Proposed Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements, 66024-66059 [2018-27177]

Download as PDF 66024 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Office of the Comptroller of the Currency 12 CFR Parts 3 and 50 [Docket ID OCC–2018–0037] RIN 1557–AE56 FEDERAL RESERVE SYSTEM 12 CFR Parts 217 and 249 [Docket No. R–1628] RIN 7100–AF21 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Parts 324 and 329 RIN 3064–AE96 Proposed Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements Office of the Comptroller of the Currency, Treasury; the Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation. ACTION: Notice of proposed rulemaking with request for public comment. AGENCY: The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies) are inviting comment on a proposal that would establish risk-based categories for determining applicability of requirements under the regulatory capital rule, the liquidity coverage ratio rule, and the proposed net stable funding ratio rule for large U.S. banking organizations. The proposal would establish four categories of standards and apply tailored capital and liquidity requirements for banking organizations subject to each category. The proposal is consistent with a separate proposal issued by the Board that would apply certain prudential standards for large U.S. banking organizations based on the same categories. The proposal would not amend the capital and liquidity requirements currently applicable to an intermediate holding company of a foreign banking organization or its subsidiary depository institutions. This proposal also would not amend the requirements applicable to Federal branches or agencies of foreign banking organizations. DATES: Comments must be received by January 22, 2019. amozie on DSK3GDR082PROD with PROPOSALS4 SUMMARY: VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 Comments should be directed to: OCC: You may submit comments to the OCC by any of the methods set forth below. Commenters are encouraged to submit comments through the Federal eRulemaking Portal or email, if possible. Please use the title ‘‘Proposed Changes to Thresholds Applicable to Regulatory Capital and Liquidity Requirements’’ to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • Federal eRulemaking Portal— ‘‘regulations.gov’’: Go to www.regulations.gov. Enter ‘‘Docket ID OCC–2018–0037’’ in the Search Box and click ‘‘Search.’’ Click on ‘‘Comment Now’’ to submit public comments. Click on the ‘‘Help’’ tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments. • Email: regs.comments@ occ.treas.gov. • Mail: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E–218, Washington, DC 20219. • Hand Delivery/Courier: 400 7th Street SW, Suite 3E–218, Washington, DC 20219. • Fax: (571) 465–4326. Instructions: You must include ‘‘OCC’’ as the agency name and ‘‘Docket ID OCC–2018–0037’’ in your comment. In general, the OCC will enter all comments received into the docket and publish them on the Regulations.gov website without change, including any business or personal information that you provide such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this rulemaking action by any of the following methods: • Viewing Comments Electronically: Go to www.regulations.gov. Enter ‘‘Docket ID OCC–2018–0037’’ in the Search box and click ‘‘Search.’’ Click on ‘‘Open Docket Folder’’ on the right side of the screen and then ‘‘Comments.’’ Comments and supporting materials can be filtered by clicking on ‘‘View all documents and comments in this docket’’ and then using the filtering tools on the left side of the screen. Click on the ‘‘Help’’ tab on the ADDRESSES: DEPARTMENT OF THE TREASURY PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 Regulations.gov home page to get information on using Regulations.gov. The docket may be viewed after the close of the comment period in the same manner as during the comment period. • Viewing Comments Personally: You may personally inspect comments at the OCC, 400 7th Street SW, Washington, DC 20219. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649–6700 or, for persons who are hearing impaired, TTY, (202) 649–5597. Upon arrival, visitors will be required to present valid government-issued photo identification and submit to security screening in order to inspect comments. Board: You may submit comments, identified by Docket No. R–1628, by any of the following methods: • Agency Website: https:// www.federalreserve.gov. Follow the instructions for submitting comments at https://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm. • Email: regs.comments@ federalreserve.gov. Include docket number in the subject line of the message. • FAX: (202) 452–3819 or (202) 452– 3102. • Mail: Ann E. Misback, 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 website at https://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or to remove personally identifiable information at the commenter’s request. Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room 3515, 1801 K Street NW (between 18th and 19th Streets NW), between 9:00 a.m. and 5:00 p.m. on weekdays. FDIC: You may submit comments, identified by RIN 3064–AE96, by any of the following methods: • Agency Website: https:// www.FDIC.gov/regulations/laws/ federal/propose.html. Follow instructions for submitting comments on the Agency website. • Mail: Robert E. Feldman, Executive Secretary, Attention: Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. • Hand Delivered/Courier: Comments may be hand-delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules business days between 7:00 a.m. and 5:00 p.m. • Email: comments@FDIC.gov. Include RIN 3064–AE96 on the subject line of the message. • Public Inspection: All comments received must include the agency name and RIN 3064–AE96 for this rulemaking. All comments received will be posted without change to https://www.fdic.gov/ regulations/laws/federal/, including any personal information provided. Paper copies of public comments may be ordered from the FDIC Public Information Center, 3501 North Fairfax Drive, Room E–1002, Arlington, VA 22226 by telephone at (877) 275–3342 or (703) 562–2200. FOR FURTHER INFORMATION CONTACT: OCC: Mark Ginsberg, Senior Risk Expert, or Venus Fan, Risk Expert, Capital and Regulatory Policy, (202) 649–6370; James Weinberger, Technical Expert, Treasury & Market Risk Policy, (202) 649–6360; or Carl Kaminski, Special Counsel, Henry Barkhausen, Counsel, or Daniel Perez, Attorney, Chief Counsel’s Office, (202) 649–5490, or for persons who are hearing impaired, TTY, (202) 649–5597, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. Board: Constance M. Horsley, Deputy Associate Director, (202) 452–5239; Elizabeth MacDonald, Manager, (202) 475–6216; Brian Chernoff, Senior Supervisory Financial Analyst, (202) 452–2952; Sean Healey, Supervisory Financial Analyst, (202) 912–4611; Matthew McQueeney, Supervisory Financial Analyst (202) 452–2942; Christopher Powell, Supervisory Financial Analyst, (202) 452–3442, Division of Supervision and Regulation; or Benjamin McDonough, Assistant General Counsel (202) 452–2036; Asad Kudiya, Counsel, (202) 475–6358; Mary Watkins, Senior Attorney (202) 452– 3722; Alyssa O’Connor, Attorney, (202) 452–3886, Legal Division, Board of Governors of the Federal Reserve System, 20th and C Streets NW, Washington, DC 20551. For the hearing impaired only, Telecommunication Device for the Deaf (TDD), (202) 263– 4869. FDIC: Benedetto Bosco, Chief, Capital Policy Section, bbosco@fdic.gov; Stephanie Lorek, Senior Policy Analyst, slorek@fdic.gov; Michael Maloney, Senior Policy Analyst, mmaloney@ fdic.gov; regulatorycapital@fdic.gov; Michael E. Spencer, Chief, Capital Markets Strategies Section, michspencer@fdic.gov; Eric W. Schatten, Senior Policy Analyst, eschatten@fdic.gov; Andrew D. Carayiannis, Senior Policy Analyst, VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 acarayiannis@fdic.gov; Capital Markets Branch, Division of Risk Management Supervision, (202) 898–6888; Michael Phillips, Acting Supervisory Counsel, mphillips@fdic.gov; Catherine Wood, Counsel, cawood@fdic.gov; Suzanne Dawley, Counsel, sudawley@fdic.gov; Andrew B. Williams II, Counsel, andwilliams@fdic.gov; Catherine Topping, Counsel, ctopping@fdic.gov; or Alexander Bonander, Attorney, abonander@fdic.gov; Supervision and Legislation Branch, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. SUPPLEMENTARY INFORMATION: Table of Contents I. Background and Summary of Proposal II. Proposal A. Scope of Application B. Scoping Criteria for Proposed Categories 1. Size 2. Other Risk-Based Indicators a. Cross-Jurisdictional Activity b. Weighted Short-Term Wholesale Funding c. Nonbank Assets d. Off-Balance Sheet Exposure 3. Alternative Scoping Criteria 4. Determination of Applicable Category of Standards C. Proposed Regulatory Framework 1. Category I Standards 2. Category II Standards 3. Category III Standards 4. Category IV Standards III. Impact Analysis IV. Administrative Law Matters A. Paperwork Reduction Act B. Regulatory Flexibility Act Analysis C. Plain Language D. OCC Unfunded Mandates Reform Act of 1995 Determination E. Riegle Community Development and Regulatory Improvement Act of 1994 I. Background and Summary of Proposal In 2013, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) adopted a revised regulatory capital rule (capital rule) that, among other things, addressed weaknesses in the regulatory framework that became apparent in the 2007–2009 financial crisis.1 The capital rule strengthened the capital requirements applicable to banking organizations 2 supervised by the 1 Covered intermediate holding companies shall remain subject to this part as in effect on October 31, 2018, until the Board amends the liquidity risk measurement standards applicable to the subsidiaries of foreign banking organizations in effect on October 31, 2018. 2 Banking organizations subject to the agencies’ capital rule include national banks, state member PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 66025 agencies by improving both the quality and quantity of regulatory capital and increasing the risk-sensitivity of capital requirements. In addition, to improve the banking sector’s resiliency to liquidity stress and to improve the ability of large and internationally active banking organizations to monitor and manage liquidity risk, the agencies adopted the liquidity coverage ratio (LCR) rule in 2014,3 and the Board implemented enhanced liquidity standards 4 for the largest depository institution holding companies. Companies subject to the LCR rule must maintain an amount of high-quality liquid assets (HQLA) equal to or greater than their projected total net cash outflows over a prospective 30 calendarday period.5 Finally, on June 1, 2016, the agencies invited comment on a proposed rule to implement a net stable funding ratio (NSFR) requirement.6 The proposed NSFR rule would establish a quantitative metric to measure and help ensure the stability of the funding profile of a banking organization over a one-year time horizon. Many of the agencies’ current rules, including the capital rule, the LCR rule, and the proposed NSFR rule, differentiate among banking organizations based on one or more risk indicators, such as total asset size and foreign exposure. Specifically, the capital rule categorizes banking organizations into two groups: (i) banks, insured state nonmember banks, savings associations, and top-tier bank holding companies and savings and loan holding companies domiciled in the United States not subject to the Board’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (12 CFR part 225, appendix C, and 12 CFR 238.9), excluding certain savings and loan holding companies that are substantially engaged in insurance underwriting or commercial activities or that are estate trusts, and bank holding companies and savings and loan holding companies that are employee stock ownership plans. 3 See 79 FR 61440 (October 10, 2014), codified at 12 CFR part 50 (OCC), 12 CFR part 249 (Board), and 12 CFR part 329 (FDIC). 4 These enhanced liquidity standards require a bank holding company to establish and maintain robust liquidity risk management practices, perform internal stress tests for determining the adequacy of their liquidity resources, and maintain a buffer of highly liquid assets to cover cash flow needs under stress. See 12 CFR part 252. 5 For depository institution holding companies with $50 billion or more, but less than $250 billion, in total consolidated assets and less than $10 billion in on-balance sheet foreign exposure, the Board separately adopted a modified LCR requirement, described further below. 12 CFR 249 subpart G. 6 ‘‘Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements; Proposed Rule,’’ 81 FR 35124 (June 1, 2016). For depository institution holding companies with $50 billion or more, but less than $250 billion, in total consolidated assets and less than $10 billion in total on-balance sheet foreign exposure, the Board separately proposed a modified NSFR requirement. E:\FR\FM\21DEP4.SGM 21DEP4 66026 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules amozie on DSK3GDR082PROD with PROPOSALS4 Banking organizations subject solely to the generally applicable risk-based capital rules, which have total consolidated assets of less than $250 billion and total on-balance sheet foreign exposure of less than $10 billion (standardized approach banking organizations),7 and (ii) banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in total on-balance sheet foreign exposure, together with depository institution subsidiaries of banking organizations meeting those thresholds (advanced approaches banking organizations).8 Standardized approach banking organizations must calculate risk-weighted assets using the standardized approach 9 and calculate a leverage ratio that measures regulatory capital relative to on-balance sheet assets. Advanced approaches banking organizations must use both the internal models-based advanced approaches and the standardized approach to determine their risk-based capital ratios. They also must calculate a supplementary leverage ratio, which measures regulatory capital relative to on-balance sheet and certain off-balance sheet exposures, in addition to the leverage ratio described above. In addition, when calculating their regulatory capital levels, advanced approaches banking organizations are required to include most elements of accumulated other comprehensive income (AOCI) in regulatory capital, which better reflects the loss-absorbing capacity of a banking organization at a specific point in time, but can also result in regulatory capital volatility and require more sophisticated capital planning and asset-liability management. Additional capital requirements apply to U.S. GSIBs beyond those applicable to advanced approaches banking organizations, which are intended to increase their resiliency as the largest, most interconnected and systemically risky banking organizations. First, a risk-based capital surcharge applies to U.S. GSIBs at the top-tier bank holding company level, calibrated to reflect their systemic footprint. Second, an enhanced supplementary leverage ratio standard 7 See 12 CFR part 217, subparts D & E (Board); 12 CFR part 3 (OCC), Subparts D & E; 12 CFR part 324, subparts D & E (FDIC). 8 See 12 CFR 217.1(c), 12 CFR 217.100(b) (Board); 12 CFR 3.1(c), 12 CFR 3.100(b) (OCC); 12 CFR 324.1(c), 12 CFR 324.100(b) (FDIC). U.S. global systemically important bank holding companies (GSIBs) form a sub-category of advanced approaches banking organizations. 9 Also referred to as the ‘‘generally applicable’’ risk-based capital requirements. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 applies to U.S. GSIBs and their insured depository institution subsidiaries.10 With respect to the liquidity rules, the LCR rule also distinguishes between banking organizations based on total asset size and foreign exposure. The full LCR requirement generally applies to banking organizations that meet the advanced approaches thresholds and to their subsidiary depository institutions with total consolidated assets of $10 billion or more.11 The Board’s regulations also apply a less stringent, modified LCR requirement to depository institution holding companies that do not meet the advanced approaches thresholds but have more than $50 billion in total consolidated assets. The proposed NSFR requirement would apply to the same banking organizations as the current LCR requirement. Similarly, under the NSFR proposal, the Board proposed to apply a less stringent, modified NSFR requirement to the same depository institution holding companies that are subject to the modified LCR requirement. The scoping criteria of the regulations described above rely on a definition of advanced approaches banking organization that the agencies introduced in 2007 in connection with the adoption of the advanced approaches risk-based capital rule. The thresholds established by the definition were designed to include the largest and most internationally active banking organizations. In implementing the liquidity rules, the agencies relied on these same thresholds, recognizing the applicable banking organizations have balance sheet compositions, off-balance sheet activities, and funding profiles that lead to larger and more complex liquidity profiles. The agencies are proposing modifications to their capital and liquidity rules that would revise the criteria for determining the prudential standards that apply to large banking organizations operating in the United 10 The FDIC and OCC apply an enhanced supplementary leverage ratio standard to insured depository institution subsidiaries of U.S. top-tier bank holding companies with more than $700 billion in total consolidated assets or more than $10 trillion in total assets under custody, while the Board’s regulation applies these requirements to insured depository institution subsidiaries of U.S. GSIBs. There is currently no difference between the holding companies identified by these regulations, and the OCC has proposed to amend its regulation to reference the Board’s U.S. GSIB definition. See Regulatory Capital Rules: Regulatory Capital, Enhanced Supplementary Leverage Ratio Standards for U.S. Global Systemically Important Bank Holding Companies and Certain of Their Subsidiary Insured Depository Institutions; Total LossAbsorbing Capacity Requirements for U.S. Global Systemically Important Bank Holding Companies, 83 FR 17317 (proposed April 19, 2018). 11 See 12 CFR 249.1. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 States (the proposal).12 Specifically, the agencies are proposing to (i) amend the scope of certain aspects of the regulatory capital rule and the LCR rule; and (ii) repropose the scope of the NSFR rule. The proposal would update the current regulatory distinction between advanced approaches and standardized approach banking organizations and further tailor the capital and liquidity requirements applicable to large banking organizations according to riskbased indicators. Specifically, for banking organizations with total consolidated assets of $100 billion or more, the proposal would establish four categories of standards based on size, cross-jurisdictional activity, weighted short-term wholesale funding, offbalance sheet exposure, and nonbank assets. Section II.B of this Supplementary Information section below discusses the proposed scoping criteria for each of these categories, and section II.C describes the capital and liquidity requirements proposed for each category of standards.13 The agencies note that there are currently additional outstanding notices of proposed rulemaking that make reference to the advanced approaches thresholds to set the scope of application, relating to simplifications to the agencies’ capital rule (issued October 2017) 14 and a standardized approach to calculating derivative 12 This proposal is part of the agencies’ ongoing effort to review their respective capital and liquidity requirements to determine how best to tailor their application based on the size, complexity, and overall risk profile of banking organizations. Consistent with these efforts, the agencies also intend to issue a proposal to implement section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which requires the agencies to revise the capital requirements applicable to certain banking organizations with less than $10 billion in total consolidated assets. See Public Law 115–174, 132 Stat. 1296 (2018). 13 Separately, the Board is requesting comment on a proposed rule (the Board-only proposal) that would tailor certain prudential standards for large domestic banking organizations based on the same categories. In particular, and consistent with section 401 of EGRRCPA, the Board-only proposal would further tailor the application of existing prudential standards relating to liquidity, risk management, stress testing, and single-counterparty credit limits. In order to appropriately tailor the prudential requirements, the Board-only proposal incorporates the four categories of prudential standards for banking organizations described in this proposal. In addition, the Board-only proposal would apply prudential standards to certain large savings and loan holding companies (other than those substantially engaged in insurance underwriting or commercial activities), using the same categories, to further their safety and soundness. The agencies encourage commenters to review this proposal together with the Board-only proposal. 14 See ‘‘Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996.’’ 82 FR 49984 (October 27, 2017). E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules exposures (issued October 2018).15 For purposes of considering and commenting on those pending notices, the requirements that would apply to ‘‘advanced approaches banking organizations’’ under those notices of proposed rulemaking would be included as Category I and II standards under this proposal. For purposes of considering and commenting on those pending notices, the requirements that would apply to ‘‘advanced approaches banking organizations’’ under those outstanding notices of proposed rulemaking would be included as Category I and II standards under this proposal. Furthermore, the agencies note that they are still considering amendments to their capital rule that would take into account final Basel III reforms adopted by the Basel Committee on Banking Supervision (BCBS) in December of 2017.16 amozie on DSK3GDR082PROD with PROPOSALS4 II. Proposal Post-crisis regulatory reforms, which include the agencies’ capital and liquidity standards, have resulted in significant enhancements to financial stability and the safety and soundness of banking organizations. The agencies continue to evaluate the requirements of these measures to ensure that they meet their objectives in a manner that minimizes unintended consequences and aligns with banking organizations’ risk profiles. These efforts include assessing the costs and benefits of regulations as well as exploring alternative approaches that achieve regulatory objectives but improve upon the simplicity, transparency, and efficiency of the regime. The proposal builds on the agencies’ existing practice of tailoring capital and liquidity requirements based on the size, complexity, and overall risk profile of banking organizations. The proposal would make changes that would further distinguish applicable capital and liquidity standards on the basis of risk. Under the proposal, the most stringent standards would continue to apply to banking organizations that present the greatest systemic risks. For other banking 15 See ‘‘Regulatory Capital Rule: Standardized Approach for Calculating the Exposure Amount of Derivative Contracts,’’ available at https:// www.occ.treas.gov/news-issuances/news-releases/ 2018/nr-ia-2018-114.html. 16 See ‘‘Basel III: Finalising post-crisis reforms,’’ available at https://www.bis.org/bcbs/publ/ d424.htm. The BCBS is a committee of banking supervisory authorities, which was established by the central bank governors of the G–10 countries in 1975. More information regarding the BCBS and its membership is available at https://www.bis.org/bcbs/ about.htm. Documents issued by the BCBS are available through the Bank for International Settlements website at https://www.bis.org. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 organizations, the proposal would refine the application of capital and liquidity standards based on these banking organizations’ risk profiles, consistent with safety and soundness and financial stability. Under the proposal, the most stringent set of standards (Category I) would apply to U.S. GSIBs and their subsidiary depository institutions. These banking organizations have the potential to pose the greatest risks to U.S. financial stability due to their systemic risk profiles. The existing postfinancial crisis framework for U.S. GSIBs has resulted in significant gains in resiliency and risk management. The proposal accordingly would maintain the most stringent standards for these banking organizations, which are generally consistent with the standards developed by the BCBS, subject to notice and comment rulemaking in the United States. The second set of standards (Category II) would apply to banking organizations that are very large or have significant international activity. Like Category I, the agencies intend for Category II standards to be consistent with standards developed by the BCBS, subject to notice and comment rulemaking in the United States. The application of consistent prudential standards across jurisdictions to banking organizations with significant size or cross-jurisdictional activity helps to promote competitive equity among U.S. banking organizations and their foreign peers and competitors, and to reduce opportunities for regulatory arbitrage, while applying standards that appropriately reflect the risk profiles of banking organizations in this category. In addition, consistency of standards can facilitate U.S. banking organizations’ regulatory compliance in foreign markets. Category II standards would also reflect the risks associated with these banking organizations’ very large size or cross-border operations. The third set of standards (Category III) would apply to banking organizations with total consolidated assets of $250 billion or more that do not meet the criteria for Category I or II, and to other banking organizations with total consolidated assets of $100 billion or more, but less than $250 billion, that meet or exceed specified indicators of risk. Category III standards would reflect these banking organizations’ heightened risk profiles relative to smaller and less complex banking organizations. The fourth set of standards (Category IV) would apply to banking organizations with total consolidated assets of $100 billion or more that do not meet the thresholds for one of the PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 66027 other categories. These banking organizations generally have greater scale and operational and managerial complexity relative to smaller banking organizations, but less than banking organizations that would be subject to Category I, II, or III standards. In addition, the failure or distress of one or more banking organizations that would be subject to Category IV standards, while not likely to have as significant of an impact on financial stability as the failure or distress of a firm subject to Category I, II or III standards, could nonetheless have a more significant negative effect on economic growth and employment relative to the failure or distress of smaller banking organizations. Category IV standards are therefore less stringent than Category III standards, reflecting the lower risk profile of these banking organizations relative to other banking organizations with $100 billion or more in total consolidated assets. For example, based on the size and risk profile of these banking organizations, the proposal would remove applicability of the LCR rule and proposed NSFR rule for banking organizations subject to Category IV standards. As a result, firms subject to Category IV standards would generally face the same capital and liquidity regulatory requirements as banking organizations under $100 billion in total consolidated assets.17 Unlike firms with less than $100 billion in total consolidated assets, however, firms subject to Category IV standards would be required to monitor and report certain risk-based indicators, as described further below. A. Scope of Application The next section II.B describes the proposed criteria for determining which of the four proposed categories of standards applies to a banking organization with total consolidated assets of $100 billion or more and its subsidiary depository institutions. The proposed categories and criteria are consistent with the considerations and factors set forth in section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),18 as amended by EGRRCPA, and with the categories of prudential standards in the Board-only proposal. The proposal would not amend the capital and liquidity requirements 17 Bank holding companies and savings and loan holding companies with less than $3 billion in total consolidated assets and that meet certain additional criteria are not subject to the capital rule pursuant to the Board’s small bank holding company policy statement. See 12 CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225, appendix C; 12 CFR 238.9. 18 Public Law 111–203, 124 Stat. 1376 (2010). E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66028 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules applicable to an intermediate holding company or its subsidiary depository institutions or the bank holding company subsidiary of a foreign banking organization.19 This proposal also would not amend the requirements applicable to Federal branches or agencies of foreign banking organizations. The proposal would apply the same category of standards to both the top-tier holding company and its subsidiary depository institutions. With respect to capital, the proposal would apply the same requirements to a subsidiary depository institution of a holding company as would apply at the holding company level. This treatment aligns with the agencies’ longstanding policy of applying similar standards to holding companies and their subsidiary depository institutions. For example, since 2007 the agencies have generally required depository institutions to apply the advanced approaches capital requirements if their parent holding company is identified as an advanced approaches banking organization. This approach serves as an important safeguard against arbitrage among affiliated banks that would otherwise be subject to substantially different regulatory requirements. With respect to liquidity, subsidiary depository institutions of a holding company subject to the full LCR and the proposed full NSFR with $10 billion or more in total consolidated assets at the depository institution level are also subject to the LCR requirement and would be subject to the proposed NSFR requirement. Large subsidiary depository institutions play a significant role in a covered company’s funding structure, and in the operation of the payments system. These large subsidiaries generally also have access to deposit insurance coverage. Accordingly, the proposal would maintain the application of the LCR and proposed NSFR requirements to these large subsidiary depository institutions. Question 1: The agencies invite comment on the advantages and disadvantages of assigning a category of standards to a subsidiary depository institution based on the category assigned to its top-tier parent holding company. What would be the advantages and disadvantages of relying 19 The Board continues to consider the appropriate way to assign the U.S. operations of foreign banking organizations to the categories of standards described in this proposal, in light of the special structures through which these banking organizations conduct business in the United States. The Board plans to develop a separate proposal relating to foreign banking organizations and their U.S. operations. