
state ‘‘liquidation refers to final
distribution of assets, satisfaction of
liabilities, and closing of capital
accounts of a company, as opposed to
sale or transfer of the company.’’
The same commenter also requested
that the instructions be expanded on
reporting when a nonbanking company
is a functionally regulated subsidiary
since the mere registration with a
functional regulator does not necessarily
qualify a company as being functionally
regulated for these purposes. In
response to the commenter’s request,
the Board notes that respondents should
refer to the definition of ‘‘Functionally
Regulated Subsidiary’’ in the FR Y–10
instructions, which provides that
certain companies may be required to be
registered with one of the enumerated
regulators without necessarily
qualifying as being functionally
regulated by that regulator; for example,
publicly held companies may be
required to be registered with the U.S.
Securities and Exchange Commission
(SEC) without necessarily qualifying as
functionally regulated by the SEC as a
securities broker-dealer, investment
adviser, investment company, or
company that engages in commodity
futures trading.
15 See
12 CFR 252.143(c) and 252.154(c).
VerDate Sep<11>2014
17:59 Jan 22, 2018
Jkt 244001
Board of Governors of the Federal Reserve
System, January 18, 2018.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2018–01153 Filed 1–22–18; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL RESERVE SYSTEM
Agency Information Collection
Activities; Announcement of Board
Approval Under Delegated Authority
and Submission to OMB
Board of Governors of the
Federal Reserve System.
SUMMARY: The Board of Governors of the
Federal Reserve System (Board or
Federal Reserve) is adopting a proposal
to extend for three years, with revision,
the following mandatory reports:
(1) The Financial Statements of U.S.
Nonbank Subsidiaries of U.S. Holding
Companies (FR Y–11; OMB No. 7100–
0244),
(2) the Abbreviated Financial
Statements of U.S. Nonbank
Subsidiaries of U.S. Holding Companies
(FR Y–11S; OMB No. 7100–0244),
(3) the Financial Statements of
Foreign Subsidiaries of U.S. Banking
Organizations (FR 2314; OMB No. 7100–
0073), and
(4) the Abbreviated Financial
Statements of Foreign Subsidiaries of
U.S. Banking Organizations (FR 2314S;
OMB No. 7100–0073).
FOR FURTHER INFORMATION CONTACT:
Federal Reserve Board Clearance
Officer—Nuha Elmaghrabi—Office of
the Chief Data Officer, Board of
Governors of the Federal Reserve
System, Washington, DC 20551, (202)
452–3829. Telecommunications Device
for the Deaf (TDD) users may contact
(202) 263–4869, Board of Governors of
the Federal Reserve System,
Washington, DC 20551.
OMB Desk Officer—Shagufta
Ahmed—Office of Information and
Regulatory Affairs, Office of
Management and Budget, New
Executive Office Building, Room 10235,
725 17th Street NW, Washington, DC
20503.
AGENCY:
On June
15, 1984, the Office of Management and
Budget (OMB) delegated to the Board
authority under the Paperwork
Reduction Act (PRA) to approve of and
assign OMB control numbers to
collection of information requests and
requirements conducted or sponsored
by the Board. Board-approved
collections of information are
incorporated into the official OMB
inventory of currently approved
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00036
Fmt 4703
Sfmt 4703
3145
collections of information. Copies of the
Paperwork Reduction Act Submission,
supporting statements and approved
collection of information instrument(s)
are placed into OMB’s public docket
files. The Federal Reserve may not
conduct or sponsor, and the respondent
is not required to respond to, an
information collection that has been
extended, revised, or implemented on or
after October 1, 1995, unless it displays
a currently valid OMB control number.
Final approval under OMB delegated
authority of the extension for three
years, with revision, of the following
information collections:
1. Report Title: Financial Statements
of U.S. Nonbank Subsidiaries of U.S.
Holding Companies and the
Abbreviated Financial Statements of
U.S. Nonbank Subsidiaries of U.S.
Holding Companies.
Agency Form Number: FR Y–11 and
FR Y–11S.
OMB Control Number: 7100–0244.
Frequency: Quarterly and annually.
Reporters: Holding companies.