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 on the top-tier holding company’s categorization and, under this approach, how should these standards be applied at the subsidiary depository institution? If commenters prefer an alternative approach to relying on the top-tier holding company’s categorization, please describe any alternative scoping criteria that the agencies should consider for categorizing subsidiary depository institutions. If an alternative approach were applied, what increases in compliance costs or operational challenges could arise if a subsidiary depository institution were subject to a different category of standards than its top-tier parent holding company? B. Scoping Criteria for Proposed Categories Where possible, the proposal would rely on indicators and thresholds already used in the agencies’ existing regulatory frameworks or reported by large U.S. bank holding companies or savings and loan holding companies. As described further below, these categories would be defined based on the following criteria: • Category I standards would apply to U.S. GSIBs and their subsidiary depository institutions. • Category II standards would apply to banking organizations with $700 billion or more in total consolidated assets or $75 billion or more in crossjurisdictional activity that are not subject to Category I standards and to their subsidiary depository institutions. • Category III standards would apply to banking organizations that are not subject to Category I or II standards and that have $250 billion or more in total consolidated assets or $75 billion or more in any of the following indicators: Nonbank assets, weighted short-term wholesale funding, or off-balance-sheet exposures. Category III standards would also apply to the subsidiary depository institutions of any holding companies subject to Category III standards. • Category IV standards would apply to banking organizations with at least $100 billion in total consolidated assets that do not meet any of the thresholds specified for Categories I through III and to their subsidiary depository institutions. To determine which banking organizations are subject to the most stringent standards under Category I, the agencies would use the existing methodology under the Board’s GSIB surcharge rule.20 The proposal would 20 See 12 CFR part 217, subpart H; see also ‘‘Regulatory Capital Rules: Implementation of RiskBased Capital Surcharges for Global Systemically PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 not modify the requirements that currently apply to U.S. GSIBs and their subsidiary depository institutions. To determine the applicability of the remaining categories of capital and liquidity standards, the agencies are proposing to differentiate requirements based on a banking organization’s level of specific risk-based indicators.21 This approach is intended to allow banking organizations and the public to easily identify and predict what requirements will apply to a banking organization, and what requirements would apply if the characteristics of a banking organization change. Under the proposed approach, Categories II through IV would be defined by five indicators linked to a banking organization’s risk profile: Size, crossjurisdictional activity, weighted shortterm wholesale funding, nonbank assets, and off-balance sheet exposure. By taking into consideration the relative presence or absence of each risk factor, the proposal would provide a basis for assessing a banking organization’s financial stability and safety and soundness risks.22 These indicators generally track measures already used in the agencies’ existing regulatory framework and that banking organizations that would be covered by the proposal already publicly report at the holding company level. This approach would promote transparency and, for banking organizations that already report this information, would not require additional compliance costs to track and report. The proposed thresholds would apply based on the level of each indicator over the preceding four calendar quarters, as described further below, in order to account for significant changes in a banking organization’s risk profile that reflect longer term shifts in business activities. Under the proposal, a depository institution without a holding company Important Bank Holding Companies; Final Rule,’’ 80 FR 49082 (August 14, 2015). 21 As an alternative, the agencies are also requesting comment on a score-based approach, which would differentiate requirements for banking organizations using an aggregated ‘‘score’’ across multiple measures of risk. Section II.B.3 of this Supplementary Information section describes this proposed alternative. 22 When reviewing agency interpretations of statutes that require an agency to ‘‘take into account’’ or ‘‘take into consideration’’ a number of factors, courts generally defer to the expertise of the agency in determining how to apply the factors and the relative weight given to each factor. See, e.g., National Wildlife Federation v. EPA, 286 F.3d 554, 570 (D.C. Cir. 2002); Lignite Energy v. EPA, 198 F.3d 930, 933 (D.C. Cir. 1999); Trans World Airlines, Inc. v. Civil Aeronautics Board, 637 F.2d 62, 67–68 (2d Cir. 1980); Weyerhaeuser v. EPA, 590 F.2d 1011, 1046 (D.C. Cir. 1978); Sec’y of Agric. v. Cent. Roig Ref. Co., 338 U.S. 604, 611–12 (1950). E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules amozie on DSK3GDR082PROD with PROPOSALS4 would be required to calculate these risk-based indicators, apart from size, based upon the instructions of certain reports that are required to be filed by holding companies, including the Banking Organization Systemic Risk Report (FR Y–15) and the Parent Company Only Financial Statements for Large Holding Companies (FR Y–9LP). Specifically, such a depository institution would need to report crossjurisdictional activity, weighted shortterm wholesale funding, off-balance sheet exposure, and nonbank asset indicator data to its agency supervisory staff for the purpose of determining which capital and liquidity regulations would apply. Question 2: The agencies invite comment on the advantages and disadvantages of requiring a depository institution without a holding company to calculate indicators according to this approach. What operational complexities and challenges would arise if the agencies adopted this approach? What additional information could the agencies incorporate into the Consolidated Reports of Condition and Income (Call Reports), or other reports currently required of depository institutions, to replicate the calculation methodology for these indicators such as the measure of foreign assets and liabilities captured in the FR Y–15? What existing information is currently reported by depository institutions that could be used to replicate the calculation methodologies described under the proposal? What alternative indicators and related reporting requirements should the agencies consider to apply the proposal to large depository institutions without holding companies? 1. Size The proposal would measure size based on a banking organization’s total consolidated assets. The agencies have previously used size as a simple measure of a banking organization’s potential systemic impact as well as safety and soundness risks.23 The effect of a large banking organization’s failure on the economy is likely to be greater than that which occurs when a smaller banking organization fails, even though the two banking organizations might be engaged in similar business lines.24 Board staff 23 For example, advanced approaches capital requirements, the supplementary leverage ratio, and the LCR requirement generally apply to banking organizations with total consolidated assets of $250 billion or more or total consolidated on-balance sheet foreign exposure of $10 billion or more. 24 See Amy G. Lorenc, and Jeffery Y. Zhang (2018). ‘‘The Differential Impact of Bank Size on VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 estimates that stress at a single large banking organization with an assumed $100 billion in deposits would result in approximately a 107 percent decline in quarterly real GDP growth, whereas stress among five smaller banking organizations—each with an assumed $20 billion in deposits—would result in roughly a 22 percent decline in quarterly real GDP growth.25 Both scenarios assume $100 billion in total deposits, but the negative impact is greatest when larger banking organizations fail. In general, a banking organization’s size also provides a measure of the extent to which customers or counterparties may be exposed to a risk of loss or suffer a disruption in the provision of services if a banking organization were to experience distress, and the extent to which asset fire sales by a banking organization could transmit distress to other market participants, given that a larger banking organization has more assets to sell. In addition, the large size of a banking organization may give rise to challenges that may complicate resolution of the firm if it were to fail. The size of a banking organization can also be an indication of operational and managerial complexity, which can present safety and soundness risks even when a banking organization is not engaged in complex business lines. A larger banking organization operates on a larger scale, has a broader geographic scope, and generally will have more complex internal operations than a smaller banking organization, resulting in greater risks to safety and soundness. The proposal would establish thresholds of $700 billion, $250 billion, and $100 billion in total consolidated assets for Category II, III, and IV requirements, respectively, for banking organizations that are not U.S. GSIBs. A holding company with $700 billion or more in total consolidated assets, and its subsidiary depository institutions, would be subject to Category II requirements in order to address the substantial risks that can arise from the activities and potential distress of very large banking organizations that are not U.S. GSIBs. Historical examples suggest that a banking organization of this size should be subject to stringent prudential standards. For example, during the financial crisis, significant losses at Wachovia Corporation, which had $780 billion in assets at the time of being Systemic Risk,’’ Finance and Economics Discussion Series 2018–066. Washington: Board of Governors of the Federal Reserve System, available at: https:// doi.org/10.17016/FEDS.2018.066. 25 Id. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 66029 acquired in distress, had a destabilizing effect on the financial system. A threshold of $700 billion or more in total consolidated assets would ensure that a banking organization with a size of similar magnitude would be subject to Category II standards. A holding company with $250 billion or more in total consolidated assets that does not meet the requirements for Category II, and its subsidiary depository institutions, would be subject to Category III requirements. As discussed above, the Board estimates that the failure or distress of a banking organization of this size would likely have a greater economic and financial stability impact than that of a smaller banking organization,26 and Category III standards would also further the safety and soundness of a banking organization of this size. The application of strong prudential standards would also be consistent with weaknesses and risks highlighted during the financial crisis with banking organizations of this size, such as Washington Mutual.27 A threshold of this level would also align with the $250 billion statutory asset threshold under EGRRCPA, above which the Board must apply enhanced prudential standards to a bank holding company.28 In the Board-only proposal, the Board is proposing to apply certain requirements as Category IV standards to bank holding companies and certain savings and loan holding companies with $100 billion or more in total consolidated assets that do not meet the criteria for Category I, II, or III. As discussed in section II.C.4 of this Supplementary Information section, based on the risk profiles of banking organizations that would be subject to Category IV standards, the agencies are proposing not to apply to banking organizations that meet the Category IV criteria additional requirements under 26 Id. 27 Washington Mutual, a savings and loan holding company, had approximately $300 billion in assets at the time of failure. After the collapse of Lehman Brothers, Washington Mutual experienced significant deposit outflows and was unable to raise funds to improve its liquidity position. In September 2008, the Office of Thrift Supervision, Washington Mutual’s primary regulator, determined that the firm had insufficient liquidity to meet its obligations, closed the firm, and appointed the FDIC as the receiver. Washington Mutual was thereafter acquired by another firm. The FDIC estimated that it would have cost $42 billion to liquidate Washington Mutual, a sum that would have depleted the entire balance of the Deposit Insurance Fund at the time. See Offices of Inspector General, U.S. Department of Treasury and FDIC, Evaluation of Federal Regulatory Oversight of Washington Mutual Bank (April 2010), available at: https://www.fdicig.gov/sites/default/files/ publications/10-002EV.pdf. 28 See EGRRCPA § 401. E:\FR\FM\21DEP4.SGM 21DEP4 66030 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules the capital rule relative to generally applicable requirements or the LCR rule or proposed NSFR rule. Question 3: The agencies invite comment on the advantages and disadvantages of using size thresholds to tailor capital and liquidity requirements. The agencies invite comment on whether the inclusion of asset size thresholds in capital and liquidity standards drives changes in bank business models and risk profiles in ways that differ from the effects of thresholds based on other risk-based indicators. As an alternative to size thresholds, the agencies invite comment on whether other factors alone can adequately differentiate between the risk profiles of banking organizations and serve as the primary tool to tailor capital and liquidity requirements. 2. Other Risk-Based Indicators amozie on DSK3GDR082PROD with PROPOSALS4 In addition to size, the proposal would consider a banking organization’s level of cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance sheet exposure to determine the applicable category of standards. The agencies are proposing to apply a uniform threshold of $75 billion for each of these riskbased indicators, based on the degree of concentration this amount would represent for each banking organization. In each case, a threshold of $75 billion would represent at least 30 percent and as much as 75 percent of total consolidated assets for banking organizations with between $100 billion and $250 billion in total consolidated assets.29 In addition, setting the indicators at $75 billion would ensure that banking organizations that account for the vast majority—over 85 percent— of the total amount of each risk factor among all U.S. depository institution holding companies with $100 billion or more in total consolidated assets would be subject to prudential standards that account for the associated risks of these indicators, which facilitates consistent treatment of these risks across banking organizations. To the extent levels and the distribution of an indicator substantially change in the future, the agencies may consider modifications if appropriate. 29 Because a size threshold of $250 billion in total consolidated assets also would apply for Category III, the weighted short-term wholesale funding, nonbank assets, and off-balance sheet exposure indicators would only have effect for a banking organization with total consolidated assets of $100 billion or more, but less than $250 billion. Similarly, the proposed cross-jurisdictional activity threshold would only have effect for a banking organization with total consolidated assets of $100 billion or more, but less than $700 billion. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 Category II standards would apply to a banking organization with $100 billion or more in total consolidated assets and $75 billion or more in crossjurisdictional activity to promote parallel treatment among banking organizations with large global operations. Category III standards would apply to a banking organization with $100 billion or more in total consolidated assets and at least $75 billion in weighted short-term wholesale funding, nonbank assets, or off-balance sheet exposure. a. Cross-Jurisdictional Activity Cross-jurisdictional activity would be defined as the sum of crossjurisdictional assets and liabilities, as each is reported on the FR Y–15 by holding companies. Cross-jurisdictional activity can affect the complexity of a banking organization and give rise to challenges that may complicate the resolution of such a banking organization if it were to fail. In particular, foreign operations and crossborder positions add operational complexity in normal times and complicate the ability of a banking organization to undergo a successful recovery in times of stress, generating both safety and soundness and financial stability risks. For example, a banking organization with significant crossborder operations may require more sophisticated capital and liquidity management relating to risks of ringfencing by one or more jurisdictions during stress, which could impede the banking organization’s ability to move resources in one jurisdiction to meet needs in another. The agencies’ capital and liquidity regulations currently use foreign exposure as a metric to determine the application of certain requirements, such as advanced approaches capital requirements 30 and the LCR requirement.31 The proposal would amend these regulations to replace the current $10 billion foreign exposure threshold with a $75 billion crossjurisdictional activity threshold. Compared to the current foreign exposure measure, the proposed crossjurisdictional activity indicator includes foreign liabilities in addition to foreign assets. In addition, compared to the foreign exposure measure, the proposed cross-jurisdictional activity indicator does not include the assets and liabilities from positions in derivative contracts. Measuring cross-jurisdictional 30 See 12 CFR 217.100(b)(1) (Board), 12 CFR 324.100(b)(1) (FDIC), 12 CFR 3.100(b)(1) (OCC). 31 See 12 CFR 249.1(b)(ii) (Board), 12 CFR 329.1(b)(ii)(FDIC), 12 CFR 50.1(b)(ii) (OCC). PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 activity using both assets and liabilities—instead of just assets—would provide a broader gauge of the scale of a banking organization’s foreign operations, as it includes both borrowing and lending activities outside of the United States. Question 4: How should depository institutions report a measure of foreign assets and liabilities for purposes of calculating cross-jurisdictional activity? What problems would depository institutions face if they used the measure of foreign assets and liabilities as reported on the Country Exposure Report (FFIEC 009)? b. Weighted Short-Term Wholesale Funding The proposed weighted short-term wholesale funding indicator would track the measure currently reported on the FR Y–15 by holding companies and be consistent with the calculation used for purposes of the GSIB surcharge rule.32 This indicator provides a measure of a banking organization’s liquidity risk, as reliance on short-term, generally uninsured funding from more sophisticated counterparties can make a banking organization vulnerable to the consequences of large-scale funding runs. In particular, banking organizations that fund long-term assets with short-term liabilities from financial intermediaries such as investment funds may face large liquidity outflows resulting in the need to rapidly sell relatively illiquid assets to fund withdrawals and maintain their operations in a time of stress, which they may be able to do only at fire sale prices. Such asset fire sales can cause rapid deterioration in a banking organization’s financial condition and negatively affect broader financial stability by driving down asset prices across the market. As a result, the shortterm wholesale funding indicator reflects both safety and soundness and financial stability risks. This indicator also provides a measure of interconnectedness among market participants, including other financial sector entities, which can provide a mechanism for transmission of distress. 32 Specifically, short-term wholesale funding is the amount of a banking organization’s funding obtained from wholesale counterparties or retail brokered deposits and sweeps with a remaining maturity of one year or less. Categories of short-term wholesale funding are then weighted based on four residual maturity buckets; the asset class of collateral, if any, backing the funding; and characteristics of the counterparty. Weightings reflect risk of runs and attendant fire sales. See 12 CFR 217.406 and Regulatory Capital Rules: Implementation of Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies, 80 FR 49082 (August 14, 2015). E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules c. Nonbank Assets Under the proposal, nonbank assets would be measured as the average amount of equity investments in nonbank subsidiaries.33 The level of a banking organization’s investment in nonbank subsidiaries provides a measure of the organization’s business and operational complexity. Specifically, banking organizations with significant investments in nonbank subsidiaries are more likely to have complex corporate structures, interaffiliate transactions, and funding relationships. As discussed in the Board’s final GSIB surcharge rulemaking, a banking organization’s complexity is positively correlated with the impact of its failure or distress.34 Because nonbank subsidiaries may not be resolved through the FDIC’s receivership process, significant investments in nonbank subsidiaries present heightened resolvability risk. Nonbank activities may involve a broader range of risks than those associated with purely banking activities, and can increase interconnectedness with other financial firms, requiring sophisticated risk management and governance, including capital planning, stress testing, and liquidity risk management. If not adequately managed, the risks associated with nonbanking activities could present significant safety and soundness concerns and increase financial stability risks. The failure of a nonbank subsidiary could be destabilizing to a banking organization and cause counterparties and creditors to lose confidence in the banking organization. Nonbank assets also reflect the degree to which a banking organization may be engaged in activities through legal entities that are not subject to separate capital requirements or to the direct regulation and supervision applicable to a regulated banking entity. amozie on DSK3GDR082PROD with PROPOSALS4 d. Off-Balance Sheet Exposure Off-balance sheet exposure complements the measure of size by taking into consideration financial and banking activities not reflected on a 33 The proposed measure of nonbank assets also would include the average of the assets in each Edge or Agreement Corporation, but would exclude nonbank assets held in a savings association. 34 See Regulatory Capital Rules: Implementation of Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies, 80 FR 49082 (August 14, 2015). See paragraph 25 of the ‘‘Global systemically important banks: Updated assessment methodology and the higher loss absorbency requirement,’’ which provides certain revisions and clarifications to the initial GSIB framework. The document is available at https://www.bis.org/publ/bcbs255.htm. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 banking organization’s balance sheet. Like a banking organization’s size, offbalance sheet exposure provides a measure of the extent to which customers or counterparties may be exposed to a risk of loss or suffer a disruption in the provision of services. In addition, off-balance sheet exposure can lead to significant future draws on capital and liquidity, particularly in times of stress. In the financial crisis, for example, vulnerabilities at individual banking organizations were exacerbated by margin calls on derivative exposures, calls on commitments, and support provided to sponsored funds. These exposures can be a source of safety and soundness risk, as banking organizations with significant offbalance sheet exposure may have to fund these positions in the market in a time of stress, which can put a strain on both capital and liquidity. The nature of these risks for banking organizations of this size and complexity can also lead to financial stability risk, as they can manifest rapidly and with less transparency to other market participants. In addition, because draws on off-balance sheet exposures such as committed credit and liquidity facilities tend to increase in times of stress, they can exacerbate the effects of stress on a banking organization.35 Off-balance sheet exposures may also serve as a measure of a banking organization’s interconnectedness. Some off-balance sheet exposures, such as derivatives, are concentrated among the largest financial firms.36 The distress or failure of one party to a financial contract, such as a derivative or securities financing transaction, can trigger disruptive terminations of these contracts that destabilize the defaulting party’s otherwise solvent affiliates.37 Such a default also can lead to 35 See William F. Bassett, Simon Gilchrist, Gretchen C. Weinbach, Egon Zakrajsˇek, ‘‘Improving Our Ability to Monitor Bank Lending,’’ chapter in Risk Topography: Systemic Risk and Macro Modeling (2014), Markus Brunnermeier and Arvind Krishnamurthy, ed., pp. 149–161, available at: https://www.nber.org/chapters/c12554. 36 See, e.g., Sheri M. Markose, Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and its Mitigation with SuperSpreader Tax, IMF Working Papers (Nov. 30, 2012), available at: https://www.imf.org/en/Publications/ WP/Issues/2016/12/31/Systemic-Risk-from-GlobalFinancial-Derivatives-A-Network-Analysis-ofContagion-and-Its-40130. 37 To address these risks, the agencies have established restrictions relating to the qualified financial contracts of U.S. GSIBs, the insured depository institution subsidiaries of U.S. GSIBs, and the U.S. operations of systemically important foreign banking organizations. See 12 CFR part 252, subpart I (Board); 12 CFR part 47 (OCC); and 12 CFR part 382 (FDIC). That rule does not apply to savings and loan holding companies, or to other large bank holding companies and insured depository institutions. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 66031 disruptions in markets for financial contracts, including by resulting in rapid market-wide unwinding of trading positions.38 In this way, the effects of one party’s failure or distress can be amplified by its off-balance sheet connections with other financial market participants. The proposal would define offbalance sheet exposure based on measures currently reported by holding companies with more than $100 billion in assets, specifically, as total exposure, as defined on FR Y–15, minus total consolidated assets, as reported on the Consolidated Financial Statements for Holding Companies (FR Y–9C). Total exposure includes a banking organization’s on-balance sheet assets plus certain off-balance sheet exposures, including derivative exposures, repostyle transactions, and other off-balance sheet exposures (such as commitments). Question 5: What are the advantages and disadvantages of the proposed riskbased indicators? What different indicators should the agencies use, and why? Question 6: At what level should the threshold for each indicator be set, and why? Commenters are encouraged to provide data supporting their recommendations. Question 7: The agencies are considering whether Category II standards should apply based on a banking organization’s weighted shortterm wholesale funding, nonbank assets, and off-balance sheet exposure, using a higher threshold than the $75 billion that would apply for Category III standards, in addition to the thresholds discussed above based on asset size and cross-jurisdictional activity. For example, a banking organization could be subject to Category II standards if one or more of these indicators equaled or exceeded a level such as $100 billion or $200 billion. A threshold of $200 billion would represent at least 30 percent and as much as 80 percent of total consolidated assets for banking organizations with between $250 billion and $700 billion in total consolidated assets. If the agencies were to adopt additional indicators for purposes of identifying banking organizations that should be subject to Category II standards, at what level should the threshold for each indicator be set, and why? Commenters are encouraged to provide data supporting their recommendations. 38 See, e.g., The Orderly Liquidation of Lehman Brothers Holdings Inc. under the Dodd-Frank Act, 5 FDIC Quarterly No. 2, 31 (2011), https:// www.fdic.gov/bank/analytical/quarterly/2011-vol52/article2.pdf. E:\FR\FM\21DEP4.SGM 21DEP4 66032 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules 3. Alternative Scoping Criteria amozie on DSK3GDR082PROD with PROPOSALS4 An alternative approach for assessing the risk profile and systemic footprint of a banking organization for purposes of tailoring prudential standards would be to use a single, comprehensive score. The Board uses a GSIB identification methodology (scoring methodology) to identify global systemically important bank holding companies and apply riskbased capital surcharges to these banking organizations. The agencies could use this same scoring methodology to tailor prudential standards for large, but not globally systemic, banking organizations. The scoring methodology calculates a GSIB’s capital surcharge under two methods.39 The first method is based on the sum of a firm’s systemic indicator scores reflecting its size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity (method 1). The second method is based on the sum of these same measures of risk, except that the substitutability measures are replaced with a measure of the firm’s reliance on short-term wholesale funding (method 2).40 The Board designed the scoring methodology to provide a single, comprehensive, integrated assessment of a large bank holding company’s systemic footprint. Accordingly, the indicators in the scoring methodology measure the extent to which the failure or distress of a bank holding company could pose a threat to financial stability or inflict material damage on the broader economy. The indicators used in the scoring methodology also could be used to help identify banking organizations that have heightened risk profiles and would closely align with the risk-based factors specified in section 165 of the Dodd-Frank Act for applying enhanced prudential standards and differentiating among banking organizations to which the enhanced prudential standards apply.41 Importantly, large bank holding companies already submit to the Board periodic public reports on their indicator scores in the scoring methodology. Accordingly, use of the scoring methodology more broadly for tailoring of prudential standards would promote transparency and would 39 See 12 CFR part 217, subpart H. more discussion relating to the scoring methodology, please see the Board’s final rule establishing the scoring methodology. See Regulatory Capital Rules: Implementation of RiskBased Capital Surcharges for Global Systemically Important Bank Holding Companies, 80 FR 49082 (Aug. 14, 2015). 41 See 12 U.S.C. 5365(a)(2)(A). 40 For VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 economize on compliance costs for large bank holding companies. Under the alternative scoring approach, a banking organization’s size and either its method 1 or method 2 score from the scoring methodology would be used to determine which category of standards would apply to the firm. In light of the changes made by EGRRCPA, the Board conducted an analysis of the distribution of method 1 and method 2 scores of bank holding companies and covered savings and loan holding companies with at least $100 billion in total assets.42 Category I: As under the proposal and under the Board’s existing enhanced prudential standards framework, Category I standards would continue to apply to U.S. GSIBs, which would continue to be defined as U.S. banking organizations with a method 1 score of 130 or more. Category II: Category II banking organizations are defined in the proposal as those whose failure or distress could impose costs on the U.S. financial system and economy that are higher than the costs imposed by the failure or distress of an average banking organization with total consolidated assets of $250 billion or more. In selecting the ranges of method 1 or method 2 scores that could define the application of Category II standards, the Board considered the potential of a firm’s material distress or failure to disrupt the U.S. financial system or economy. As noted in section II.B.1 of this Supplementary Information section, during the financial crisis, significant losses at Wachovia Corporation, which had $780 billion in total consolidated assets at the time of being acquired in distress, had a destabilizing effect on the financial system. The Board estimated method 1 and method 2 scores for Wachovia Corporation, based on available data, and also calculated the scores of banking organizations with more than $250 billion in total consolidated assets that are not U.S. GSIBs assuming that each had $700 billion in total consolidated assets (the asset size threshold used to define Category II in the agencies’ main proposal). The Board also considered the outlier method 1 and method 2 scores for banking organizations with more than $250 billion in total 42 In conducting its analysis, the Board considered method 1 and method 2 scores as of December 31, 2017. Consistent with the thresholds in EGRRCPA, the Board considered the scores of bank holding companies and covered savings and loan holding companies with total consolidated assets of $100 billion or more but less than $250 billion, $250 billion or more that are not GSIBs, and GSIBs. PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 consolidated assets that are not U.S. GSIBs.43 Based on this analysis, the agencies would apply Category II standards to any non-GSIB banking organization with at least $100 billion in total consolidated assets and with a method 1 score between 60 and 80 or a method 2 score between 100 to 150. If the agencies adopt a final rule that uses the scoring methodology to establish tailoring thresholds, the agencies would set a single score within the listed ranges for application of Category II standards. The agencies invite comment on what score within these ranges would be appropriate. Category III: As noted, section 165 of the Dodd-Frank Act requires the Board to apply enhanced prudential standards to any bank holding company with total consolidated assets of $250 billion or more and authorizes the Board to apply these standards to bank holding companies with between $100 billion and $250 billion in total consolidated assets if the Board makes certain statutory findings. To determine a scoring methodology threshold for application of Category III standards to banking organizations with between $100 billion and $250 billion in total consolidated assets, the Board considered the scores of these banking organizations as compared to the scores of banking organizations with greater than $250 billion in total consolidated assets that are not U.S. GSIBs. Based on this analysis, the Board determined that, under a scoring methodology approach to tailoring, Category III standards would be applied to banking organizations with total consolidated assets between $100 billion and $250 billion that have a method 1 score between 25 to 45. Banking organizations with a score in this range would have a score similar to that of the average firm with greater than $250 billion in total consolidated assets. Using method 2 scores, the agencies would apply Category III standards to any banking organization with total consolidated assets between $100 billion and $250 billion that have a method 2 score between 50 to 85. Again, if the agencies were to adopt the scoring methodology for tailoring in a final rule, the agencies would pick a single score within the listed ranges. The agencies invite comment on what score within these ranges would be appropriate. 43 Outliers can be determined by a number of statistical methods. For these purposes, the Board computed an outlier as the third quartile plus three times the interquartile range of method 1 and method 2 scores of these U.S. bank holding companies and covered savings and loan holding companies. E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules amozie on DSK3GDR082PROD with PROPOSALS4 Category IV: Under a score-based approach, category IV standards would apply to banking organizations with at least $100 billion in total assets that do not meet any of the thresholds specified for Categories I through III (that is, a method 1 score of less than 25 to 45 or a method 2 score of less than 50 to 85). Question 8: What are the advantages and disadvantages to using the scoring methodology and category thresholds described above relative to the proposed thresholds? Question 9: If the agencies were to use the scoring methodology to differentiate non-GSIB banking organizations for purposes of tailoring prudential standards, should the agencies use method 1 scores, method 2 scores, or both? Question 10: If the agencies adopt the scoring methodology, what would be the advantages or disadvantages of the agencies requiring banking organizations to calculate their scores at a frequency greater than annually, including, for example, requiring a banking organization to calculate its score on a quarterly basis? Question 11: With respect to each category of banking organization described above, at what level should the method 1 or method 2 score thresholds be set and why, and discuss how those levels could be impacted by considering additional data, or by considering possible changes in the banking system. Commenters are encouraged to provide data supporting their recommendations. Question 12: What are the advantages and disadvantages in using the scoring methodology to categorize banking organizations with systemic footprints smaller than the GSIBs for purposes of tailoring prudential standards? Question 13: What other approaches should the agencies consider in setting thresholds for tailored prudential standards? 4. Determination of Applicable Category of Standards Under the proposal, a holding company with total consolidated assets of $100 billion or more and its subsidiary depository institutions would be required to determine the category of standards to which it is subject. The proposal would add certain defined terms to the agencies’ capital rule and LCR rule to implement the proposed categories. U.S. GSIBs would continue to be identified using the Board’s GSIB surcharge methodology, and the proposal would refer to these banking organizations as global systemically important bank holding companies, consistent with the term VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 used elsewhere in the agencies’ regulations.44 The proposal would also add defined terms for banking organizations subject to Category II, III, or IV standards as Category II banking organizations, Category III banking organizations, or Category IV banking organizations, respectively. Banking organizations that would be subject to the proposal would be required to report size and other riskbased indicators on a quarterly basis. In order to capture significant changes in a banking organization’s risk profile, rather than temporary fluctuations, a category of standards would apply to a banking organization based on the average levels of each indicator over the preceding four calendar quarters.45 A banking organization would remain subject to a category of standards until the banking organization no longer meets the indicators for its current category in each of the four most recent calendar quarters, or until the banking organization meets the criteria for another category of standards based on an increase in the average value of one or more indicators over the preceding four calendar quarters. This approach would be consistent with the existing applicability and cessation requirements of the Board’s enhanced prudential standards rule.46 Changes in requirements that result from a change in category generally would take effect on the first day of the second quarter following the change in the banking organization’s category.47 For example, a banking organization that changes from Category IV to Category III based on an increase in the average value of its indicators over the first, second, third, and fourth quarters of a calendar year would be subject to Category III standards beginning on April 1 (the first day of the second quarter) of the following year. Under the LCR rule and NSFR proposed rule, a banking organization that meets the thresholds for applicability measured as of the yearend must comply with the requirement(s) beginning on April 1 of the following year, or as specified by the appropriate agency.48 Under the 44 See, e.g., 12 CFR part 217. respect to a firm that has reported an indicator for less than four quarters, the proposal would refer to the average of the most recent quarter or quarters. 46 See, e.g., 12 CFR 252.43. 47 The Board would maintain existing transition provisions for Category I and II capital standards, such as changes to a bank holding company’s GSIB surcharge. 48 12 CFR 50.1(b)(2) (OCC); 12 CFR 249.1(b)(2) (Board); 12 CFR 329(1)(b)(2) (FDIC); and NSFR proposed rule. See also Liquidity Coverage Ratio: 45 With PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 66033 proposal, a banking organization that becomes subject to the LCR rule or proposed NSFR rule would be required to comply with these requirements on the first day of the second quarter after the banking organization became subject to these requirements, consistent with the amount of time currently provided under the LCR rule and proposed NSFR rule after the year-end measurement date. In addition, the LCR rule provides newly covered banking organizations with a transition period for the daily calculation requirement, recognizing that a daily calculation requirement could impose significant operational and technology demands. Specifically, a newly covered banking organization must calculate its LCR monthly from April 1 to December 1 of its first year of compliance. Beginning on January 1 of the following year, the banking organization must calculate its LCR daily.49 The proposal would maintain this transition period of three calendar quarters following initial applicability of the LCR requirement. The agencies are not proposing changes to the cessation provisions of the LCR rule, NSFR proposed rule, and advanced approaches capital requirements. Once a banking organization is subject to advanced approaches capital requirements, the LCR rule, or the NSFR proposed rule, it would remain subject to the rule until its primary federal supervisor determines that application of the rule would not be appropriate in light of the banking organization’s asset size, level of complexity, risk profile, or scope of operations. Question 14: What are the advantages and disadvantages to a banking organization calculating its category on a quarterly basis? Discuss whether calculation on an annual basis would be more appropriate and why. Question 15: What are the advantages and disadvantages of the proposed transition period for each of the standards in each of the categories? What would be the advantages or disadvantages of providing additional time to conform to new requirements? If a banking organization changes category because of an increase in one or more risk-based indicators, discuss the advantages and disadvantages of providing an additional quarter before applying the new category’s standards. Question 16: As noted above, the LCR rule currently provides that a banking organization becomes subject to the LCR Liquidity Risk Measurement Standards, 79 FR 61440, 61447 (October 10, 2014). 49 See id. E:\FR\FM\21DEP4.SGM 21DEP4 66034 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules rule ‘‘beginning on April 1 of the year in which the [banking organization] becomes subject to the minimum liquidity standard.’’ If the applicability of the LCR rule is amended to be based on a four-quarter average of indicators, what would be the advantages and disadvantages of removing this transition mechanism? What would be the advantages and disadvantages of requiring a banking organization to comply with the LCR and proposed NSFR requirements in the quarter following the quarter when it exceeds the applicability thresholds? Question 17: What would be the advantages and disadvantages of maintaining the cessation provisions in the advanced approaches rule, LCR rule, and NSFR proposed rule? What would be the advantages and disadvantages of aligning the cessation provisions in the advanced approaches capital requirements, LCR rule, and NSFR proposed rule with the transition provisions between categories of standards? For example, the current version of the LCR rule provides that, once a banking organization becomes subject to the LCR rule, it remains subject to the LCR rule until its regulator determines in writing that application of the LCR rule is no longer appropriate. What are the advantages and disadvantages of requiring a written determination before a banking organization can move to a lower category? What would be the advantages and disadvantages of automatically moving the category of a banking organization based on its size and indicators? amozie on DSK3GDR082PROD with PROPOSALS4 C. Proposed Regulatory Framework This section describes the capital and liquidity requirements that currently apply and those that would apply under the four categories in the proposal. Similar to certain aspects of the current capital requirements, the proposal would allow banking organizations to choose to apply the more stringent requirements of another category (e.g., a banking organization subject to Category III standards could choose to comply with the more stringent Category II standards to minimize compliance costs across multiple jurisdictions). 1. Category I Standards Currently, U.S. GSIBs are subject to the most stringent prudential standards relative to other banking organizations, which reflect the heightened risks these banking organizations pose to U.S. financial stability. The proposal would make no changes to the capital and liquidity requirements applicable to U.S. GSIBs. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 Accordingly, U.S. GSIBs would remain subject to the most stringent capital and liquidity requirements, including requirements based on standards developed by the BCBS, subject to notice and comment rulemaking in the United States. Their subsidiary depository institutions would also be subject to the most stringent requirements, as applicable. Category I capital standards would include a requirement to calculate riskbased capital ratios using both the advanced approaches and the standardized approach; the U.S. leverage ratio; the enhanced supplementary leverage ratio; the GSIB surcharge (at the holding company level only); the requirement to recognize most elements of AOCI in regulatory capital; and the requirement to expand their capital conservation buffer by the amount of the countercyclical capital buffer, if applicable. Category I liquidity standards would include the full LCR requirement 50 and proposed NSFR requirement. These standards would continue to strengthen the capital and liquidity positions of U.S. GSIBs based on their significant risk profiles, to improve their resiliency and ability to provide consistent financial intermediation across market and economic conditions, and to reduce risks to U.S. financial stability. Consistent with current requirements, a subsidiary depository institution of a banking organization subject to the full LCR and proposed NSFR requirements with $10 billion or more in total consolidated assets would be required to meet the LCR and NSFR requirements. Currently, the $10 billion consolidated asset threshold is measured based on the most recent yearend Consolidated Report of Condition and Income. Consistent with the other proposed scoping criteria described in section II.B of this Supplementary Information section, the proposal would amend the LCR and proposed NSFR rules to measure this threshold based on the value of total consolidated assets over the four most recent calendar quarters. 2. Category II Standards The failure or distress of banking organizations that would be subject to Category II standards could impose significant costs on the U.S. financial system and economy, although they generally do not present the same degree of risk as U.S. GSIBs. Their size 50 The full requirements of the LCR rule include the calculation of the LCR on each business day and the inclusion of a maturity mismatch add-on in the total net cash outflow amount. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 and cross-jurisdictional activity present risks that require enhanced regulatory capital standards and greater supervisory oversight relative to other banking organizations. Further, size and cross-jurisdictional activity can present particularly heightened challenges in the case of a liquidity stress, which can create both financial stability and safety and soundness risks. For example, a very large banking organization that engages in asset fire sales to meet shortterm liquidity needs is more likely to transmit distress on a broader scale because of the greater volume of assets it could sell in a short period of time. Similarly, a banking organization with significant international activity may be more exposed to the risk of ring-fencing of liquidity resources by one or more jurisdictions that could impede its ability to move liquidity to meet outflows. In this proposal, capital and liquidity requirements that are generally consistent with standards developed by the BCBS, subject to notice and comment rulemaking in the United States, would continue to apply to holding companies subject to Category II standards. These standards would include the full LCR and proposed NSFR requirements, advanced approaches capital requirements, and the supplementary leverage ratio. Similar to Category I standards, holding companies subject to Category II standards would also be required to recognize most elements of AOCI in regulatory capital. Reflecting AOCI in regulatory capital results in a more accurate measure of capital, which is important for maintaining the resilience of these banking organizations. Additionally, holding companies subject to Category II standards would be required to expand their capital conservation buffer by the amount of the countercyclical capital buffer, if applicable. As under existing requirements, the proposed Category II capital standards would apply to the subsidiary depository institutions of holding companies subject to Category II standards, and the LCR and proposed NSFR requirements would apply to subsidiary depository institutions with total consolidated assets of $10 billion or more. 3. Category III Standards The agencies’ current regulatory framework generally applies the same capital and liquidity standards to all non-GSIB banking organizations with $250 billion or more in total consolidated assets. For example, advanced approaches capital E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules requirements, the supplementary leverage ratio, and the LCR requirement generally apply to banking organizations with $250 billion or more in total consolidated assets or $10 billion or more in foreign exposure. The proposed framework would differentiate among banking organizations with $250 billion or more in total consolidated assets. In particular, Categories I and II would include requirements generally consistent with standards developed by the BCBS, subject to notice and comment rulemaking in the United States, whereas Category III would include fewer such standards, based on the relatively lower risk profiles and lesser degree of cross-border activity of subject banking organizations. In particular, the agencies are proposing not to apply advanced approaches capital requirements and the requirement to recognize most elements of AOCI in regulatory capital to banking organizations subject to Category III (and Category IV) standards. However, Category III standards would also reflect the elevated risk profile of these banking organizations relative to smaller and less complex banking organizations. Category III standards would apply to all banking organizations with at least $250 billion in total consolidated assets that do not meet the criteria for Category I or Category II, as well as to certain banking organizations with less than $250 billion in total consolidated assets based on their risk profile. As discussed in section II.B.2 of this Supplementary Information section, weighted shortterm wholesale funding, nonbank assets, and off-balance sheet exposure indicators contribute to the systemic risk profile and safety and soundness risk profile of banking organizations. Under the proposal, Category III capital standards would include generally applicable risk-based capital requirements, the U.S. leverage ratio, and the supplementary leverage ratio. Category III standards would also include the countercyclical capital buffer, given these banking organizations’ significant role in financial intermediation in the United States individually and as a group. These banking organizations have a substantial enough footprint that they should expand their capital conservation buffer as necessary to support the prudential goals of the buffer framework. The supplementary leverage ratio would apply to banking organizations subject to Category III standards given these banking organizations’ size and risk profile. For example, firms subject to Category III standards include banking organizations with material off-balance sheet VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 exposures that are not accounted for in the traditional U.S. tier 1 leverage ratio. The supplementary leverage ratio is important for these banking organizations to constrain the build-up of off-balance sheet exposures, which can contribute to instability and undermine safety and soundness of individual banking organizations. The agencies are separately proposing to adopt the standardized approach for counterparty credit risk for derivatives exposures (SA–CCR) and to require advanced approaches banking organizations (banking organizations subject to Category I or II standards, under this proposal) to use SA–CCR for calculating their risk-based capital ratios and a modified version of SA–CCR for calculating total leverage exposure under the supplementary leverage ratio. If that proposal were to be adopted, the agencies would allow a Category III banking organization to elect to use SA– CCR for calculating derivatives exposure in connection with its risk-based capital ratios, consistent with the SA–CCR proposal. Furthermore, if that proposal were to be adopted, the agencies intend to allow a banking organization subject to Category III standards to elect to use SA–CCR for calculating its total leverage exposure calculations used to determine the supplementary leverage ratio, or to continue to use the current exposure method. Banking organizations subject to Category III standards would not be required to apply advanced approaches capital requirements. The models for applying these requirements are costly to build and maintain, and the agencies do not expect that the removal of these requirements would materially change the amount of capital that these banking organizations would be required to maintain. The standardized approach currently represents the binding riskbased capital constraint for all banking organizations in the current population of banking organizations that would be subject to Category III standards. Question 18: Under the current capital rule, the agencies apply certain provisions, such as the supplementary leverage ratio and countercyclical capital buffer, based on the same applicability thresholds as advanced approaches capital requirements. The proposal would establish different applicability thresholds for the supplementary leverage ratio and countercyclical capital buffer by including them as Category III standards, while advanced approaches capital requirements would apply only as Category I and II standards. This approach would increase the risksensitivity of the framework and allow PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 66035 for the retention of key elements of the capital rule for banking organizations subject to Category III standards without requiring them to comply with advanced approaches capital requirements more broadly. However, it also increases the complexity of the capital rule. To what extent, if any, would this additional complexity increase compliance costs for large banking organizations (for example, by requiring banking organizations to monitor and manage the proposed risk-based indicator thresholds)? To what extent, if any, would the proposed approach add complexity for market participants when comparing the capital adequacy of banking organizations in different categories? The agencies request comment on the advantages and disadvantages of establishing separate regulatory capital standards for banking organizations that would be subject to Category III that are different from either Category II or IV standards, including any wider implications for financial stability. Question 19: What are the advantages and disadvantages of applying the supplementary leverage ratio requirement to banking organizations subject to Category III standards? How do these advantages and disadvantages compare to any costs associated with any additional complexity to the regulatory framework that would result from applying this to banking organizations subject to Category III standards? To what extent would application of the supplementary leverage ratio requirement to these banking organizations strengthen their safety and soundness and improve U.S. financial stability? Question 20: What are the advantages and disadvantages of not requiring banking organizations subject to Category III standards to recognize most elements of AOCI in regulatory capital? To what extent does not requiring banking organizations subject to Category III standards to recognize most elements of AOCI in regulatory capital impact safety and soundness of individual banking organizations or raise broader financial stability concerns? For example, to what extent would this approach reduce the accuracy of these banking organizations’ reported regulatory capital? To what extent does the recognition of most elements of AOCI in regulatory capital improve market discipline and provide for a clearer picture of the financial health of banking organizations? To what extent does it make comparing the financial condition of Category III banking organizations to that of Category I and E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66036 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Category II banking organizations, on the one hand, and that of Category IV banking organizations, on the other hand, more difficult? Question 21: With respect to banking organizations that currently recognize most elements of AOCI in regulatory capital, to what extent do intra-quarter variations in regulatory capital due to the inclusion of AOCI since the capital rule took effect differ from variations in reported quarter-end data over the same period? What have been the causes of variations in each? Question 22: As discussed above, the agencies are not requiring banking organizations subject to Category III standards to recognize most elements of AOCI in regulatory capital. Alternatively, the agencies could require only the top-tier parent holding company to recognize most elements of AOCI in regulatory capital while exempting their subsidiary depository institutions from this requirement. What are the advantages and disadvantages of this alternative approach? What would be the costs and operational challenges associated with this additional complexity, where the holding company and subsidiary depository institutions implement different standards related to AOCI? To what degree would this alternative approach to AOCI impose less cost or burden to banking organizations subject to Category III standards relative to their current AOCI requirement under the agencies’ capital rule (i.e., both the top-tier holding company and subsidiary depository institutions are currently required to recognize most elements of AOCI in regulatory capital)? To what degree would this alternative approach provide market participants with a transparent picture of the financial condition of the subsidiary depository institutions and the parent holding company? Question 23: For purposes of comparability, in a final rulemaking should the agencies require all banking organizations subject to Category III standards to use SA–CCR for either riskbased or supplementary leverage ratio calculations and, if so, why? Question 24: What would be the advantages and disadvantages of no longer applying the countercyclical capital buffer to banking organizations that would be subject to Category III standards? In particular, how would narrowing the scope of application of the countercyclical buffer affect the financial stability and countercyclical objectives of the buffer? What other regulatory tools, if any, could be used to meet these objectives? Question 25: The proposal would apply Category III standards to a VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 banking organization that exceeds certain risk-based indicators, including having more than $75 billion in offbalance sheet exposures. In light of the inclusion of off-balance sheet exposures as a threshold for Category III standards, discuss the advantages and disadvantages of including the supplementary leverage ratio as a Category III standard. With respect to liquidity requirements, the LCR rule and proposed NSFR rule provide standardized minimum liquidity requirements and measures of liquidity risk that enhance banking organizations’ resiliency, improve risk management, and facilitate comparisons of liquidity risk across banking organizations. These standards are designed to achieve two separate but complementary objectives. The LCR rule promotes the resilience of a banking organization to liquidity risk by ensuring that it has sufficient liquid assets to survive a short-term period of stress. The proposed NSFR rule would address funding risks over a longer, oneyear time horizon and mitigate the risk of disruptions to a banking organization’s regular sources of funding by requiring banking organizations to maintain a stable funding profile. Category III standards would include full or reduced LCR and NSFR requirements, depending on a banking organization’s level of weighted shortterm wholesale funding. Specifically, a banking organization that meets the criteria for Category III standards would be subject to the full LCR and NSFR requirements if it has weighted shortterm wholesale funding of $75 billion or more, or would be subject to less stringent, reduced LCR and NSFR requirements if it has less than $75 billion in weighted short-term wholesale funding. For banking organizations subject to Category III standards with weighted short-term wholesale funding of less than $75 billion, the agencies are proposing to reduce the stringency of the LCR and NSFR requirements and request comment regarding the appropriate level. These banking organizations would be subject to reduced LCR and NSFR requirements, as they have less reliance on short-term wholesale funding that is a source of liquidity risk. While the failure or distress of such a firm could pose risks to U.S. financial stability, their risk profile is lower than that of U.S. GSIBs and they are smaller or face a lesser degree of cross-border challenges than firms that would be subject to Category II standards. In addition, although the proposal would reduce the standardized PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 LCR and NSFR requirements for these banking organizations, under the Boardonly proposal, depository institution holding companies subject to Category III standards would be required to comply with liquidity risk management, stress testing, and buffer requirements, which reflect the firm’s individual risk profile. The denominator of the proposed reduced LCR would equal the net cash outflows calculated under the full LCR requirement, multiplied by a factor that reduces its stringency. Similarly, the denominator of the NSFR would equal the required stable funding requirement calculated under the full NSFR requirement, multiplied by a factor that reduces its stringency. The agencies are requesting comment on applying reduced standards that would be equivalent to between 70 and 85 percent of the full LCR and NSFR requirements. The proposal would not alter other aspects of the LCR and NSFR calculations for these banking organizations, relative to the full LCR and proposed NSFR requirements. For example, these banking organizations would continue to calculate their LCR on each business day and include the maturity mismatch add-on in the calculation.51 Like the current LCR and NSFR requirements, the proposal would apply Category III LCR and NSFR requirements to a depository institution that has total consolidated assets of $10 billion or more and is a consolidated subsidiary of a company subject to Category III standards.52 The level of the LCR and NSFR requirements applicable to the subsidiary depository institution would be the same as the level that would apply to the parent banking organization. For example, a subsidiary depository institution with $10 billion in total consolidated assets of a banking organization subject to the reduced LCR and NSFR requirements under Category III standards would also be subject to the reduced LCR and NSFR requirement.53 51 Section 30 of the LCR rule requires a banking organization, as applicable, to include in its total net cash outflow amount a maturity mismatch addon, which is calculated as the difference (if greater than zero) between the covered company’s largest net cumulative maturity outflow amount for any of the 30 calendar days following the calculation date and the net day 30 cumulative maturity outflow amount. 