Estimated Number of Respondents:
FR Y–11 (quarterly): 634; FR Y–11
(annual): 230; FR Y–11S: 299.
Estimated Average Hours per
Response: FR Y–11 (quarterly): 6.8; FR
Y–11 (annual): 6.8; FR Y–11S: 1.
Estimated Annual Reporting Hours:
FR Y–11 (quarterly): 17,244; FR Y–11
(annual): 1,564; FR Y–11S: 299.
General Description of Information
Collection: The FR Y–11 reporting forms
collect financial information for
individual, non-functionally regulated
U.S. nonbank subsidiaries of domestic
holding companies (i.e., bank holding
companies, savings and loan holding
companies, securities holding
companies, and intermediate holding
companies). Holding companies file the
FR Y–11 on a quarterly or annual basis
or the FR Y–11S on an annual basis,
predominantly based on whether the
organization meets certain asset size
thresholds described in the instructions
to the reports. The FR Y–11 data are
used with other holding company data
to assess the condition of holding
companies that are heavily engaged in
nonbanking activities and to monitor
the volume, nature, and condition of
their nonbanking operations.
2. Report Title: Financial Statements
of Foreign Subsidiaries of U.S. Banking
Organizations and the Abbreviated
Financial Statements of Foreign
Subsidiaries of U.S. Banking
Organizations.
Agency Form Number: FR 2314 and
FR 2314S.
OMB Control Number: 7100–0073.
Frequency: Quarterly and annually.
E:\FR\FM\23JAN1.SGM
23JAN1
Agencies
[Federal Register Volume 83, Number 15 (Tuesday, January 23, 2018)]
[Notices]
[Pages 3141-3145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01153]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is adopting a proposal to revise, without extension, the Annual Report
of Foreign Banking Organizations (FR Y-7). The revisions to the
mandatory FR Y-7 information collection are effective beginning with FR
Y-7 reports for fiscal year-ends that end on or after March 1, 2018.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of
Governors of the Federal Reserve System, Washington, DC 20551 (202)
452-3829. Telecommunications Device for the Deaf (TDD) users may
contact (202) 263-4869, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
OMB Desk Officer--Shagufta Ahmed--Office of Information and
Regulatory Affairs, Office of Management and Budget, New Executive
Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503
or by fax to (202) 395-6974.
SUPPLEMENTARY INFORMATION: On June 15, 1984, the Office of Management
and Budget (OMB) delegated to the Board
[[Page 3142]]
authority under the Paperwork Reduction Act (PRA) to approve of and
assign OMB control numbers to collection of information requests and
requirements conducted or sponsored by the Board. Board-approved
collections of information are incorporated into the official OMB
inventory of currently approved collections of information. Copies of
the Paperwork Reduction Act Submission, supporting statements and
approved collection of information instrument(s) are placed into OMB's
public docket files. The Federal Reserve may not conduct or sponsor,
and the respondent is not required to respond to, an information
collection that has been extended, revised, or implemented on or after
October 1, 1995, unless it displays a currently valid OMB control
number.
Final approval under OMB delegated authority of the revision of the
following information collection:
Report Titles: Annual Report of Holding Companies; Annual Report of
Foreign Banking Organizations; Report of Changes in Organizational
Structure; Supplement to the Report of Changes in Organizational
Structure.
Agency Form Numbers: FR Y-6; FR Y-7 (with revision); FR Y-10; FR Y-
10E.
OMB Control Number: 7100-0297.
Effective Date: Beginning with fiscal year-ends that end and for
reports submitted on or after March 1, 2018.
Frequency: FR Y-6: Annual; \1\ FR Y-7: Annual; \2\ FR Y-10: Event-
generated; \3\ FR Y-10E: Event-generated.\4\
---------------------------------------------------------------------------
\1\ The FR Y-6 is submitted annually, no later than 90 calendar
days after the end of the respondent's fiscal year. Individual
respondent data are available to the public upon request through the
appropriate Reserve Bank. Under certain circumstances, however,
respondents may request confidential treatment.
\2\ All FBOs that are qualifying file the FR Y-7 annually as of
the end of the FBO's fiscal year; the data are due no later than
four months after the report date. Individual respondent data are
available to the public upon request through the appropriate Reserve
Bank. Under certain circumstances, however, respondents may request
confidential treatment.
\3\ The FR Y-10 is event-generated, and the data are submitted
within 30 calendar days of a reportable transaction or event.
Individual respondent data are available to the public upon request
through the appropriate Reserve Bank. Under certain circumstances,
however, respondents may request confidential treatment. Limited
data from the FR Y-10 are published on the National Information
Center's public website.
\4\ The FR Y-10E is event-generated and the data are submitted
on an ad-hoc basis as needed.
---------------------------------------------------------------------------
Respondent: Bank holding companies (BHCs) and savings and loan
holding companies, securities holding companies, and intermediate
holding companies (collectively, holding companies (HCs)), foreign
banking organizations (FBOs), state member banks unaffiliated with a
BHC, Edge Act and agreement corporations, and nationally chartered
banks that are not controlled by a BHC (with regard to their foreign
investments only).
Number of Respondents: FR Y-6 initial: 13; FR Y-6 ongoing: 4,827;
FR Y-7: 243; FR Y-10: 5,298; FR Y-10E: 5,298.
Estimated Average Hours per Response: FR Y-6 initial: 10 hours; FR
Y-6 ongoing: 5.5 hours; FR Y-7: 6 hours; FR Y-10: 2.5 hours; FR Y-10E:
0.5 hour.
Estimated Annual Burden Hours: FR Y-6 initial: 130 hours; FR Y-6
ongoing: 26,549 hours; FR Y-7: 1,458 hours; FR Y-10: 39,735 hours; FR
Y-10E: 2,649 hours.
General Description of Report: The FR Y-6 is an annual information
collection submitted by top-tier domestic HCs and FBOs that are non-
qualifying. It collects financial data, an organization chart,
verification of domestic branch data, and information about
shareholders. The Federal Reserve uses the data to monitor HC
operations and determine HC compliance with the provisions of the BHC
Act, Regulation Y (12 CFR 225), the Home Owners' Loan Act (HOLA),
Regulation LL (12 CFR 238), and Regulation YY (12 CFR 252).
The FR Y-7 is an annual information collection submitted by FBOs
that are qualifying to update their financial and organizational
information with the Federal Reserve. The FR Y-7 collects financial,
organizational, shareholder, and managerial information. The Federal
Reserve uses the information to assess an FBO's ability to be a
continuing source of strength to its U.S. operations and to determine
compliance with U.S. laws and regulations.
The FR Y-10 is an event-generated information collection submitted
by FBOs; top-tier HCs; securities holding companies as authorized under
Section 618 of the Dodd-Frank Act (12 U.S.C. 1850a(c)(1)); state member
banks unaffiliated with a BHC; Edge and agreement corporations that are
not controlled by a member bank, a domestic BHC, or an FBO; and
nationally chartered banks that are not controlled by a BHC (with
regard to their foreign investments only) to capture changes in their
regulated investments and activities. The Federal Reserve uses the data
to monitor structure information on subsidiaries and regulated
investments of these entities engaged in banking and nonbanking
activities.
The FR Y-10E is an event-driven supplement that may be used to
collect additional structural information deemed to be critical and
needed in an expedited manner.
Legal authorization and confidentiality: These information
collections are mandatory as follows:
FR Y-6: Section 5(c)(1)(A) of the Bank Holding Company Act (BHC
Act) (12 U.S.C. 1844(c)(1)(A)); sections 8(a) and 13(a) of the
International Banking Act (IBA) (12 U.S.C. 3106(a) and 3108(a));
sections 11(a)(1), 25, and 25A of the Federal Reserve Act (FRA) (12
U.S.C. 248(a)(1), 602, and 611a); and sections 113, 165, 312, 618, and
809 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) (12 U.S.C. 5361, 5365, 5412, 1850a(c)(1), and
5468(b)(1)).
FR Y-7: Sections 8(a) and 13(a) of the IBA (12 U.S.C. 3106(a) and
3108(a)); sections 113, 165, 312, 618, and 809 of the Dodd-Frank Act
(12 U.S.C. 5361, 5365, 5412, 1850a(c)(1), and 5468(b)(1)).