52 As discussed in section II.B.4 of this Supplementary Information section, the proposal would measure the total consolidated assets of a subsidiary depository institution based on the level over the previous four calendar quarters. 53 In the case of a depository institution that is not a consolidated subsidiary of a banking organization that would be subject to Category I, II, III, or IV standards or a consolidated subsidiary of a foreign E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Question 26: In general, the proposed framework would apply consistent requirements to all banking organizations within each category of standards. For the LCR and proposed NSFR requirements, however, the agencies are proposing two levels of standards within Category III. Specifically, the proposal would apply reduced LCR and NSFR requirements to a banking organization subject to Category III standards that has less than $75 billion in weighted short-term wholesale funding and that is not a subsidiary of a banking organization subject to the full LCR or proposed NSFR requirements. This additional degree of tailoring is intended to reflect considerations specific to liquidity risk, and would allow further differentiation within Category III to accommodate reduced requirements for banking organizations with lesser liquidity risk profiles. However, this additional risksensitivity would also increase the complexity of the proposed framework. The agencies request comment regarding this proposed trade-off. In particular, what do commenters believe would be the advantages and disadvantages of this additional degree of differentiation for purposes of determining the level of LCR and NSFR requirements? What costs, if any, would this additional degree of complexity create for large banking organizations? What alternatives should the agencies consider to the proposed approach that would maintain strong standardized liquidity requirements for large banking organizations with significant liquidity risk exposures that do not meet the proposed criteria for application of Category I or Category II standards? What other risk-based indicators, besides short-term wholesale funding, should the agencies consider in prescribing the liquidity requirements under the proposal, and why? What would be the advantages or disadvantages of requiring all Category III banking organizations to meet the full LCR and NSFR requirements? Similarly, what would be the advantages or disadvantages of requiring all Category III banking organizations to meet the reduced LCR and NSFR requirements? Question 27: Between a range of 70 and 85 percent of the full requirements, banking organization, the applicable category of standards would depend on the risk-based indicators of the depository institution. For example, if the depository institution meets the criteria for Category III standards but has weighted short-term wholesale funding of less than $75 billion, the depository institution would be subject to the proposed reduced LCR and NSFR requirements. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 what level should the agencies adopt for the reduced LCR and NSFR requirements for banking organizations subject to Category III standards that have less than $75 billion in weighted short-term wholesale funding, and why? Consistent with section 22(b) of the LCR rule, a banking organization subject to the proposed reduced LCR requirement would not be permitted to include in its HQLA amount eligible HQLA of a consolidated subsidiary except up to the amount of the net cash outflows of the subsidiary (as adjusted for the factor reducing the stringency of the requirement), plus any additional amount of assets, including proceeds from the monetization of assets, that would be available for transfer to the top-tier covered company during times of stress without statutory, regulatory, contractual, or supervisory restrictions.54 A similar restriction would apply under section 108 of the NSFR proposed rule.55 Question 28: The agencies request comment regarding this proposed approach, as well as potential alternative approaches to recognizing restrictions on the transferability of liquidity from a consolidated subsidiary to the top-tier covered company. What alternative approaches should the agencies consider? For example, should the agencies consider the approach the Board currently permits for holding companies subject to a modified LCR requirement? Under this approach, a company may include in its HQLA amount eligible HQLA held at a subsidiary up to 100 percent of the net cash outflows of the subsidiary, plus amounts that may be transferred without restriction to the top-tier covered company. In the case of the NSFR proposed rule, a company could include available stable funding amounts of the subsidiary up to 100 percent of the required stable funding amount of the subsidiary, plus amounts that may be transferred without restriction to the top-tier covered company. What would be the advantages and disadvantages of the proposed approach and potential alternatives? What incentives would each have with respect to the positioning of HQLA within a banking organization? What effects would the proposed approach or alternative approaches have on the safety and soundness of a holding company and its subsidiary depository institutions? 54 See § ll.22(b)(3) and (4) of the LCR rule (12 CFR 50.22(b)(3) and (4) (OCC); 12 CFR 249.22(b)(3) and (4) (Board); 12 CFR 329.22(b)(3) and (4) (FDIC). 55 See NSFR proposed rule § ll.108. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 66037 4. Category IV Standards Under the proposal, Category IV standards would apply to banking organizations with $100 billion or more in total consolidated assets that do not meet the criteria for Categories I, II, or III, and their subsidiary depository institutions. Relative to current requirements, the proposed Category IV standards would reduce liquidity and, in certain circumstances, capital requirements to reflect these banking organizations’ lower risk profile and lesser degree of complexity relative to other large banking organizations. Category IV capital standards would include the generally applicable riskbased capital requirements and the U.S. leverage ratio. The proposal would not apply the countercyclical capital buffer and the supplementary leverage ratio applicable under Category III to Category IV banking organizations. In this manner, the standards applicable to banking organizations subject to Category IV would maintain the risksensitivity of the current capital regime and resiliency of these banking organizations’ capital positions, and would recognize that these banking organizations, while large, have lower indicators of risk relative to their larger peers, as set forth in the proposal. As a result, and as noted above, banking organizations subject to Category IV standards would generally have the same capital and liquidity regulatory requirements as banking organizations under $100 billion in total consolidated assets. Under the proposal, Category IV standards would not include an LCR or NSFR requirement. As a result, the Board is proposing to remove the current modified LCR requirement and the proposed modified NSFR requirement for domestic banking organizations.56 The LCR rule and NSFR proposed rule are important standards for Category I, Category II, and Category III given such banking organizations’ size, complexity, and the resulting challenges that may complicate the resolution of such banking organizations. However these standardized liquidity requirements are less important for banking organizations subject to Category IV standards given 56 The proposal would also remove the modified LCR and proposed modified NSFR requirements for banking organizations with total consolidated assets less than $100 billion. As previously noted, the Board plans to develop a separate proposal relating to foreign banking organizations. Accordingly, the proposal would maintain the current full and modified LCR requirements, as applicable, for banking organizations that are consolidated subsidiaries of a foreign banking organization until such time as the Board adopts a final rule to amend the requirements for these banking organizations. E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66038 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules their smaller systemic footprint, more limited size, and other applicable requirements. As a class, the domestic banking organizations currently in this category have more traditional balance sheet structures, are largely funded by stable deposits, and have little reliance on less stable wholesale funding. All banking organizations that would be subject to Category IV have less than $75 billion in weighted short-term wholesale funding. Board estimates of stable funding for these banking organizations indicate they would exceed by roughly 40 percent the modified 70 percent NSFR requirement that would apply under the agencies’ NSFR proposed rule. These banking organizations would also continue to be subject to the internal liquidity stress testing requirements at the consolidated holding company level under the Board’s regulations, which include 30day and 1-year planning horizons, and Complex Institution Liquidity Monitoring Report (FR 2052a) requirements.57 Based on this combination of factors, and given the compliance and disclosure obligations under the LCR rule and proposed NSFR rule, the agencies are proposing to no longer apply the LCR rule and proposed NSFR rule to banking organizations subject to Category IV standards. Question 29: Based on the risk profiles of banking organizations subject to Category IV standards, what alternative capital and liquidity requirements should the agencies consider and why? Question 30: The proposal would not apply the LCR or the proposed NSFR rules to banking organizations subject to Category IV standards. What are the advantages and disadvantages of this approach? To what extent would scoping out banking organizations subject to Category IV standards from the LCR and proposed NSFR rules affect the safety and soundness of individual banking organizations or raise broader financial stability concerns? To what extent does maintaining liquidity risk management and internal liquidity stress testing and buffer requirements at the holding company level for these firms under the Board-only proposal mitigate these concerns? What are the advantages and disadvantages of maintaining standardized liquidity requirements, such as the current LCR requirement and proposed NSFR requirement, for firms subject to Category IV standards? If the Board 57 The Board-only proposal provides further discussion of liquidity standards that would apply under the Board’s regulations to firms that would be subject to Category IV standards. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 were to apply some or all of the LCR and proposed NSFR requirements to these firms, what, if any, other regulatory requirements should the Board consider reducing or removing? III. Impact Analysis The Board assessed the potential impact of the proposed rule, taking into account potential benefits in the form of increased net interest margins from holding higher yielding assets, reduced compliance costs, and increased regulatory flexibility, and potential costs related to increased risk to holding companies during a period of elevated economic stress or market volatility.58 The Board expects the proposal to have no material impact on the capital levels of banking organizations that would be subject to Category I or II standards. For banking organizations that would be subject to Category III or IV standards, the Board expects the proposal to slightly lower capital requirements under current conditions (by approximately $8 billion, or 60 basis points of total risk-weighted assets among these banking organizations) and reduce compliance costs for certain banking organizations related to the advanced approaches capital requirements. The impact on capital levels for banking organizations subject to Category III and IV standards could vary under different economic and market conditions. For example, from 2001 to 2018, the aggregate AOCI for banking organizations subject to Category III or Category IV standards that included AOCI in capital has ranged from a decrease of approximately 140 basis points of total risk-weighted assets to an increase of approximately 50 basis points of total risk-weighted assets. For purposes of assessing the potential impact of the proposed changes to the liquidity standards, the Board’s assessment focused on the impact of the proposed change in the applicability and the stringency of the Board’s existing liquidity standards under the LCR rule.59 The Board quantified the impact of the proposed LCR tailoring on the HQLA of affected holding companies.60 In the analysis, 58 As noted in section IV.D of this Supplementary Information, the OCC also considered the potential costs of the proposed rule for the purpose of the Unfunded Mandates Reform Act of 1996 (2 U.S.C. 1532). 59 Because the NSFR and modified NSFR requirements have not yet been finalized, banking organizations are not currently subject to those minimum requirements. As a result, the Board did not assess any changes in impact as a result of amending its scope of application. 60 The Board’s analysis estimates the impact of reducing the LCR requirement for holding PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 the Board assumed that holding companies subject to Category III standards and holding companies subject to Category IV standards would respond differently to the new regulatory requirements. For holding companies subject to Category III requirements, the proposal would generally result in a decrease in LCR minimum requirements that could range from 70 to 85 percent of the full LCR requirements if the firm has less than $75 billion in weighted short-term wholesale funding. The Board assumes that holding companies subject to Category III standards would adjust their HQLA so that they choose the higher of the following two options: (i) Preserve the same LCR, in percentage point terms, they had in the first quarter of 2018, measured using the new requirement, or (ii) meet their internal liquidity stress test (ILST) requirement.61 As holding companies subject to Category IV standards would no longer be subject to an LCR requirement under the proposal, the Board assumed that these firms would adjust their liquid asset holdings such that they choose the higher of the following: (i) Match the HQLA levels of holding companies that are currently not subject to the LCR rule or (ii) meet their internal liquidity stress test requirement. The Board assumed that the net cash outflows of holding companies, the denominator of the LCR, remains unchanged. The Board estimates that under a 70 percent LCR requirement, holding companies subject to Category III standards that have less than $75 billion in weighted short-term wholesale funding would reduce HQLA by approximately $43 billion.62 With regard to the holding companies subject to Category IV standards, the Board estimates a reduction in HQLA of approximately $34 billion. The combined reduction represents a 2.5 companies that would be subject to Category III or Category IV standards using data submitted on the FR 2052a and FR Y9–C by these holding companies for the 2018Q1 reporting period. 61 For example, in the case of a holding company that would be subject to Category III standards and the reduced LCR and NSFR requirements under the proposal, if the firm’s current LCR requirement is greater than its ILST-based liquidity buffer requirement, and the firm currently maintains an LCR of 120 percent relative to the currently applicable full LCR requirement, the approach would assume the firm will reduce its HQLA by 30 percent under a 70 percent LCR requirement. 62 The estimated drop in HQLA, assuming an 85 percent LCR for holding companies subject to Category III standards that have less than $75 billion in weighted short-term wholesale funding, would be approximately $20 billion (or 0.6 percent reduction of aggregate HQLA among holding companies with $100 billion or more in total consolidated assets). E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules percent reduction of aggregate HQLA among holding companies with $100 billion or more in total consolidated assets. As a result, the Board projects that the reduction in LCR requirements would modestly reduce the liquidity buffers held at affected holding companies. In the second part of the analysis, the Board estimated how the proposal would affect the net interest margin, loan growth, and the probability that these holding companies could experience liquidity pressure during a period of elevated stress or volatility (outcome variables). The Board implemented this analysis by using regression models for the above variables. As an input to these regression models, the Board used the estimates for the proposal’s direct effects on HQLA to infer its indirect effects on the outcome variables. The Board estimates that the reduction in the LCR requirements would modestly increase the net interest margin at affected holding companies. Reducing the LCR calibration to 70 percent for banking organizations subject to Category III standards that have less than $75 billion in weighted short-term wholesale funding and removing the LCR for holding companies subject to Category IV standards would moderately increase the likelihood that these holding companies could experience liquidity pressure during times of stress.63 The Board-only proposal would continue to require these holding companies to conduct internal liquidity stress tests and hold highly liquid assets sufficient to meet projected 30-day net stressed cash-flow needs under internal stress scenarios. In addition, the Board will continue to assess the safety and soundness of these holding companies through the normal course of supervision. amozie on DSK3GDR082PROD with PROPOSALS4 IV. Administrative Law Matters A. Paperwork Reduction Act Certain provisions of the proposed rule contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501–3521). In accordance with the requirements of the PRA, the agencies may not conduct or sponsor, and a respondent is not required to respond to, an information collection 63 If the agencies calibrate the LCR requirement at 85 percent for banking organizations subject to Category III standards with less than $75 billion in weighted short-term wholesale funding, the Board estimates the likelihood of experiencing material financial distress during a period of elevated economic stress or market volatility would increase only modestly. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 unless it displays a currently valid Office of Management and Budget (OMB) control number. The OMB control number for the OCC is 1557– 0318, Board is 7100–0313, and FDIC is 3064–0153. The OCC and FDIC may need to request new control numbers if submissions are pending under their respective control numbers at the time of this submission. These information collections will be extended for three years, with revision. The information collection requirements contained in this proposed rulemaking have been submitted by the OCC and FDIC to OMB for review and approval under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of the OMB’s implementing regulations (5 CFR 1320). The Board reviewed the proposed rule under the authority delegated to the Board by OMB. Comments are invited on: a. Whether the collections of information are necessary for the proper performance of the agencies’ 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 comments will become a matter of public record. Comments on aspects of this document that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the addresses listed in the ADDRESSES section of this document. A copy of the comments may also be submitted to the OMB desk officer for the agencies by mail to U.S. Office of Management and Budget, 725 17th Street NW, #10235, Washington, DC 20503; facsimile to (202) 395–6974; or email to oira_submission@omb.eop.gov, Attention, Federal Banking Board Desk Officer. Information Collection Proposed To Be Revised Title of Information Collection: Recordkeeping and Disclosure Requirements Associated with Capital Adequacy. Frequency: Quarterly, annual. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 66039 Affected Public: Businesses or other for-profit. Respondents: OCC: National banks and federal savings associations. Board: State member banks (SMBs), bank holding companies (BHCs), U.S. intermediate holding companies, savings and loan holding companies (SLHCs), and global systemically important bank holding companies (G–SIBs). FDIC: State nonmember banks and state savings associations. Current Actions: The proposal would establish a revised framework for determining applicability of requirements under the regulatory capital rule, the liquidity coverage ratio rule, and the proposed net stable funding ratio rule for large U.S. banking organizations based on their risk profile. The proposal would establish four categories of standards and apply tailored capital and liquidity requirements for banking organizations subject to each category. The proposal is consistent with a separate proposal issued by the Board that would apply enhanced prudential standards for large banking organizations based on those four categories of standards. The proposal would not amend the capital and liquidity requirements currently applicable to an intermediate holding company of a foreign banking organization or its subsidiary depository institutions. These changes will not result in changes to the PRA-related burden. Nevertheless, in order to be consistent across the agencies, the agencies would apply a conforming methodology for calculating the PRA-related burden estimates. The agencies would also update the number of respondents based on the current number of supervised entities even though this proposal only affects a limited number of entities. The agencies believe that any changes to the information collections associated with the proposed rule are the result of the conforming methodology and updates to the respondent count, and not the result of the proposed rule changes. PRA Burden Estimates OCC OMB control number: 1557–0318. Estimated number of respondents: 1,365 (of which 18 are advanced approaches institutions). Estimated average hours per response: Minimum Capital Ratios (1,365 Institutions Affected) Recordkeeping (Ongoing)—16. E:\FR\FM\21DEP4.SGM 21DEP4 66040 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Standardized Approach (1,365 Institutions Affected for Ongoing) Standardized Approach (3,575 Institutions Affected for Ongoing) Recordkeeping (Initial setup)—122. Recordkeeping (Ongoing)—20. Disclosure (Initial setup)—226.25. Disclosure (Ongoing quarterly)— 131.25. Recordkeeping (Initial setup)—122. Recordkeeping (Ongoing)—20. Disclosure (Initial setup)—226.25. Disclosure (Ongoing quarterly)— 131.25. Advanced Approach (18 Institutions Affected for Ongoing) Advanced Approach (2 Institutions Affected for Ongoing) Recordkeeping (Initial setup)—460. Recordkeeping (Ongoing)—540.77. Recordkeeping (Ongoing quarterly)— 20. Disclosure (Initial setup)—280. Disclosure (Ongoing)—5.78. Disclosure (Ongoing quarterly)—35. Estimated annual burden hours: 1,088 hours initial setup, 64,929 hours for ongoing. Recordkeeping (Initial setup)—460. Recordkeeping (Ongoing)—540.77. Recordkeeping (Ongoing quarterly)— 20. Disclosure (Initial setup)—280. Disclosure (Ongoing)—5.78. Disclosure (Ongoing quarterly)—35. Estimated annual burden hours: 1,088 hours initial setup, 130,758 hours for ongoing. The proposed rule would also require changes to the Consolidated Reports of Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, and FFIEC 051; OMB Nos. 1557–0081 (OCC), 7100–0036 (Board), and 3064–0052 (FDIC)) and Risk-Based Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101; OMB Nos. 1557–0239 (OCC), 7100– 0319 (Board), and 3064–0159 (FDIC)), which will be addressed in a separate Federal Register notice. Board Agency form number: FR Q. OMB control number: 7100–0313. Estimated number of respondents: 1,431 (of which 17 are advanced approaches institutions). Estimated average hours per response: Minimum Capital Ratios (1,431 Institutions Affected for Ongoing) Recordkeeping (Ongoing)—16. Standardized Approach (1,431 Institutions Affected for Ongoing) B. Regulatory Flexibility Act Analysis Recordkeeping (Initial setup)—122. Recordkeeping (Ongoing)—20. Disclosure (Initial setup)—226.25. Disclosure (Ongoing quarterly)— 131.25. Advanced Approach (17 Institutions Affected) Recordkeeping (Initial setup)—460. Recordkeeping (Ongoing)—540.77. Recordkeeping (Ongoing quarterly)— 20. Disclosure (Initial setup)—280. Disclosure (Ongoing)—5.78. Disclosure (Ongoing quarterly)—35. Disclosure (Table 13 quarterly)—5. Risk-Based Capital Surcharge for GSIBs (21 Institutions Affected) Recordkeeping (Ongoing)—0.5. Estimated annual burden hours: 1,088 hours initial setup, 78,183 hours for ongoing. amozie on DSK3GDR082PROD with PROPOSALS4 FDIC OMB control number: 3064–0153. Estimated number of respondents: 3,575 (of which 2 are advanced approaches institutions). Estimated average hours per response: Minimum Capital Ratios (3,575 Institutions Affected) Recordkeeping (Ongoing)—16. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), requires an agency, in connection with a proposed rule, to prepare an Initial Regulatory Flexibility Analysis describing the impact of the rule on small entities (defined by the SBA for purposes of the RFA to include commercial banks and savings institutions with total consolidated assets of $550 million or less and trust companies with total consolidated assets of $38.5 million of less) or to certify that the proposed rule would not have a significant economic impact on a substantial number of small entities. As of June 30, 2018, the OCC supervises 886 small entities.64 As part of our analysis, we consider whether the proposal will have a significant economic impact on a substantial number of small entities, pursuant to the RFA. This proposal only applies to large banking organizations, 64 The OCC calculated the number of small entities using the SBA’s size thresholds for commercial banks and savings institutions, and trust companies, which are $550 million and $38.5 million, respectively. Consistent with the General Principles of Affiliation, 13 CFR 121.103(a), the OCC counted the assets of affiliated financial institutions when determining whether to classify a national bank or Federal savings association as a small entity. PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 therefore, it will not impact any OCCsupervised small entities. For this reason, the OCC certifies that the proposed rule would not have a significant economic impact on a substantial number of OCC-supervised small entities. Board: The RFA requires an agency to either provide an initial regulatory flexibility analysis with a proposal or certify that the proposal will not have a significant impact on a substantial number of small entities. Under regulations issued by the SBA, a small entity includes a bank, bank holding company, or savings and loan holding company with assets of $550 million or less (small banking organization).65 As of June 30, 2018, there were approximately 3,304 small bank holding companies, 216 small savings and loan holding companies, and 535 small SMBs. The Board has considered the potential impact of the proposed rule on small entities in accordance with the RFA. Based on the Board’s analysis, and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial of number of small entities. Nevertheless, the Board is providing an initial regulatory flexibility analysis with respect to this proposed rule. A final regulatory flexibility analysis will be conducted after comments received during the public comment period have been considered. The Board welcomes comment on all aspects of its analysis. In particular, the Board requests that commenters describe the nature of any impact on small entities and provide empirical data to illustrate and support the extent of the impact. As discussed in the SUPPLEMENTARY INFORMATION, the Board is proposing to adopt amendments to the Board’s capital rule 66 and LCR rule.67 The capital rule applies to all state member banks, bank holding companies, and covered savings and loan holding companies, except for institutions that are subject to the Board’s Small Bank Holding Company and Small Savings and Loan Holding Company Policy Statement, which apply to bank holding companies and savings and loan holding companies with less than $3 billion in total consolidated assets that also meet certain additional criteria.68 The proposed changes to the capital rule 65 See 13 CFR 121.201. Effective July 14, 2014, the SBA revised the size standards for banking organizations to $550 million in assets from $500 million in assets. 