FR Y-10 and FR Y-10E: Sections 4(k) and 5(c)(1)(A) of the BHC Act
(12 U.S.C. 1843(k), and 1844(c)(1)(A)); section 8(a) of the IBA (12
U.S.C. 3106(a)); sections 11(a)(1), 25(7), and 25A of the FRA (12
U.S.C. 248(a)(1), 321, 601, 602, 611a, 615, and 625); sections 113,
165, 312, 618, and 809 of the Dodd-Frank Act (12 U.S.C. 5361, 5365,
5412, 1850a(c)(1), and 5468(b)(1)); and section 10(c)(2)(H) of the Home
Owners' Loan Act (HOLA) (12 U.S.C. 1467a(c)(2)(H)).
Except as discussed below, the data collected in the FR Y-6, FR Y-
7, FR Y-10, and FR Y-10E are generally not considered confidential.
With regard to information that a banking organization may deem
confidential, the institution may request confidential treatment of
such information under one or more of the exemptions in the Freedom of
Information Act (FOIA) (5 U.S.C. 552). The most likely case for
confidential treatment will be based on FOIA exemption 4, which permits
an agency to exempt from disclosure ``trade secrets and commercial or
financial information obtained from a person and privileged and
confidential'' (5 U.S.C. 552(b)(4)). To the extent an institution can
establish the potential for substantial competitive harm, such
information would be protected from disclosure under the standards set
forth in National Parks & Conservation Association v. Morton, 498 F.2d
765 (D.C. Cir. 1974). In particular, the disclosure of the responses to
the certification questions on the FR Y-7 may interfere with home
country regulators' administration, execution, and disclosure of their
stress test regime and its results, and may cause substantial
competitive harm to the FBO providing the information, and thus this
information may be protected from
[[Page 3143]]
disclosure under FOIA exemption 4. Exemption 6 of FOIA might also apply
with regard to the respondents' submission of non-public personal
information of owners, shareholders, directors, officers and employees
of respondents. Exemption 6 covers ``personnel and medical files and
similar files the disclosure of which would constitute a clearly
unwarranted invasion of personal privacy'' (5 U.S.C. 552(b)(6)). All
requests for confidential treatment would need to be reviewed on a
case-by-case basis and in response to a specific request for
disclosure.
Current Actions: On December 2, 2015, the Board published a notice
in the Federal Register (80 FR 75457) requesting public comment for 60
days on the proposal to revise, with extension, of the FR Y-6, FR Y-7,
FR Y-10, and FR Y-10E. In the notice, the Board proposed revisions to
the FR Y-7 reporting form to require an FBO to indicate its compliance
with Regulation YY by certifying that it meets, does not meet, or is
not subject to the relevant U.S. risk committee certification
requirement and to indicate that it meets, does not meet, or is not
subject to the relevant home country stress testing requirement. The
notice also included revisions to the instructions to the FR Y-7
reporting form to describe the requirements and the scope of
applicability of the report to FBOs. The comment period for this notice
expired on February 1, 2016. The Federal Reserve received two comment
letters, one from an industry association and one from a banking
organization. One comment letter requested clarification on certain of
the requirements of Regulation YY, including the requirement to form a
U.S. risk committee, while the other comment letter requested
clarification on the instructions for the FR Y-6 and the FR Y-10
reports. The Board is adopting the revisions as proposed except that
(i) the Board is extending the effective date to be effective beginning
with FR Y-7 reports submitted for fiscal year-ends that end on or after
March 1, 2018, and (ii) the Board is not adopting the proposed
extensions of the FR Y-6, FR Y-7, FR Y-10, and FR Y-10E. The Board is
also clarifying several of the issues raised by commenters in response
to the December 2, 2015, Federal Register notice, as further discussed
below.
Section 165 of the Dodd-Frank Act directs the Board to establish
enhanced prudential standards for BHCs and FBOs with total consolidated
assets of $50 billion or more and nonbank financial companies that the
Financial Stability Oversight Council has designated for supervision by
the Board. In addition, the Dodd-Frank Act directs the Board to issue
regulations applying certain standards to BHCs and FBOs with total
consolidated assets of $10 billion or more. In particular, the Board is
directed to require publicly traded BHCs and FBOs with total
consolidated assets of $10 billion or more to establish risk
committees.\5\ In addition, section 165 requires the Board to issue
regulations imposing company-run stress test requirements on BHCs,
FBOs, state member banks, and savings and loan holding companies with
total consolidated assets of more than $10 billion.\6\
---------------------------------------------------------------------------
\5\ See 12 CFR 252.132(a) and 252.144(a).
\6\ See 12 U.S.C. 5365(i).
---------------------------------------------------------------------------
In February of 2014, the Board adopted enhanced prudential
standards for FBOs, including risk committee and stress testing
requirements for FBOs with total consolidated assets of more than $10
billion. These standards are contained in the Board's Regulation YY,
which applies different requirements to FBOs depending on their asset
size. The risk committee and stress testing requirements are located in
the following subparts:
Subpart L establishes stress testing requirements for FBOs
with total consolidated assets of more than $10 billion;
Subpart M establishes risk committee requirements for
publicly traded FBOs with total consolidated assets between $10-$50
billion;
Subpart N establishes enhanced prudential standards
(including risk committee and stress testing requirements) for FBOs
with total consolidated assets of $50 billion or more but combined U.S.
assets of less than $50 billion; and
Subpart O establishes enhanced prudential standards
(including risk committee and stress testing requirements) for FBOs
with total consolidated assets of $50 billion or more and combined U.S.
assets of $50 billion or more.
With regard to risk committee requirements, an FBO subject to
subpart M or N of Regulation YY is required to certify that it has a
risk committee that oversees the risk management practices of the
combined U.S. operations of the company and has at least one member
with appropriate risk expertise.\7\ This certification must be filed on
an annual basis with the Board concurrently with the FR Y-7. An FBO
subject to subpart O of Regulation YY is subject to additional U.S.
risk committee requirements that are more prescriptive and must employ
a U.S. chief risk officer in the United States.\8\
---------------------------------------------------------------------------
\7\ The combined U.S. operations of an FBO include its U.S.
branches and agencies and U.S. subsidiaries (other than any company
held under section 2(h)(2) of the BHC Act, if applicable).
\8\ FBOs subject to subpart O are not required to certify that
they have a U.S. risk committee because the Board expects to gain
sufficient information through the supervisory process to evaluate
whether the U.S. risk committee meets the requirements of this
section.
---------------------------------------------------------------------------
With regard to stress testing, an FBO subject to subpart L, N, or O
of Regulation YY must be subject to a consolidated capital stress
testing regime administered or reviewed by the FBO's home country
supervisor, meet the home country supervisor's minimum standards, and,
in some cases, provide information to the Board about the results of
home country stress testing or face additional requirements in the
United States. In particular, the U.S. branches and agencies of the FBO
become subject to an asset maintenance requirement, and the FBO
generally must conduct an annual stress test of its U.S. subsidiaries.
An FBO subject to subpart O also must stress test any U.S. IHC.
The revisions to the FR Y-7 implement the U.S. risk committee
certification requirement in Regulation YY and provide FBOs with a
standardized way to indicate compliance with the home country stress
testing requirements (and thus, avoid being subject to additional
requirements in the U.S.). The revisions to the FR Y-7 also better
describe the risk committee requirements in Regulation YY and the scope
of applicability of the report to FBOs.
Detailed Discussion of Public Comments
The following is a detailed discussion of the two comments received
regarding the FR Y-7 proposal and the responses related to the changes
in the FR Y-7 proposal. Although no comments were received on the
reporting burden estimates, the Board has reconsidered the estimates
given the clarifications provided to Regulation YY. Thus, the Board
increased the estimated hourly burden from 4 hours to 6 hours per
response.
A commenter requested a number of clarifications regarding the
provisions in Regulation YY that require an FBO to maintain a committee
of its global board of directors (or equivalent thereof) that oversees
the risk-management policies of the combined U.S. operations of the
FBO.\9\ Each of these questions are matters of interpretation of the
requirements of Regulation YY and are
[[Page 3144]]
not related to the reporting requirements in the FR Y-7.
---------------------------------------------------------------------------
\9\ See 12 CFR 252.132(a) and 252.144(a).