79 FR 33647 (June 12, 2014). 66 See 12 CFR part 217. 67 See 12 CFR part 249. 68 See 12 CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225, appendix C; 12 CFR 238.9. E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules generally affect state member banks, bank holding companies, and covered savings and loan holding companies with $50 billion or more in total consolidated assets. Thus, most state member banks, bank holding companies, and covered savings and loan holding companies that would be subject to the proposed rule exceed the $550 million asset threshold at which a banking organization would qualify as a small banking organization. The Board is also proposing changes to regulatory requirements under the LCR rule. The LCR rule applies to state member banks, bank holding companies and covered savings and loan holding companies with (i) $250 billion or more in total consolidated assets; or (ii) total consolidated on-balance sheet foreign exposure equal to $10 billion or more. The LCR rule also applies to state member banks with total consolidated assets equal to $10 billion or more that are consolidated subsidiaries of a covered bank holding company. The modified LCR, which is part of the LCR rule, applies to certain bank holding companies and covered savings and loan holding companies with $50 billion or more in total consolidated assets. Most institutions that are affected by the proposal therefore substantially exceed the $550 million asset threshold at which a banking entity is considered a ‘‘small entity’’ under SBA regulations. The agencies anticipate proposing updates to the relevant reporting forms at a later date to the extent necessary to align with the proposed changes to the capital rule and LCR rule. Given that the proposed rule does not impact the recordkeeping and reporting requirements to which that affected small banking organizations are currently subject, there would be no change to the information that small banking organizations must track and report. The Board does not believe that the proposed rule duplicates, overlaps, or conflicts with any other Federal rules. In addition, there are no significant alternatives to the proposed rule. In light of the foregoing, the Board does not believe that the proposed rule, if adopted in final form, would have a significant economic impact on a substantial number of small entities. FDIC: The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities.69 However, a 69 5 U.S.C. 601 et seq. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined ‘‘small entities’’ to include banking organizations with total assets of less than or equal to $550 million who are independently owned and operated or owned by a holding company with less than $550 million in total assets.70 For the reasons described below and under section 605(b) of the RFA, the FDIC certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. The FDIC supervises 3,575 institutions, of which 2,763 are considered small entities for the purposes of RFA.71 This proposed rule will affect all institutions subject to the current advanced approaches regulations and their subsidiaries. The FDIC does not supervise any advanced approaches banking organizations or subsidiaries thereof that have $550 million or less in total consolidated assets.72 Since this proposal does not affect any institutions that are defined as small entities for the purposes of the RFA, the FDIC certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this rule have any significant effects on small entities that the FDIC has not identified? C. Plain Language Section 722 of the Gramm-LeachBliley Act 73 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies have sought to present the proposed rule in a simple and straightforward manner, and invite 70 The SBA defines a small banking organization as having $550 million or less in assets, where ‘‘a financial institution’s assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.’’ See 13 CFR 121.201 (as amended, effective December 2, 2014). ‘‘SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates.’’ See 13 CFR 121.103. Following these regulations, the FDIC uses a covered entity’s affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the covered entity is ‘‘small’’ for the purposes of RFA. 71 Call Report data, June 30th, 2018. 72 Call Report data, June 30th 2018. 73 Public Law 106–102, section 722, 113 Stat. 1338, 1471 (1999). PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 66041 comment on the use of plain language. For example: • Have the agencies organized the material to suit your needs? If not, how could they present the proposed rule more clearly? • Are the requirements in the proposed rule clearly stated? If not, how could the proposed rule be more clearly stated? • Do the regulations contain technical language or jargon that is not clear? If so, which language requires clarification? • Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would achieve that? • Would more, but shorter, sections be better? If so, which sections should be changed?’’ • What other changes can the agencies incorporate to make the regulation easier to understand? D. OCC Unfunded Mandates Reform Act of 1995 Determination The OCC analyzed the proposed rule under the factors set forth in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this analysis, the OCC considered whether the proposed rule includes a Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted for inflation). The OCC has determined that this proposed rule would not result in expenditures by State, local, and Tribal governments, or the private sector, of $100 million or more in any one year. Accordingly, the OCC has not prepared a written statement to accompany this proposal. E. Riegle Community Development and Regulatory Improvement Act of 1994 Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),74 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the 74 12 E:\FR\FM\21DEP4.SGM U.S.C. 4802(a). 21DEP4 66042 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules benefits of such regulations. In addition, section 302(b) of RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on insured depository institutions generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.75 The agencies note that comment on these matters has been solicited in other sections of this SUPPLEMENTARY INFORMATION section, and that the requirements of RCDRIA will be considered as part of the overall rulemaking process. In addition, the agencies also invite any other comments that further will inform the agencies’ consideration of RCDRIA. 12 CFR Part 3 Administrative practice and procedure, Asset risk-weighting methodologies, Banking, Banks, Capital adequacy, Capital requirements, Federal savings associations, National banks, Reporting and recordkeeping requirements, Risk. 12 CFR Part 50 Administrative practice and procedure, Banking, Banks, Liquidity, Reporting and recordkeeping requirements, Savings associations. 12 CFR Part 217 Administrative practice and procedure, Banking, Banks, Capital, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Risk, Securities. 12 CFR Part 249 Administrative practice and procedure, Banking, Banks, Federal Reserve System, Holding companies, Liquidity, Reporting and recordkeeping requirements. 12 CFR Part 324 amozie on DSK3GDR082PROD with PROPOSALS4 Administrative practice and procedure, Banking, Banks, Capital adequacy, Reporting and recordkeeping requirements, Savings associations, State non-member banks. 12 CFR Part 329 Administrative practice and procedure, Banking, Banks, Federal Deposit Insurance Corporation, Liquidity, Reporting and recordkeeping requirements, Savings associations. 75 Id. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 Authority and Issuance For the reasons stated in the Supplementary Information, chapter I of title 12 of the Code of Federal Regulations is proposed to be amended as follows: Department of the Treasury Office of the Comptroller of the Currency 12 CFR CHAPTER I PART 3—CAPITAL ADEQUACY STANDARDS 1. The authority citation for part 3 continues to read as follows: ■ Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B). 2. In § 3.2 add the definitions of Category II national bank or Federal savings association, and Category III national bank or Federal savings association, FR Y–9LP, and FR Y–15 in alphabetical order to read as follows: ■ § 3.2 Definitions. * * * * * Category II national bank or Federal savings association means: (1) A national bank or Federal savings association that is a subsidiary of a Category II banking organization, as defined pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or (2) A national bank or Federal savings association that: (i) (A) Has total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Consolidated Report of Condition and Income (Call Report), equal to $700 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent quarters, total consolidated assets means the average of its total consolidated assets, as reported on the PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross jurisdictional activity for the four most recent calendar quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (ii) After meeting the criteria in paragraph (2)(i) of this section, a national bank or Federal savings association continues to be a Category II national bank or Federal savings association until the national bank or Federal savings association has: (A) (1) Less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a subsidiary of a global systemically important BHC. Category III national bank or Federal savings association means: (1) A national bank or Federal savings association that is a subsidiary of a Category III banking organization as defined pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or (2) A national bank or Federal savings association that: (i)(A) Has total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $250 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules $250 billion. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) At least one of the following, each calculated as the average of the four most recent consecutive quarters, or if the national bank or Federal savings association has not filed each applicable reporting form for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: (i) Total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure equal to $75 billion or more. Off-balance sheet exposure is a national bank’s or Federal savings association’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the national bank or Federal savings association, as reported on the Call Report; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more. (ii) After meeting the criteria in paragraphs (2)(i) of this definition, a national bank or Federal savings association continues to be a Category III national bank or Federal savings association until the national bank or Federal savings association has: (A)(1) Less than $250 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (2) Less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Less than $75 billion in off-balance sheet exposure for each of the four most recent calendar quarters. Off-balance sheet exposure is a national bank’s or Federal savings association’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the national VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 bank or Federal savings association, as reported on the Call Report; or (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (C) Is a Category II national bank or Federal savings association; or (D) Is a subsidiary of a global systemically important BHC. FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * ■ 3. In § 3.10, revise paragraphs (a)(6), (c) introductory text, and (c)(4)(i) introductory text to read as follows: § 3.10 Minimum capital requirements. (a) * * * (6) For advanced approaches national banks and Federal savings associations, and for Category III national banks and Federal savings associations, a supplementary leverage ratio of 3 percent. * * * * * (c) Advanced approaches capital ratio calculations. An advanced approaches national bank or Federal savings association that has completed the parallel run process and received notification from the OCC pursuant to § 3.121(d) must determine its regulatory capital ratios as described in paragraphs (c)(1) through (3) of this section. An advanced approaches national bank or Federal savings association must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the national bank or Federal savings association institution meets any of the criteria in § 3.100(b)(1). A Category III national bank or Federal savings association must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the national bank or Federal savings association is identified as a Category III national bank or Federal savings association. * * * * * (4) Supplementary leverage ratio. (i) An advanced approaches national bank’s or Federal savings association’s or a Category III national bank’s or Federal savings association’s supplementary leverage ratio is the ratio of its tier 1 capital to total leverage exposure, the latter which is calculated as the sum of: * * * * * PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 66043 4. Amend § 3.11 as follows: a. Revise the section heading; b. Revise paragraph (b)(1) introductory text; and ■ c. Revise paragraph (b)(1)(ii). The revisions read as follows: ■ ■ ■ § 3.11 Capital conservation buffer, countercyclical capital buffer amount, and GSIB surcharge. * * * * * (b) Countercyclical capital buffer amount—(1) General. An advanced approaches national bank or Federal savings association, and a Category III national bank or Federal savings association, must calculate a countercyclical capital buffer amount in accordance with the following paragraphs for purposes of determining its maximum payout ratio under Table 1 to § 3.11. * * * * * (ii) Amount. An advanced approaches national bank or Federal savings association, and a Category III national bank or Federal savings association, has a countercyclical capital buffer amount determined by calculating the weighted average of the countercyclical capital buffer amounts established for the national jurisdictions where the national bank’s or Federal savings association’s private sector credit exposures are located, as specified in paragraphs (b)(2) and (3) of this section. * * * * * ■ 5. In § 3.100, revise paragraphs (b)(1) introductory text and (b)(1)(i) through (v) to read as follows: § 3.100 Purpose, applicability, and principle of conservatism. * * * * * (b) Applicability. (1) This subpart applies to a national bank or Federal savings association that: (i) Is a subsidiary of a global systemically important BHC, as identified pursuant to 12 CFR 217.402; (ii) Is a Category II national bank or Federal savings association; (iii) Is a subsidiary of a depository institution that uses the advanced approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12 CFR part 217 (Board), or 12 CFR part 324 (FDIC) to calculate its risk-based capital requirements; or (iv) Is a subsidiary of a bank holding company or savings and loan holding company that uses the advanced approaches pursuant to subpart E of 12 CFR part 217 to calculate its risk-based capital requirements; or (v) Elects to use this subpart to calculate its total risk-weighted assets; or * * * * * E:\FR\FM\21DEP4.SGM 21DEP4 66044 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules PART 50—LIQUIDITY RISK MEASUREMENT STANDARDS 6. The authority citation for part 50 continues to read as follows: ■ Authority: 12 U.S.C. 1 et seq., 93a, 481, 1818, and 1462 et seq. 7. In § 50.1, revise paragraphs (b)(1) and (2) to read as follows: ■ § 50.1 Purpose and applicability. amozie on DSK3GDR082PROD with PROPOSALS4 * * * * * (b) Applicability of Minimum Liquidity Standards. (1) A national bank or Federal savings association is subject to the minimum liquidity standard and other requirements of this part if: (i) It is a GSIB depository institution, a Category II national bank or Federal savings association, or a Category III national bank or Federal savings association; (ii) It is an national bank or Federal savings association that has total consolidated assets equal to $10 billion or more, as reported on the most recent year-end Call Report, and it is a consolidated subsidiary of a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated total consolidated assets as of the most recent year end, calculated in accordance with the instructions to the FR Y–9C; or (2) Call Report; or (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); or (iii) It is a national bank or Federal savings association for which the OCC has determined that application of this part is appropriate in light of the national bank’s or Federal savings association’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 (2)(i) A national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part under paragraphs (b)(1)(i) of this section must comply with the requirements of this part beginning on the first day of the second calendar quarter after which the national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) A national bank or Federal savings association must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month, for the first three calendar quarters after the national bank or Federal savings association begins complying with the minimum liquidity standard and other requirements of this part; (B) Beginning one year after the first year in which the national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(i) of this section, and thereafter, the national bank or Federal savings association must calculate and maintain a liquidity coverage ratio on each calculation date; (ii) A national bank or Federal savings association that becomes subject to this part under paragraph (b)(1)(ii) of this section must comply with the requirements of this part beginning on April 1 of the year in which the national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) From April 1 to December 31 of the year in which the national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part, the national bank or Federal savings association must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month; and (B) Beginning January 1 of the year after the first year in which the national bank or Federal savings association becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1) of this section, and thereafter, the national bank or Federal savings association must calculate and maintain a liquidity coverage ratio on each calculation date. (iii) A national bank or Federal savings association that becomes subject to the minimum liquidity standard and other requirements of this part under PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 (b)(1)(iii) of this section must comply with the requirements of this part subject to a transition period specified by the OCC. * * * * * ■ 8. In § 50.3, add the definitions of Average weighted short-term wholesale funding, Call Report, Category II national bank or Federal savings association, Category III national bank or Federal savings association, Covered intermediate holding company, FR Y–9LP, FR Y–15, Global systemically important BHC, and GSIB depository institution, in alphabetical order to read as follows: § 50.3 Definitions. * * * * * Average weighted short-term wholesale funding has the same meaning as in 12 CFR 252.2. * * * * * Call Report means the Consolidated Reports of Condition and Income. Category II national bank or Federal savings association means: (1) A national bank or Federal savings association that is a subsidiary of a depository institution holding company that is defined as a Category II Boardregulated institution pursuant to 12 CFR 249.3 and has total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (1), a national bank or Federal savings association continues to be a Category II national bank or Federal savings association until the national bank or Federal savings association has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the national bank or Federal savings association is no longer a consolidated subsidiary of a category II Boardregulated institution; or (2) A national bank or Federal savings association that: (i)(A) Has total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Consolidated E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Report of Condition and Income (Call Report), equal to $700 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross-jurisdictional activity for the four most recent consecutive quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (ii) After meeting the criteria in paragraph (2)(i) of this section, a national bank or Federal savings association continues to be a Category II national bank or Federal savings association until the national bank or Federal savings association has: (A)(1) Less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a GSIB depository institution. Category III national bank or Federal savings association means: (1) A national bank or Federal savings association that is a subsidiary of a depository institution holding company that is defined as a Category III Boardregulated institution pursuant to 12 CFR 249.3 and has total consolidated assets, calculated based on the average of the VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (1), a national bank or Federal savings association continues to be a Category III national bank or Federal savings association until the national bank or Federal savings association has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the national bank or Federal savings association is no longer a consolidated subsidiary of a Category III Boardregulated institution; or (2) A national bank or Federal savings association that: (i)(A) Has total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Consolidated Report of Condition and Income (Call Report), equal to $250 billion or more. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the national bank’s or Federal savings association’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of at least $100 billion but less than $700 billion. If the national bank or Federal savings association has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) One or more of the following, each measured as the average of the four most recent quarters, or if the national bank or Federal savings bank has not filed each applicable reporting form for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 66045 (i) Total nonbank assets, calculated in accordance with instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the national bank or Federal savings association, as reported on the Call Report, equal to $75 billion or more; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more. (ii) After meeting the criteria in paragraph (2)(i) of this section, a national bank or Federal savings association continues to be a Category III national bank or Federal savings association until the national bank or Federal savings association has: (A)(1) Less than $250 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (2) Less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Less than $75 billion in off-balance sheet exposure for each of the four most recent calendar quarters. Off-balance sheet exposure is a national bank’s or Federal savings association’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the national bank or Federal savings association, as reported on the Call Report; or (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a Category II national bank or Federal savings bank; or (D) Is a GSIB depository institution. * * * * * Covered intermediate holding company means a U.S. intermediate holding company that: (1) Was established or designated by a foreign banking organization pursuant to 12 CFR 252.153; and (2) Is a covered depository institution holding company. * * * * * E:\FR\FM\21DEP4.SGM 21DEP4 66046 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * Global systemically important BHC means a bank holding company identified as a global systemically important BHC pursuant to 12 CFR 217.402. GSIB depository institution means a depository institution that is a consolidated subsidiary of a global systemically important BHC and has total consolidated assets equal to $10 billion or more, calculated based on the average of the depository institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report. If the depository institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent calendar quarter or quarters, as applicable. After meeting the criteria under this definition, a depository institution continues to be a GSIB depository institution until the depository institution has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the depository institution is no longer a consolidated subsidiary of a global systemically important BHC. * * * * * ■ 9. In § 50.30: ■ a. Revise paragraph (a); and ■ b. Add paragraph (c) and Table 1. The revision and additions read as set forth below. § 50.30 Total net cash outflow amount. (a) Calculation of total net cash outflow amount. As of the calculation date, a national bank’s or Federal savings association’s total net cash outflow amount equals the national bank’s or Federal savings association’s outflow adjustment percentage as determined under paragraph (c) of this section multiplied by: (1) The sum of the outflow amounts calculated under § 50.32(a) through (l); minus (2) The lesser of: (i) The sum of the inflow amounts calculated under § 50.33(b) through (g); and (ii) 75 percent of the amount calculated under paragraph (a)(1) of this section; plus (3) The maturity mismatch add-on as calculated under paragraph (b) of this section. * * * * * (c) Outflow adjustment percentage. A national bank’s or Federal savings association’s outflow adjustment percentage is determined pursuant to Table 1 to § 50.30. TABLE 1 TO § 50.30—OUTFLOW ADJUSTMENT PERCENTAGES Outflow adjustment percentage A GSIB depository institution ................................................................................................................................................... Category II national bank or Federal savings association ...................................................................................................... Category III national bank or Federal savings association that: ............................................................................................. (1) Is a consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with $75 billion or more in average weighted short-term wholesale funding; or (2) Has $75 billion or more in average weighted short-term wholesale funding and is not consolidated under a holding company Category III national bank or Federal savings association that: ............................................................................................. (1) Is a consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with less than $75 billion in average weighted short-term wholesale funding; or (2) Has less than $75 billion in average weighted short-term wholesale funding and is not consolidated under a holding company A national bank or Federal savings association that is described in section .50(b)(1)(ii) ...................................................... [Re-proposal of Net Stable Funding Ratio’s Applicability] PART 50—LIQUIDITY RISK MEASUREMENT STANDARDS 10. In § 50.1, add paragraph (c) to read as follows: ■ § 50.1 Purpose and applicability. amozie on DSK3GDR082PROD with PROPOSALS4 * * * * * (c) Applicability of the minimum stable funding standard. (1) A national bank or Federal savings association is subject to the minimum stable funding and other requirements of subparts K through M if: (i) It is a GSIB depository institution, a Category II national bank or Federal savings association, a Category III national bank or Federal savings association that is the consolidated subsidiary of a Category III Boardregulated institution pursuant to 12 CFR VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 249.3 with $75 billion or more in average weighted short-term wholesale funding, or a Category III national bank or Federal savings association with $75 billion or more in average weighted short-term wholesale funding that is not consolidated under a holding company; (ii) It is a national bank or Federal savings association that has total consolidated assets equal to $10 billion or more, or reported on the most recent year-end Call Report, and is a consolidated subsidiary of a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated consolidated assets as of the most recent year end, calculated in PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 100 100 100 [70 to 85] 100 accordance with the instructions to the FR Y–9C; (2) Call Report; or (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); (iii) It is a Category III national bank or Federal savings association that meets the criteria in § 50.120(a) but does not meet the criteria in paragraph E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules (d)(1)(i) of this section, and is subject to the requirements of this part in accordance with subpart M of this part; (iv) The OCC has determined that application of this part is appropriate in light of the national bank’s or Federal savings association’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (2)(i) A national bank or Federal savings association that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraph (d)(1)(i) of this section on the effective date, must comply with the requirements of these subparts beginning on the first day of the second calendar quarter after which the national bank or Federal savings association becomes subject to the minimum stable funding standard and other requirements of this part. (ii) A national bank or Federal savings association that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraphs (d)(1)(ii) of this section after the effective date must comply with the requirements of subparts K through M of this part beginning on April 1 of the year in which the national bank or Federal savings association becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part: and (iii) A national bank or Federal savings association that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraph (d)(1)(iv) of this section after the effective date must comply with the requirements of subparts K through M of this part on the date specified by the OCC. (3) Subparts K through M do not apply to: (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), or a subsidiary of a bridge financial company; or (ii) A new depository institution or a bridge depository institution, as defined in 12 U.S.C. 1813(i). (4) A national bank or Federal savings association subject to a minimum liquidity standard under this part shall remain subject until the OCC determines in writing that application of this part to the national bank or Federal savings association is not appropriate in light of the national bank’s or Federal savings association’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 domestic covered entities, or risk to the financial system. (5) In making a determination under paragraphs (d)(1)(iv) or (d)(4) of this section, the OCC will apply, as appropriate, notice and response procedures in the same manner and to the same extent as the notice and response procedures set forth in 12 CFR 3.404. ■ 11. Add subpart M to part 50 to read as follows: Subpart M—Net stable funding ratio for certain national banks and Federal savings associations Sec. 50.120 Applicability. 50.121 Net stable funding ratio requirement. Subpart M—Net stable funding ratio for certain national banks and Federal savings associations § 50.120 Applicability. (a) Scope. This subpart applies to a national bank or Federal savings association that: (1) Is a Category III national bank or Federal savings association that is a consolidated subsidiary of a depository institution holding company with less than $75 billion in average weighted short-term wholesale funding that is a Category III Board-regulated institution, pursuant to 12 CFR 249.3; or (2) Is a Category III national bank or Federal savings association with less than $75 billion in average weighted short-term wholesale funding that is not consolidated under a holding company. (b) Applicable provisions. Except as otherwise provided in this subpart, the provisions of subparts A, K, and L of this part apply to national banks and Federal savings associations that are subject to this subpart. (c) Applicability. A national bank or Federal savings association that meets the threshold for applicability of this subpart under paragraph (a) of this section after the effective date must comply with the requirements of this subpart beginning on the first day of the second calendar quarter after which it meets the threshold set forth in paragraph (a) of this section. § 50.121 Net stable funding ratio requirement. (a) Calculation of the net stable funding ratio. A national bank or Federal savings association subject to this subpart must calculate and maintain a net stable funding ratio in accordance with § 50.100 and this subpart. (b) Available stable funding amount. A national bank or Federal savings PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 66047 association subject to this subpart must calculate its ASF amount in accordance with subpart K of this part. (c) Required stable funding amount. A national bank or Federal savings association subject to this subpart must calculate its RSF amount in accordance with subpart K of this part, provided, however, that the RSF amount of a national bank or Federal savings association subject to this subpart equals [70 to 85] percent of the RSF amount calculated in accordance with subpart K of this part. Board of Governors of the Federal Reserve System 12 CFR CHAPTER II Authority and Issuance For the reasons set forth in the Supplementary Information, chapter II of title of the Code of Federal Regulations is proposed to be amended as follows: PART 217—CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q) 12. The authority citation for part 217 continues to read as follows: ■ Authority: 12 U.S.C. 248(a), 321–338a, 481–486, 1462a, 1467a, 1818, 1828, 1831n, 1831o, 1831p–1, 1831w, 1835, 1844(b), 1851, 3904, 3906–3909, 4808, 5365, 5368, 5371. 13. In § 217.2, revise the definition of Advanced approaches Board-regulated institution and add the definitions of Category II Board-regulated institution, Category III Board-regulated institution, FR Y–9LP, and FR Y–15 in alphabetical order to read as follows: ■ § 217.2 Definitions. * * * * * Advanced-approaches Boardregulated institution means: (1) A Board-regulated institution that is described § 217.100(b)(1); or (2) A U.S. intermediate holding company that was established or designated by a foreign banking organization pursuant to 12 CFR 252.153 (i) That: (A) Has total consolidated assets (excluding assets held by an insurance underwriting subsidiary), as defined on schedule HC–K of the FR Y–9C, equal to $250 billion or more; (B) Has consolidated total on-balance sheet foreign exposure on its most recent year-end Federal Financial Institutions Examination Council (FFIEC) 009 Report equal to $10 billion or more (where total on-balance sheet E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66048 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules 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 FFIEC 009 Country Exposure Report; or (C) Has a subsidiary depository institution that is required, or has elected, to use 12 CFR part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate its risk-based capital requirements. (ii) Reserved. * * * * * Category II Board-regulated institution means: (1) A depository institution holding company that is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; (2) A state member bank that is a subsidiary of a company identified in paragraph (1) of this definition; or (3) A state member bank that: (i)(A) Has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $700 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the state member bank has not filed the Call Report for each of the four most recent quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross-jurisdictional activity for the four most recent calendar quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form. (ii) After meeting the criteria in paragraph (3)(i) of this section, a state VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 member bank continues to be a Category II Board-regulated institution until the state member bank: (A) Has: (1) Less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Has less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a subsidiary of a global systemically important BHC. Category III Board-regulated institution means: (1) A depository institution holding company that is identified as a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; (2) A state member bank that is a subsidiary of a company identified in paragraph (1) of this definition; or (3) A state member bank that: (i) (A) Has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $250 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $250 billion. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) At least one of the following, each calculated as the average of the four most recent calendar quarters, or if the state member bank has not filed each applicable reporting form for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 (i) Total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure equal to $75 billion or more. Off-balance sheet exposure is a state member bank’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the state member bank, as reported on the Call Report; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more. (ii) After meeting the criteria in paragraph (3)(i) of this section, a state member bank continues to be a Category III Board-regulated institution until the state member bank: (A) Has: (1) Less than $250 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (2) Less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Less than $75 billion in off-balance sheet exposure for each of the four most recent calendar quarters. Off-balance sheet exposure is a state member bank’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the state member bank, as reported on the Call Report; or (B) Has less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (C) Is a Category II Board-regulated institution; or (D) Is a subsidiary of a global systemically important BHC. FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * ■ 14. In § 217.10, revise paragraphs (a)(5), (c) introductory text, and (c)(4)(i) introductory text to read as follows: E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules § 217.10 Minimum capital requirements. (a) * * * (5) For advanced approaches Boardregulated institutions or, for Category III Board-regulated institutions, a supplementary leverage ratio of 3 percent. * * * * * (c) Advanced approaches capital ratio calculations. An advanced approaches Board-regulated institution that has completed the parallel run process and received notification from the Board pursuant to § 217.121(d) must determine its regulatory capital ratios as described in paragraphs (c)(1) through (3) of this section. An advanced approaches Board-regulated institution must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the Boardregulated institution meets any of the criteria in § 217.100(b)(1). A Category III Board-regulated institution must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the Boardregulated institution is identified as a Category III Board-regulated institution. * * * * * (4) Supplementary leverage ratio. (i) An advanced approaches Boardregulated institution’s or a Category III Board-regulated institution’s supplementary leverage ratio is the ratio of its tier 1 capital to total leverage exposure, the latter which is calculated as the sum of: * * * * * ■ 15. In § 217.11, revise paragraphs (b)(1) introductory text and (b)(1)(ii) as follows: § 217.11 Capital conservation buffer, countercyclical capital buffer amount, and GSIB surcharge. amozie on DSK3GDR082PROD with PROPOSALS4 * * * * * (b) Countercyclical capital buffer amount—(1) General. An advanced approaches Board-regulated institution or a Category III Board-regulated institution must calculate a countercyclical capital buffer amount in accordance with the following paragraphs for purposes of determining its maximum payout ratio under Table 1 to § 217.11. (i) * * * (ii) Amount. An advanced approaches Board-regulated institution or a Category III Board-regulated institution has a countercyclical capital buffer amount determined by calculating the weighted average of the countercyclical VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 capital buffer amounts established for the national jurisdictions where the Board-regulated institution’s private sector credit exposures are located, as specified in paragraphs (b)(2) and (3) of this section. * * * * * ■ 16. In § 217.100, paragraph (b)(1) is revised to read as follows: § 217.100 Purpose, applicability, and principle of conservatism. * * * * * (b) Applicability. (1) This subpart applies to: (i) A top-tier bank holding company or savings and loan holding company domiciled in the United States that: (A) Is not a consolidated subsidiary of another bank holding company or savings and loan holding company that uses 12 CFR part 217, subpart E, to calculate its risk-based capital requirements; and (B) That: (1) Is identified as a global systemically important BHC pursuant to 12 CFR 217.402; (2) Is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10; or (3) Has a subsidiary depository institution that is required, or has elected, to use 12 CFR part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate its risk-based capital requirements; (ii) A state member bank that: (A) Is a subsidiary of a global systemically important BHC; (B) Is a Category II Board-regulated institution; (C) Is a subsidiary of a depository institution that uses 12 CFR part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate its riskbased capital requirements; or (D) Is a subsidiary of a bank holding company or savings and loan holding company that uses 12 CFR part 217, subpart E, to calculate its risk-based capital requirements; or (iii) Any Board-regulated institution that elects to use this subpart to calculate its risk-based capital requirements. * * * * * ■ 17. In § 217.406, paragraph (b)(2) introductory text is revised to read as follows: § 217.406 score. Short-term wholesale funding * * * * * (b) * * * (2) Short-term wholesale funding includes the following components: * * * * * PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 66049 PART 249—LIQUIDITY RISK MEASUREMENT STANDARDS (REGULATION WW) 18. The authority citation for part 249 continues to read as follows: ■ Authority: 12 U.S.C. 248(a), 321–338a, 481–486, 1467a(g)(1), 1818, 1828, 1831p–1, 1831o–1, 1844(b), 5365, 5366, 5368. 19. In § 249.1, revise paragraphs (b)(1) and (2), and add paragraph (d) to read as follows: ■ § 249.1 Purpose and applicability. * * * * * (b) Applicability of Minimum Liquidity Standards. (1) A Boardregulated institution is subject to the minimum liquidity standard and other requirements of this part if: (i) It is a global systemically important BHC, a GSIB depository institution, a Category II Board-regulated institution, or a Category III Board-regulated institution; (ii) It is a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated total consolidated assets as of the most recent year-end, calculated in accordance with the instructions to the FR Y–9C; or (2) Call Report; or (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); (iii) It is a depository institution that is a consolidated subsidiary of a covered intermediate holding company described in paragraph (b)(1)(ii) of this section and has total consolidated assets equal to $10 billion or more, as reported on the most recent year-end Call Report; (iv) It is a covered nonbank company; (v) It is a covered intermediate holding company that meets the criteria in § 249.60(a) but does not meet the criteria in paragraph (b)(1)(ii) of this E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66050 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules section, and is subject to complying with the requirements of this part in accordance with subpart G of this part; or (vi) The Board has determined that application of this part is appropriate in light of the Board-regulated institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (2)(i) A Board-regulated institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(i) of this section must comply with the requirements of this part beginning on the first day of the second calendar quarter after which the Board-regulated institution becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) A Board-regulated institution must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month, for the first three calendar quarters after the Board-regulated institution begins complying with the minimum liquidity standard and other requirements of this part; (B) Beginning one year after the first year in which the Board-regulated institution becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(i) of this section, and thereafter, the Board-regulated institution must calculate and maintain a liquidity coverage ratio on each calculation date; (ii) A Board-regulated institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraphs (b)(1)(ii) or (b)(1)(iii) of this section after September 30, 2014, must comply with the requirements of this part beginning on April 1 of the year in which the Board-regulated institution becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) From April 1 to December 31 of the year in which the Board-regulated institution becomes subject to the minimum liquidity standard and other requirements of this part, the Boardregulated institution must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month; and (B) Beginning January 1 of the year after the first year in which the Boardregulated institution becomes subject to the minimum liquidity standard and VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 other requirements of this part under paragraph (b)(1) of this section, and thereafter, the Board-regulated institution must calculate and maintain a liquidity coverage ratio on each calculation date; and (iii) A Board-regulated institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(vi) of this section after September 30, 2014, must comply with the requirements of this part subject to a transition period specified by the Board. * * * * * (d) Applicability of the minimum stable funding standard. (1) A Boardregulated institution is subject to the minimum stable funding standard and other requirements of subparts K through N if: (i) It is a global systemically important BHC, a GSIB depository institution, a Category II Board-regulated institution, or a Category III Board-regulated institution with $75 billion or more in average weighted short-term wholesale funding, (ii) It is a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated total consolidated assets as of the most recent year end, calculated in accordance with the instructions to the FR Y–9C; or (2) Call Report; (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); (iii) It is a depository institution that is: (A) A Category III Board-regulated institution; and (B) A consolidated subsidiary of a Category III Board-regulated institution with $75 billion or more in average weighted short-term wholesale funding; PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 (iv) It is a depository institution that is a consolidated subsidiary of a covered intermediate holding company described in paragraph (d)(1)(ii) of this section and has total consolidated assets equal to $10 billion or more, as reported on the most recent year-end Call Report; (v) It is a covered nonbank company; (vi) It is a Category III Board-regulated institution or a covered intermediate holding company that meets the criteria in § 249.120(a) but does not meet the criteria in paragraphs (d)(1)(i) or (ii) of this section, and is subject to complying with the requirements of this part in accordance with subpart M of this part; or (vii) The Board has determined that application of this part is appropriate in light of the Board-regulated institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (2)(i) A Board-regulated institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through N of this part under paragraphs (d)(1)(i) or (d)(1)(iii) of this section after the effective date, must comply with the requirements of these subparts beginning on the first day of the second calendar quarter after which the Boardregulated institution becomes subject to the minimum stable funding standard and other requirements of this part. (ii) A Board-regulated institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through N of this part under paragraphs (d)(1)(ii) or (d)(1)(iv) of this section after the effective date must comply with the requirements of subparts K through N of this part beginning on April 1 of the year in which the Board-regulated institution becomes subject to the minimum stable funding standard and requirements of subparts K through N of this part; and, (iii) A Board-regulated institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through N of this part under paragraph (d)(1)(vii) of this section after the effective date must comply with the requirements of subparts K through N of this part on the date specified by the Board. (3) Subparts K through N do not apply to: (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), or a subsidiary of a bridge financial company; or (ii) A new depository institution or a bridge depository institution, as defined in 12 U.S.C. 1813(i). E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules (4) A Board-regulated institution subject to a minimum stable funding standard under this part shall remain subject until the Board determines in writing that application of this part to the Board-regulated institution is not appropriate in light of the Boardregulated institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (5) In making a determination under paragraphs (d)(1)(vii) or (d)(4) of this section, the Board will apply, as appropriate, notice and response procedures in the same manner and to the same extent as the notice and response procedures set forth in 12 CFR 263.202. ■ 20. In § 249.3, add the definitions of Average weighted short-term wholesale funding, Call Report, Category II Boardregulated institution, Category III Boardregulated institution, Covered intermediate holding company, FR Y–9LP, FR Y–15, Global systemically important BHC, and GSIB depository institution in alphabetical order to read as follows: § 249.3 Definitions. amozie on DSK3GDR082PROD with PROPOSALS4 * * * * * Average weighted short-term wholesale funding has the same meaning as in 12 CFR 252.2. * * * * * Call Report means the Consolidated Reports of Condition and Income. Category II Board-regulated institution means: (1) A covered depository institution holding company that is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10; (2) A state member bank that is a consolidated subsidiary of a company described in paragraphs (1) or (3) and that has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (2), a state member bank continues to be a Category II Board-regulated institution until the state member bank has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 quarters, or the state member bank is no longer a consolidated subsidiary of a company described in paragraphs (1) or (3); or (3) A state member bank that: (i)(A) Has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $700 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross-jurisdictional activity for the four most recent calendar quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form. (ii) After meeting the criteria in paragraph (3)(i) of this section, a state member bank continues to be a Category II Board-regulated institution until the state member bank: (A)(1) Has less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Has less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Has less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a GSIB depository institution. Category III Board-regulated institution means: (1) A covered depository institution holding company that is identified as a PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 66051 Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; (2) A state member bank that is a consolidated subsidiary of a company described in paragraphs (1) or (3) and that has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (2), a state member bank continues to be a Category III Board-regulated institution until the state member bank has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the state member bank is no longer a consolidated subsidiary of a company described in paragraphs (1) or (3); or (3) A state member bank that: (i)(A) Has total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets in the four most recent quarters as reported quarterly on the most recent Call Report, equal to $250 billion or more. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the state member bank’s total consolidated assets in the four most recent calendar quarters as reported quarterly on the most recent Call Report, of $100 billion or more but less than $250 billion. If the state member bank has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) One or more of the following, each measured as the average of the four most recent calendar quarters, or if the state member bank has not filed the FR Y–9LP or equivalent reporting form, Call Report, or FR Y–15 or equivalent reporting form, as applicable, for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: E:\FR\FM\21DEP4.SGM 21DEP4 66052 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules (i) Total nonbank assets, calculated in accordance with instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the state member bank, as reported on the Call Report, equal to $75 billion or more; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more. (ii) After meeting the criteria in paragraph (3)(i) of this section, a state member bank continues to be a Category III Board-regulated institution until the state member bank: (A)(1) Has less than $250 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (2) Has less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Has less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Has less than $75 billion in offbalance sheet exposure for each of the four most recent calendar quarters. Offbalance sheet exposure is a state member bank’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the state member bank, as reported on the Call Report; or (B) Has less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (C) Is a Category II Board-regulated institution; or (D) Is a GSIB depository institution. * * * * * Covered intermediate holding company means a U.S. intermediate holding company that: (1) Was established or designated by a foreign banking organization pursuant to 12 CFR 252.153; and (2) Is a covered depository institution holding company. * * * * * FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * Global systemically important BHC means a bank holding company identified as a global systemically important BHC pursuant to 12 CFR 217.402. GSIB depository institution means a depository institution that is a consolidated subsidiary of a global systemically important BHC and has total consolidated assets equal to $10 billion or more, calculated based on the average of the depository institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report. If the depository institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent calendar quarter or quarters, as applicable. After meeting the criteria under this definition, a depository institution continues to be a GSIB depository institution until the depository institution has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the depository institution is no longer a consolidated subsidiary of a global systemically important BHC. * * * * * ■ 21. In § 249.30, revise paragraph (a), and add paragraph (c) to read as follows: § 249.30 Total net cash outflow amount. (a) Calculation of total net cash outflow amount. As of the calculation date, a Board-regulated institution’s total net cash outflow amount equals the Board-regulated institution’s outflow adjustment percentage as determined under paragraph (c) of this section multiplied by: (1) The sum of the outflow amounts calculated under § 249.32(a) through (l); minus (2) The lesser of: (i) The sum of the inflow amounts calculated under § 249.33(b) through (g); and (ii) 75 percent of the amount calculated under paragraph (a)(1) of this section; plus (3) The maturity mismatch add-on as calculated under paragraph (b) of this section. * * * * * (c) Outflow adjustment percentage. A Board-regulated institution’s outflow adjustment percentage is determined pursuant to Table 1 to § 249.30. TABLE 1 TO § 249.30—OUTFLOW ADJUSTMENT PERCENTAGES amozie on DSK3GDR082PROD with PROPOSALS4 Outflow adjustment percentage Global systemically important BHC or GSIB depository institution ......................................................................................... Category II Board-regulated institution .................................................................................................................................... Category III Board-regulated institution with $75 billion or more in average weighted short-term wholesale funding and any Category III Board-regulated institution that is a consolidated subsidiary of such a Category III Board-regulated institution ................................................................................................................................................................................. Category III Board-regulated institution with less than $75 billion in average weighted short-term wholesale funding and any Category III Board-regulated institution that is a consolidated subsidiary of such a Category III Board-regulated institution ................................................................................................................................................................................. Covered intermediate holding company that meets the criteria under § 249.1(b)(1)(ii) and any Board-regulated institution subject to this part that is a consolidated subsidiary of such a covered intermediate holding company 1 ......................... 100 100 100 [70 to 85] 100 1 Covered intermediate holding companies shall remain subject to this part as in effect on October 3, 2018, until the Board amends the liquidity risk measurement standards applicable to the subsidiaries of foreign banking organizations in effect on October 31, 2018. 22. Section 249.60, is revised to read as follows: ■ VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 § 249.60 Applicability. (a) Scope. This subpart applies to a covered intermediate holding company that has total consolidated assets equal PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 to $50 billion or more, based on the average of the Board-regulated institution’s four most recent FR Y–9Cs E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules and does not meet the applicability criteria set forth in § 249.1(b)(1)(ii). (b) Applicable provisions. Except as otherwise provided in this subpart, the provisions of subparts A through E of this part apply to covered intermediate holding companies that are subject to this subpart. (c) Applicability. Subject to the transition periods set forth in § 249.61, a Board-regulated institution that first meets the threshold for applicability of this subpart under paragraph (a) of this section after September 30, 2014, must comply with the requirements of this subpart one year after the date it meets the threshold set forth in paragraph (a) of this section; except that a Boardregulated institution that met the applicability criteria in § 249.1(b) immediately prior to meeting this threshold must comply with the requirements of this subpart beginning on the first day of the first quarter after which it meets the threshold set forth in paragraph (a) of this section. ■ 23. In § 249.90, paragraph (b)(3) is revised to read as follows: § 249.90 Timing, method and retention of disclosures. * * * * * (b) * * * (3) A covered depository institution holding company or covered nonbank company that is subject to the minimum liquidity standard and other requirements of this part pursuant to § 249.1(b)(2)(i) or (ii) must provide the disclosures required by this subpart for the first calendar quarter beginning no later than the date it is first required to comply with the requirements of this part pursuant to § 249.1(b)(2)(i) or (ii). * * * * * ■ 24. Add subpart M to part 249 to read as follows: Subpart M—Net stable funding ratio for certain Board-regulated institutions Sec. 249.120 Applicability. 