---------------------------------------------------------------------------
First, the commenter requested clarification on whether the
committee that oversees U.S. risk must be composed entirely of members
of the FBO's global board or may be configured in other ways that take
into account the size, scale, and complexity of an FBO's combined U.S.
operations and more effectively utilize the expertise of personnel
familiar with the risk of these operations.
In response to this comment, to certify compliance with sections
252.132(a) and 252.144(a), the FBO is not required to form a special
U.S. risk committee comprised of members of the FBO's board of
directors. Rather, the FBO must ensure that the FBO's board of
directors or a committee comprised of members of the FBO's board of
directors has primary responsibility for oversight of the risks of the
combined U.S. operations. The committee that oversees U.S. risk for an
FBO subject to Regulation YY is not required to (though it may)
directly administer the FBO's U.S. risk management policies; rather,
the FBO may designate specific senior management officials from the
FBO's U.S. operations to be responsible for administering the U.S. risk
management policies and for providing regular reports directly to the
FBO's board of directors or risk committee.\10\ The rule is intended to
allow an FBO flexibility in establishing its oversight function so long
as the FBO's board of directors is informed about and provides the
appropriate level of guidance about the risks of the combined U.S.
operations of the FBO. However the FBO designs its oversight function,
the FBO must also take appropriate measures to ensure that the risk
management policies for its combined U.S. operations are implemented
and that the risk committee is provided sufficient information on the
combined U.S. operations to allow it to carry out its
responsibilities.\11\
---------------------------------------------------------------------------
\10\ See 79 FR 17284 (March 27, 2014).
\11\ See 12 CFR 252.132(c) and 252.144(c).
---------------------------------------------------------------------------
The same commenter requested clarification regarding how the
requirement in Regulation YY for an FBO to have a committee that
oversees U.S. risk would apply to an FBO with a two-tier board
structure. The two-tier board structure is a common feature of FBOs in
European countries, and generally consists of a supervisory board
independent from management that sets the direction of the company and
oversees the company's senior management, and a management/executive
board that implements the company's strategies and risk management. The
purpose of the risk committee requirements in Regulation YY is to
ensure that the FBO parent is aware of and takes responsibility for the
oversight of the risks of its combined U.S. operations. This oversight
function can be integrated into various board structures that currently
exist in different foreign countries. In a two-tier board structure, a
committee of either the supervisory board or the management/executive
board (or a combination thereof) could be considered a committee of the
FBO board of directors for purposes of complying with the requirement
under Regulation YY for an FBO to maintain a committee that oversees
U.S. risk. Both tiers of a two-tier board are typically involved in
evaluating risk management at an FBO with the same goals as those of a
single board of directors in the United States.
The same commenter requested clarification regarding various
requirements in Regulation YY relating to capital stress testing and
liquidity stress testing.\12\ To be exempt from additional U.S. capital
stress testing requirements, Regulation YY requires an FBO to be
subject on a consolidated basis to an annual capital stress testing
regime in its home country that meets certain requirements and to
actually meet any minimum stress testing standards set by the FBO's
home country supervisor.\13\ In reporting Item 5 of the FR Y-7, an FBO
is expected to evaluate the stress testing regime to which it is
subject and make a reasonable conclusion about whether this regime
meets the home country stress testing criteria in Regulation YY.
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\12\ See 12 CFR 252.122(a), 12 CFR 252.145(a), 12 CFR
252.146(b), and 12 CFR 252.158(b).
\13\ The capital stress testing regime must include: (i) An
annual supervisory capital stress test conducted by the relevant
home country supervisor or an annual evaluation and review by the
home country supervisor of an internal capital adequacy stress test
conducted by the FBO; and (ii) requirements for governance and
controls of stress testing practices by relevant management and the
board of directors (or equivalent thereof).
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Moreover, the same commenter requested clarification as to whether
an FBO would meet the home country stress test requirements upon a
satisfactory completion of an Internal Capital Adequacy Assessment
Process (ICAAP). If an ICAAP satisfies the underlying requirements for
a capital stress test, including all applicable information
requirements in Regulation YY, satisfactory completion of the ICAAP
would be sufficient to satisfy these requirements.