249.121 Net stable funding ratio requirement. Subpart M—Net stable funding ratio for certain Board-regulated institutions amozie on DSK3GDR082PROD with PROPOSALS4 § 249.120 Applicability. (a) Scope. This subpart applies to: (1) A Category III Board-regulated institution with less than $75 billion in average weighted short-term wholesale funding; (2) A depository institution that is: (i) A consolidated subsidiary of a Category III Board-regulated institution described in (a)(1) of this section; and (ii) A Category III Board-regulated institution. VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 (3) A covered intermediate holding company that has total consolidated assets equal to $50 billion or more, based on the average of the covered intermediate holding company’s total consolidated assets in the four most recent quarters as reported on the FR Y– 9C and does not meet the applicability criteria set forth in § 249.1(d). (b) Applicable provisions. Except as otherwise provided in this subpart, the provisions of subparts A, K, L, and N of this part apply to Board-regulated institutions that are subject to this subpart. (c) Applicability. (1) A Board-regulated institution that meets the threshold for applicability of this subpart under paragraphs (a)(1) or (2) of this section after the effective date must comply with the requirements of this subpart beginning on the first day of the second calendar quarter after which it meets the thresholds set forth in paragraph (a) of this section. (2) A Board-regulated institution that meets the threshold for applicability of this subpart under paragraph (a)(3) of this section after the effective date must comply with the requirements of this subpart beginning one year after the date it meets the threshold set forth in paragraph (a) of this section. § 249.121 Net stable funding ratio requirement. (a) Calculation of the net stable funding ratio. A Board-regulated institution subject to this subpart must calculate and maintain a net stable funding ratio in accordance with § 249.100 and this subpart. (b) Available stable funding amount. A Board-regulated institution subject to this subpart must calculate its ASF amount in accordance with subpart K of this part. (c) Required stable funding amount. A Board-regulated institution subject to this subpart must calculate its RSF amount in accordance with subpart K of this part, provided, however, that the RSF amount of a Board-regulated institution subject to this subpart equals [70 to 85] percent of the RSF amount calculated in accordance with subpart K of this part.1 1 Under the proposed rule to implement the net stable funding ratio (NSFR), the RSF amount of a Board-regulated institution that is a covered intermediate holding company subject to this part would have equaled 70 percent of the RSF amount calculated in accordance with subpart K of this part. Upon adoption of the final NSFR rule, covered intermediate holding companies would remain subject to this part as proposed in June 1, 2016, until the Board adopts regulations that directly relate to the application of liquidity risk measurement and net stable funding standards to foreign banking organizations. PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 66053 Federal Deposit Insurance Corporation 12 CFR CHAPTER III For the reasons set out in the joint preamble, the FDIC proposes to amend 12 CFR chapter III as follows. PART 324—CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS 25. The authority citation for part 324 continues to read as follows: ■ Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102–233, 105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102–242, 105 Stat. 2236, 2355, as amended by Pub. L. 103–325, 108 Stat. 2160, 2233 (12 U.S.C. 1828 note); Pub. L. 102–242, 105 Stat. 2236, 2386, as amended by Pub. L. 102–550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note); Pub. L. 111–203, 124 Stat. 1376, 1887 (15 U.S.C. 78o–7 note). 26. In § 324.2, add the definitions of Category II FDIC-supervised institution and Category III FDIC-supervised institution, FR Y–9LP, and FR Y–15 in alphabetical order to read as follows: ■ § 324.2 Definitions. * * * * * Category II FDIC-supervised institution means: (1) An FDIC-supervised institution that is a subsidiary of a depository institution holding company that is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or (2) An FDIC-supervised institution that: (i)(A) Has total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Consolidated Report of Condition and Income (Call Report), equal to $700 billion or more. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the FDICsupervised institution has not filed the Call Report for each of the four most recent quarters, total consolidated assets means the average of its total E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66054 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross jurisdictional activity for the four most recent calendar quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (ii) After meeting the criteria in paragraph (2)(i) of this section, an FDICsupervised institution continues to be a Category II FDIC-supervised institution until the FDIC-supervised institution: (A) Has: (1) Less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Has less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a subsidiary of a global systemically important BHC pursuant to 12 CFR 217.402. Category III FDIC-supervised institution means: (1) An FDIC-supervised institution that is a subsidiary of a depository institution holding company that is identified as a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or (2) An FDIC-supervised institution that: (i)(A) Has total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $250 billion or more. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 but less than $250 billion. If the FDICsupervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) At least one of the following, each calculated as the average of the four most recent calendar quarters, or if the FDIC-supervised institution has not filed each applicable reporting form for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: (i) Total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure equal to $75 billion or more. Off-balance sheet exposure is an FDIC-supervised institution’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the FDIC-supervised institution, as reported on the Call Report; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more. (ii) After meeting the criteria in paragraph (2)(i) of this section, an FDICsupervised institution continues to be a Category III FDIC-supervised institution until the FDIC-supervised institution: (A) Has: (1) Less than $250 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (2) Less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Less than $75 billion in off-balance sheet exposure for each of the four most recent calendar quarters. Off-balance sheet exposure is a FDIC-supervised institution’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the FDIC-supervised institution, as reported on the Call Report; or PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 (B) Has Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (C) Is a Category II FDIC-supervised institution; or (D) Is a subsidiary of a global systemically important BHC pursuant to 12 CFR 217.402. * * * * * FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * ■ 27. In § 324.10, revise paragraphs (a)(5), (c), and (c)(4)(i) introductory text to read as follows: § 324.10 Minimum capital requirements. (a) * * * (5) For advanced approaches FDICsupervised institutions or, for Category III FDIC-supervised institutions, a supplementary leverage ratio of 3 percent. * * * * * (c) Advanced approaches capital ratio calculations. An advanced approaches FDIC-supervised institution that has completed the parallel run process and received notification from the FDIC pursuant to § 324.121(d) must determine its regulatory capital ratios as described in paragraphs (c)(1) through (3) of this section. An advanced approaches FDICsupervised institution must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the FDIC-supervised institution meets any of the criteria in § 324.100(b)(1). A Category III FDICsupervised institution must determine its supplementary leverage ratio in accordance with paragraph (c)(4) of this section, beginning with the calendar quarter immediately following the quarter in which the FDIC-supervised institution is identified as a Category III FDIC-supervised institution. * * * * * (4) Supplementary leverage ratio. (i) An advanced approaches FDICsupervised institution’s or a Category III FDIC-supervised institution’s supplementary leverage ratio is the ratio of its tier 1 capital to total leverage exposure, the latter which is calculated as the sum of: * * * * * ■ 28. In § 324.11, revise paragraphs (b)(1) and (b)(1)(ii) as follows: § 324.11 Capital conservation buffer and countercyclical capital buffer amount. * E:\FR\FM\21DEP4.SGM * * 21DEP4 * * Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules (b) Countercyclical capital buffer amount—(1) General. An advanced approaches FDIC-supervised institution or a Category III FDIC-supervised institution must calculate a countercyclical capital buffer amount in accordance with the following paragraphs for purposes of determining its maximum payout ratio under Table 1 to § 324.11. * * * * * (ii) Amount. An advanced approaches FDIC-supervised institution or a Category III FDIC-supervised institution has a countercyclical capital buffer amount determined by calculating the weighted average of the countercyclical capital buffer amounts established for the national jurisdictions where the FDIC-supervised institution’s private sector credit exposures are located, as specified in paragraphs (b)(2) and (3) of this section. * * * * * ■ 29. In § 324.100, paragraph (b)(1) is revised to read as follows: § 324.100 Purpose, applicability, and principle of conservatism. * * * * * (b) Applicability. (1) This subpart applies to an FDIC-supervised institution that: (i) Is a subsidiary of a global systemically important BHC pursuant to 12 CFR 217.402; (ii) Is a Category II FDIC-supervised institution; (iii) Is a subsidiary of a depository institution that uses 12 CFR part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate its riskbased capital requirements; (iv) Is a subsidiary of a bank holding company or savings and loan holding company that uses 12 CFR part 217, subpart E, to calculate its risk-based capital requirements; or (v) Elects to use this subpart to calculate its total risk-weighted assets. * * * * * PART 329—LIQUIDITY RISK MEASUREMENT STANDARDS 30. The authority citation for part 329 continues to read as follows: amozie on DSK3GDR082PROD with PROPOSALS4 ■ Authority: 12 U.S.C. 1815, 1816, 1818, 1819, 1828, 1831p–1, 5412. 31. In § 329.1, paragraphs (b)(1) and (2) are revised to read as follows: ■ § 329.1 Purpose and applicability. * * * * * (b) Applicability of Minimum Liquidity Standards. (1) An FDICsupervised institution is subject to the VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 minimum liquidity standard and other requirements of this part if: (i) It is a GSIB FDIC-supervised institution, Category II FDIC-supervised institution or a Category III FDICsupervised institution; (ii) It is an FDIC-supervised institution that has total consolidated assets equal to $10 billion or more, as reported on the most recent year-end Call Report, and it is a consolidated subsidiary of a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated total consolidated assets as of the most recent year end, calculated in accordance with the instructions to the FR Y–9C; or (2) Call Report; or (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); or (iii) It is an FDIC-supervised institution for which the FDIC has determined that application of this part is appropriate in light of the FDICsupervised institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (2)(i) An FDIC-supervised institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(i) of this section must comply with the requirements of this part beginning on the first day of the second calendar quarter after which the FDIC-supervised institution becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) An FDIC-supervised institution must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month, PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 66055 for the first three calendar quarters after the FDIC-supervised institution begins complying with the minimum liquidity standard and other requirements of this part; (B) Beginning one year after the first year in which the FDIC-supervised institution becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(i) of this section, and thereafter, the FDIC-supervised institution must calculate and maintain a liquidity coverage ratio on each calculation date; (ii) An FDIC-supervised institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(ii) of this section after September 30, 2014, must comply with the requirements of this part beginning on April 1 of the year in which the FDIC-supervised institution becomes subject to the minimum liquidity standard and other requirements of this part, except: (A) From April 1 to December 31 of the year in which the FDIC-supervised institution becomes subject to the minimum liquidity standard and other requirements of this part, the FDICsupervised institution must calculate and maintain a liquidity coverage ratio monthly, on each calculation date that is the last business day of the applicable calendar month; and (B) Beginning January 1 of the year after the first year in which the FDICsupervised institution becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1) of this section, and thereafter, the FDIC-supervised institution must calculate and maintain a liquidity coverage ratio on each calculation date; and (iii) An FDIC-supervised institution that becomes subject to the minimum liquidity standard and other requirements of this part under paragraph (b)(1)(iii) of this section after September 30, 2014, must comply with the requirements of this part subject to a transition period specified by the FDIC. * * * * * ■ 32. In § 329.3, add the definitions of Average weighted short-term wholesale funding, Call Report, Category II Boardregulated institution, Category III Boardregulated institution, Covered intermediate holding company, FR Y– 9LP, FR Y–15, Global systemically important BHC, and GSIB FDICsupervised institution in alphabetical order to read as follows: E:\FR\FM\21DEP4.SGM 21DEP4 66056 § 329.3 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Definitions. amozie on DSK3GDR082PROD with PROPOSALS4 * * * * * Average weighted short-term wholesale funding has the same meaning as in 12 CFR 252.2. * * * * * Call Report means the Consolidated Reports of Condition and Income. Category II FDIC-supervised institution means: (1) An FDIC-supervised institution that is a consolidated subsidiary of a company that is identified as a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 and has total consolidated assets, calculated based on the average of the FDICsupervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (1), an FDICsupervised institution continues to be a Category II FDIC-supervised institution until the FDIC-supervised institution has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the FDICsupervised institution is no longer a consolidated subsidiary of a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10; or (2) An FDIC-supervised institution that: (i)(A) Has total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Consolidated Report of Condition and Income (Call Report), equal to $700 billion or more. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, of $100 billion or more but less than $700 billion. If the FDICsupervised institution has not filed the Call Report for each of the four most VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) Cross-jurisdictional activity, calculated based on the average of its cross-jurisdictional activity for the four most recent calendar quarters, of $75 billion or more. Cross-jurisdictional activity is the sum of crossjurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (ii) After meeting the criteria in paragraph (2)(i) of this section, an FDICsupervised institution continues to be a Category II FDIC-supervised institution until the FDIC-supervised institution has: (A)(1) Less than $700 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; and (2) Less than $75 billion in crossjurisdictional activity for each of the four most recent calendar quarters. Cross-jurisdictional activity is the sum of cross-jurisdictional claims and crossjurisdictional liabilities, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form; (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; or (C) Is a GSIB FDIC-supervised institution. Category III FDIC-supervised institution means: (1) An FDIC-supervised institution that is a consolidated subsidiary of a company that is identified as a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable and has total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report, equal to $10 billion or more. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable. After meeting the criteria under this paragraph (1), an FDICsupervised institution continues to be a Category III FDIC-supervised institution until the FDIC-supervised institution has less than $10 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters, or the FDICsupervised institution is no longer a PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10; or (2) An FDIC-supervised institution that: (i)(A) Has total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets in the four most recent quarters as reported quarterly on the most recent Call Report, equal to $250 billion or more. If the FDICsupervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; or (B) Has: (1) Total consolidated assets, calculated based on the average of the FDIC-supervised institution’s total consolidated assets in the four most recent calendar quarters as reported quarterly on the most recent Call Report, of at least $100 billion but less than $250 billion. If the FDIC-supervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent quarter or quarters, as applicable; and (2) One or more of the following, each measured as the average of the four most recent quarters, or if the FDICsupervised institution has not filed each applicable reporting form for each of the four most recent calendar quarters, for the most recent quarter or quarters, as applicable: (i) Total nonbank assets, calculated in accordance with instructions to the FR Y–9LP or equivalent reporting form, equal to $75 billion or more; (ii) Off-balance sheet exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the FDICsupervised institution, as reported on the Call Report, equal to $75 billion or more; or (iii) Weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, equal to $75 billion or more; (ii) After meeting the criteria in paragraph (2)(i) of this section, an FDICsupervised institution continues to be a Category III FDIC-supervised institution until the FDIC-supervised institution has: (A)(1) Less than $250 billion in total consolidated assets, as reported on the E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Call Report, for each of the four most recent calendar quarters; (2) Less than $75 billion in total nonbank assets, calculated in accordance with the instructions to the FR Y–9LP or equivalent reporting form, for each of the four most recent calendar quarters; (3) Less than $75 billion in weighted short-term wholesale funding, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, for each of the four most recent calendar quarters; and (4) Less than $75 billion in off-balance sheet exposure for each of the four most recent calendar quarters. Off-balance sheet exposure is an FDIC-supervised institution’s total exposure, calculated in accordance with the instructions to the FR Y–15 or equivalent reporting form, minus the total consolidated assets of the FDIC-supervised institution, as reported on the Call Report; or (B) Less than $100 billion in total consolidated assets, as reported on the Call Report, for each of the four most recent calendar quarters; (C) Is a Category II FDIC-supervised institution; or (D) Is a GSIB FDIC-supervised institution. * * * * * Covered intermediate holding company means a U.S. intermediate holding company that: (1) Was established or designated by a foreign banking organization pursuant to 12 CFR 252.153; and (2) Is a bank holding company or savings and loan holding company. * * * * * FR Y–15 means the Banking Organization Systemic Risk Report. FR Y–9LP means the Parent Company Only Financial Statements for Large Holding Companies. * * * * * Global systemically important BHC means a bank holding company identified as a global systemically important BHC pursuant to 12 CFR 217.402. GSIB FDIC-supervised institution means an FDIC-supervised institution that is a consolidated subsidiary of a global systemically important BHC and has total consolidated assets equal to $10 billion or more, calculated based on the average of the depository institution’s total consolidated assets for the four most recent calendar quarters as reported on the Call Report. If the FDICsupervised institution has not filed the Call Report for each of the four most recent calendar quarters, total consolidated assets means the average of its total consolidated assets, as reported on the Call Report, for the most recent calendar quarter or quarters, as applicable. After meeting the criteria under this definition, an FDICsupervised institution continues to be a GSIB FDIC-supervised institution until the depository institution has less than $10 billion in total consolidated assets, 66057 as reported on the Call Report, for each of the four most recent calendar quarters, or the FDIC-supervised institution is no longer a consolidated subsidiary of a global systemically important BHC. * * * * * ■ 33. In § 329.30, paragraph (a) is revised to read as follows: § 329.30 Total net cash outflow amount. (a) Calculation of total net cash outflow amount. As of the calculation date, an FDIC-supervised institution’s total net cash outflow amount equals the FDIC-supervised institution’s outflow adjustment percentage as determined under paragraph (c) of this section multiplied by: (1) The sum of the outflow amounts calculated under § 329.32(a) through (l); minus (2) The lesser of: (i) The sum of the inflow amounts calculated under § 329.33(b) through (g); and (ii) 75 percent of the amount calculated under paragraph (a)(1) of this section; plus (3) The maturity mismatch add-on as calculated under paragraph (b) of this section. * * * * * ■ 34. In § 329.30, paragraph (c) is added to read as follows: (c) Outflow adjustment percentage. A FDIC-supervised institution’s outflow adjustment percentage is determined pursuant to Table 1 to § 329.30. TABLE 1 TO § 329.30—OUTFLOW ADJUSTMENT PERCENTAGES Outflow adjustment percentage amozie on DSK3GDR082PROD with PROPOSALS4 GSIB FDIC-supervised institution ............................................................................................................................................ Category II FDIC-supervised institution ................................................................................................................................... Category III FDIC-supervised institution that: ......................................................................................................................... (1) Is a consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with $75 billion or more in average weighted short-term wholesale funding; or (2) Has $75 billion or more in average weighted short-term wholesale funding and is not consolidated under a holding company Category III FDIC-supervised institution that: ......................................................................................................................... (1) Is a consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with less than $75 billion in average weighted short-term wholesale funding; or (2) Has less than $75 billion in average weighted short-term wholesale funding and is not consolidated under a holding company FDIC-supervised institution that is described in § 329.1(b)(1)(ii) ............................................................................................ * * * * * [Re-Proposal of Net Stable Funding Ratio’s Applicability] PART 329—LIQUIDITY RISK MEASUREMENT STANDARDS 35. In § 329.1, add paragraph (c) to read as follows: ■ VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 § 329.1 Purpose and applicability. * * * * * (c) Applicability of the minimum stable funding standard. (1) An FDICsupervised institution is subject to the minimum stable funding standard and other requirements of subparts K through M if: PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 100 100 100 [70 to 85] 100 (i) It is a GSIB FDIC-supervised institution, Category II FDIC-supervised institution, Category III FDIC-supervised institution that is the consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with $75 billion or more in average weighted short-term wholesale funding, or a Category III E:\FR\FM\21DEP4.SGM 21DEP4 amozie on DSK3GDR082PROD with PROPOSALS4 66058 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules FDIC-supervised institution with $75 billion or more in average weighted short-term wholesale funding that is not consolidated under a holding company; or (ii) It is an FDIC-supervised institution that has total consolidated assets equal to $10 billion or more, as reported on the most recent year-end Call Report, and is a consolidated subsidiary of a covered intermediate holding company that: (A) Has total consolidated assets of $250 billion or more, as reported on the most recent year-end (as applicable): (1) Consolidated Financial Statements for Holding Companies reporting form (FR Y–9C), or, if the covered intermediate holding company is not required to report on the FR Y–9C, its estimated consolidated assets as of the most recent year end, calculated in accordance with the instructions to the FR Y–9C; (2) Call Report; or (B) Has total consolidated on-balance sheet foreign exposure at the most recent year-end equal to $10 billion or more (where total on-balance sheet foreign exposure equals total crossborder claims less claims with a head office or guarantor located in another country plus redistributed guaranteed amounts to the country of the head office or guarantor plus local country claims on local residents plus revaluation gains on foreign exchange and derivative transaction products, calculated in accordance with the Federal Financial Institutions Examination Council (FFIEC) 009 Country Exposure Report); (iii) It is a Category III FDICsupervised institution that meets the criteria in § 329.120(a) but does not meet the criteria in paragraph (c)(1)(i) of this section, and is subject to the requirements of this part in accordance with subpart M of this part; (iv) The FDIC has determined that application of this part is appropriate in light of the FDIC-supervised institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (2)(i) An FDIC-supervised institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraph (c)(1)(i) of this section on the effective date, must comply with the requirements of these subparts beginning on the first day of the second calendar quarter after which the FDIC-supervised institution becomes subject to the minimum stable VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 funding standard and other requirements of this part. (ii) An FDIC-supervised institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraph (c)(1)(ii) of this section after the effective date must comply with the requirements of subparts K through M of this part beginning on April 1 of the year in which the FDIC-supervised institution becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part: and (iii) An FDIC-supervised institution that becomes subject to the minimum stable funding standard and other requirements of subparts K through M of this part under paragraph (c)(1)(iv) of this section after the effective date must comply with the requirements of subparts K through M of this part on the date specified by the FDIC. (3) Subparts K through M of this part do not apply to: (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), or a subsidiary of a bridge financial company; or (ii) A new depository institution or a bridge depository institution, as defined in 12 U.S.C. 1813(i). (4) An FDIC-supervised institution subject to a minimum stable funding standard under this part shall remain subject until the FDIC determines in writing that application of this part to the FDIC-supervised institution is not appropriate in light of the FDICsupervised institution’s asset size, level of complexity, risk profile, scope of operations, affiliation with foreign or domestic covered entities, or risk to the financial system. (5) In making a determination under paragraphs (c)(1)(iv) or (c)(4) of this section, the FDIC will apply, as appropriate, notice and response procedures in the same manner and to the same extent as the notice and response procedures set forth in 12 CFR 324.5. * * * * * ■ 36. Add subpart M to part 329 to read as follows: Subpart M—Net Stable Funding Ratio for FDIC-Supervised Institutions Sec. 329.120 Applicability. 329.121 Net stable funding ratio requirement. PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 Subpart M—Net Stable Funding Ratio for FDIC-Supervised Institutions § 329.120 Applicability. (a) Scope. This subpart applies to an FDIC-supervised institution that: (1) Is a Category III FDIC-supervised institution that is a consolidated subsidiary of a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 with less than $75 billion in average weighted short-term wholesale funding; or (2) Is a Category III FDIC-supervised institution with less than $75 billion in average weighted short-term wholesale funding that is not consolidated under a holding company. (b) Applicable provisions. Except as otherwise provided in this subpart, the provisions of subparts A, K, and L of this part apply to FDIC-supervised institutions that are subject to this subpart. (c) Applicability. An FDIC-supervised institution that meets the threshold for applicability of this subpart under paragraph (a) of this section after the effective date must comply with the requirements of this subpart beginning on the first day of the second calendar quarter after which it meets the thresholds set forth in paragraph (a) of this section. § 329.121 Net stable funding ratio requirement. (a) Calculation of the net stable funding ratio. An FDIC-supervised institution subject to this subpart must calculate and maintain a net stable funding ratio in accordance with § 329.100 and this subpart. (b) Available stable funding amount. An FDIC-supervised institution subject to this subpart must calculate its ASF amount in accordance with subpart K of this part. (c) Required stable funding amount. An FDIC-supervised institution subject to this subpart must calculate its RSF amount in accordance with subpart K of this part, provided, however, that the RSF amount of an FDIC-supervised institution subject to this subpart equals [70 to 85] percent of the RSF amount calculated in accordance with subpart K of this part. Dated: October 30, 2018. Joseph M. Otting, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, November 30, 2018. Yao Chin-Chao, Assistant Secretary of the Board. Dated at Washington, DC, on November 20, 2018. By order of the Board of Directors. E:\FR\FM\21DEP4.SGM 21DEP4 Federal Register / Vol. 83, No. 245 / Friday, December 21, 2018 / Proposed Rules Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. 2018–27177 Filed 12–20–18; 8:45 am] amozie on DSK3GDR082PROD with PROPOSALS4 BILLING CODE 4810–33–P 6210–01–P 6714–01–P VerDate Sep<11>2014 00:38 Dec 21, 2018 Jkt 247001 PO 00000 Frm 00037 Fmt 4701 Sfmt 9990 E:\FR\FM\21DEP4.SGM 21DEP4 66059