Regulation YY requires an FBO to report on an annual basis the
results of an internal liquidity stress test for either the
consolidated operations of the FBO or the FBO's combined U.S.
operations. In either case, the liquidity stress test must incorporate
three specified planning horizons. The same commenter requested
guidance on how an FBO should report when the FBO's home country uses
fewer or different planning horizons.
In the event that an FBO is not required to conduct an internal
liquidity stress test for its consolidated operations using the three
specified planning horizons in Regulation YY or chooses not to do so,
the FBO may instead choose to provide an internal liquidity stress test
for just the combined U.S. operations. Under Regulation YY, if an FBO
does not comply with the internal liquidity stress testing reporting
requirements, it must limit the net aggregate amount owed by the parent
or other non-U.S. affiliates to the U.S. operations to 25 percent or
less of the third party liabilities of the combined U.S. operations.
In addition, although Regulation YY does not prescribe the
information that must be reported to the Board regarding the internal
liquidity stress tests, given the diversity in liquidity reporting
requirements across jurisdictions, FBOs are expected to provide
sufficient information in the internal liquidity stress test to allow
the Board to assess the liquidity position of the FBO.\14\
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\14\ See 79 FR 17239, 17301 (March 27, 2014).
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The same commenter requested guidance on an FBO's compliance with
the stress testing requirement when annual stress testing is not
required by the FBO's home country supervisor. Regulation YY requires
an FBO to be subject to a stress testing regime that includes an annual
supervisory stress test or annual supervisory evaluation of the FBO's
internal stress test. A bi-annual stress test, for example, would not
satisfy this requirement.
The same commenter requested guidance on whether an FBO would be
deemed to satisfy the requirement to report and certify compliance with
its home country capital adequacy requirements by completing the FR Y-
7Q. In addition, the commenter requested confirmation of the as-of date
and frequency of the certification of the FR Y-7Q. Regulation YY
requires an FBO to report compliance with capital adequacy measures
that are consistent with the Basel Capital Framework (as defined in 12
CFR 252.143(a) and 252.154(a)) concurrently with filing the FR Y-7Q;
however, Regulation YY does not specify the frequency or the as-of date
for an FBO's certification of
[[Page 3145]]
compliance with its home country capital requirements. On December 2,
2016, the Board approved a final notice to amend the FR Y-7Q to expand
reporting regarding an FBO's home country capital ratios consistent
with Regulation YY. An FBO's completion of the FR Y-7Q on a quarterly
basis would satisfy both the requirement to report and the requirement
to certify to the Board its compliance with capital adequacy measures
that are consistent with the Basel Capital Framework. If an FBO is
unable to report that it is in compliance with such capital adequacy
measures, the Board may impose requirements, conditions, and
restrictions relating to the U.S. operations of the FBO.\15\
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\15\ See 12 CFR 252.143(c) and 252.154(c).
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A second commenter requested clarification on the definition of an
inactive company when an entity is in the liquidation process.
Respondents should refer to the definition of ``Liquidation'' in the
Banking, Savings and Loan, and Nonbanking Schedules in the FR Y-10
instructions on how to classify an entity during the liquidation
process. Specifically, the instructions state ``liquidation refers to
final distribution of assets, satisfaction of liabilities, and closing
of capital accounts of a company, as opposed to sale or transfer of the
company.''
The same commenter also requested that the instructions be expanded
on reporting when a nonbanking company is a functionally regulated
subsidiary since the mere registration with a functional regulator does
not necessarily qualify a company as being functionally regulated for
these purposes. In response to the commenter's request, the Board notes
that respondents should refer to the definition of ``Functionally
Regulated Subsidiary'' in the FR Y-10 instructions, which provides that
certain companies may be required to be registered with one of the
enumerated regulators without necessarily qualifying as being
functionally regulated by that regulator; for example, publicly held
companies may be required to be registered with the U.S. Securities and
Exchange Commission (SEC) without necessarily qualifying as
functionally regulated by the SEC as a securities broker-dealer,
investment adviser, investment company, or company that engages in
commodity futures trading.
Board of Governors of the Federal Reserve System, January 18,
2018.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2018-01153 Filed 1-22-18; 8:45 am]
BILLING CODE 6210-01-P