Agencies

[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Proposed Rules]
[Pages 66024-66059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27177]



[[Page 66023]]

Vol. 83

Friday,

No. 245

December 21, 2018

Part VII





Department of the Treasury





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Office of the Comptroller of the Currency





Federal Reserve System





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Federal Deposit Insurance Corporation





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12 CFR Parts 3, 50, 217, et al.





Proposed Changes to Applicability Thresholds for Regulatory Capital and 
Liquidity Requirements; Proposed Rule

Federal Register / Vol. 83 , No. 245 / Friday, December 21, 2018 / 
Proposed Rules

[[Page 66024]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 3 and 50

[Docket ID OCC-2018-0037]
RIN 1557-AE56

FEDERAL RESERVE SYSTEM

12 CFR Parts 217 and 249

[Docket No. R-1628]
RIN 7100-AF21

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 324 and 329

RIN 3064-AE96


Proposed Changes to Applicability Thresholds for Regulatory 
Capital and Liquidity Requirements

AGENCY: Office of the Comptroller of the Currency, Treasury; the Board 
of Governors of the Federal Reserve System; and the Federal Deposit 
Insurance Corporation.

ACTION: Notice of proposed rulemaking with request for public comment.

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SUMMARY: The Office of the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, and the Federal Deposit 
Insurance Corporation (collectively, the agencies) are inviting comment 
on a proposal that would establish risk-based categories for 
determining applicability of requirements under the regulatory capital 
rule, the liquidity coverage ratio rule, and the proposed net stable 
funding ratio rule for large U.S. banking organizations. The proposal 
would establish four categories of standards and apply tailored capital 
and liquidity requirements for banking organizations subject to each 
category. The proposal is consistent with a separate proposal issued by 
the Board that would apply certain prudential standards for large U.S. 
banking organizations based on the same categories. The proposal would 
not amend the capital and liquidity requirements currently applicable 
to an intermediate holding company of a foreign banking organization or 
its subsidiary depository institutions. This proposal also would not 
amend the requirements applicable to Federal branches or agencies of 
foreign banking organizations.

DATES: Comments must be received by January 22, 2019.

ADDRESSES: Comments should be directed to: OCC: You may submit comments 
to the OCC by any of the methods set forth below. Commenters are 
encouraged to submit comments through the Federal eRulemaking Portal or 
email, if possible. Please use the title ``Proposed Changes to 
Thresholds Applicable to Regulatory Capital and Liquidity 
Requirements'' to facilitate the organization and distribution of the 
comments. You may submit comments by any of the following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
www.regulations.gov. Enter ``Docket ID OCC-2018-0037'' in the Search 
Box and click ``Search.'' Click on ``Comment Now'' to submit public 
comments. Click on the ``Help'' tab on the Regulations.gov home page to 
get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: regs.comments@occ.treas.gov.
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-
218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2018-0037'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov website without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to 
www.regulations.gov. Enter ``Docket ID OCC-2018-0037'' in the Search 
box and click ``Search.'' Click on ``Open Docket Folder'' on the right 
side of the screen and then ``Comments.'' Comments and supporting 
materials can be filtered by clicking on ``View all documents and 
comments in this docket'' and then using the filtering tools on the 
left side of the screen. Click on the ``Help'' tab on the 
Regulations.gov home page to get information on using Regulations.gov. 
The docket may be viewed after the close of the comment period in the 
same manner as during the comment period.
     Viewing Comments Personally: You may personally inspect 
comments at the OCC, 400 7th Street SW, Washington, DC 20219. For 
security reasons, the OCC requires that visitors make an appointment to 
inspect comments. You may do so by calling (202) 649-6700 or, for 
persons who are hearing impaired, TTY, (202) 649-5597. Upon arrival, 
visitors will be required to present valid government-issued photo 
identification and submit to security screening in order to inspect 
comments.
    Board: You may submit comments, identified by Docket No. R-1628, by 
any of the following methods:
     Agency Website: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, 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 website at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or 
to remove personally identifiable information at the commenter's 
request. Accordingly, comments will not be edited to remove any 
identifying or contact information. Public comments may also be viewed 
electronically or in paper in Room 3515, 1801 K Street NW (between 18th 
and 19th Streets NW), between 9:00 a.m. and 5:00 p.m. on weekdays.
    FDIC: You may submit comments, identified by RIN 3064-AE96, by any 
of the following methods:
     Agency Website: https://www.FDIC.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on 
the Agency website.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW, Washington, DC 20429.
     Hand Delivered/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street Building (located 
on F Street) on

[[Page 66025]]

business days between 7:00 a.m. and 5:00 p.m.
     Email: comments@FDIC.gov. Include RIN 3064-AE96 on the 
subject line of the message.
     Public Inspection: All comments received must include the 
agency name and RIN 3064-AE96 for this rulemaking. All comments 
received will be posted without change to https://www.fdic.gov/regulations/laws/federal/, including any personal information provided. 
Paper copies of public comments may be ordered from the FDIC Public 
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, 
VA 22226 by telephone at (877) 275-3342 or (703) 562-2200.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Mark Ginsberg, Senior Risk Expert, or Venus Fan, Risk Expert, 
Capital and Regulatory Policy, (202) 649-6370; James Weinberger, 
Technical Expert, Treasury & Market Risk Policy, (202) 649-6360; or 
Carl Kaminski, Special Counsel, Henry Barkhausen, Counsel, or Daniel 
Perez, Attorney, Chief Counsel's Office, (202) 649-5490, or for persons 
who are hearing impaired, TTY, (202) 649-5597, Office of the 
Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
    Board: Constance M. Horsley, Deputy Associate Director, (202) 452-
5239; Elizabeth MacDonald, Manager, (202) 475-6216; Brian Chernoff, 
Senior Supervisory Financial Analyst, (202) 452-2952; Sean Healey, 
Supervisory Financial Analyst, (202) 912-4611; Matthew McQueeney, 
Supervisory Financial Analyst (202) 452-2942; Christopher Powell, 
Supervisory Financial Analyst, (202) 452-3442, Division of Supervision 
and Regulation; or Benjamin McDonough, Assistant General Counsel (202) 
452-2036; Asad Kudiya, Counsel, (202) 475-6358; Mary Watkins, Senior 
Attorney (202) 452-3722; Alyssa O'Connor, Attorney, (202) 452-3886, 
Legal Division, Board of Governors of the Federal Reserve System, 20th 
and C Streets NW, Washington, DC 20551. For the hearing impaired only, 
Telecommunication Device for the Deaf (TDD), (202) 263-4869.
    FDIC: Benedetto Bosco, Chief, Capital Policy Section, 
bbosco@fdic.gov; Stephanie Lorek, Senior Policy Analyst, 
slorek@fdic.gov; Michael Maloney, Senior Policy Analyst, 
mmaloney@fdic.gov; regulatorycapital@fdic.gov; Michael E. Spencer, 
Chief, Capital Markets Strategies Section, michspencer@fdic.gov; Eric 
W. Schatten, Senior Policy Analyst, eschatten@fdic.gov; Andrew D. 
Carayiannis, Senior Policy Analyst, acarayiannis@fdic.gov; Capital 
Markets Branch, Division of Risk Management Supervision, (202) 898-
6888; Michael Phillips, Acting Supervisory Counsel, mphillips@fdic.gov; 
Catherine Wood, Counsel, cawood@fdic.gov; Suzanne Dawley, Counsel, 
sudawley@fdic.gov; Andrew B. Williams II, Counsel, 
andwilliams@fdic.gov; Catherine Topping, Counsel, ctopping@fdic.gov; or 
Alexander Bonander, Attorney, abonander@fdic.gov; Supervision and 
Legislation Branch, Legal Division, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background and Summary of Proposal
II. Proposal
    A. Scope of Application
    B. Scoping Criteria for Proposed Categories
    1. Size
    2. Other Risk-Based Indicators
    a. Cross-Jurisdictional Activity
    b. Weighted Short-Term Wholesale Funding
    c. Nonbank Assets
    d. Off-Balance Sheet Exposure
    3. Alternative Scoping Criteria
    4. Determination of Applicable Category of Standards
    C. Proposed Regulatory Framework
    1. Category I Standards
    2. Category II Standards
    3. Category III Standards
    4. Category IV Standards
III. Impact Analysis
IV. Administrative Law Matters
    A. Paperwork Reduction Act
    B. Regulatory Flexibility Act Analysis
    C. Plain Language
    D. OCC Unfunded Mandates Reform Act of 1995 Determination
    E. Riegle Community Development and Regulatory Improvement Act 
of 1994

I. Background and Summary of Proposal

    In 2013, the Office of the Comptroller of the Currency (OCC), the 
Board of Governors of the Federal Reserve System (Board), and the 
Federal Deposit Insurance Corporation (FDIC) (collectively, the 
agencies) adopted a revised regulatory capital rule (capital rule) 
that, among other things, addressed weaknesses in the regulatory 
framework that became apparent in the 2007-2009 financial crisis.\1\ 
The capital rule strengthened the capital requirements applicable to 
banking organizations \2\ supervised by the agencies by improving both 
the quality and quantity of regulatory capital and increasing the risk-
sensitivity of capital requirements. In addition, to improve the 
banking sector's resiliency to liquidity stress and to improve the 
ability of large and internationally active banking organizations to 
monitor and manage liquidity risk, the agencies adopted the liquidity 
coverage ratio (LCR) rule in 2014,\3\ and the Board implemented 
enhanced liquidity standards \4\ for the largest depository institution 
holding companies. Companies subject to the LCR rule must maintain an 
amount of high-quality liquid assets (HQLA) equal to or greater than 
their projected total net cash outflows over a prospective 30 calendar-
day period.\5\ Finally, on June 1, 2016, the agencies invited comment 
on a proposed rule to implement a net stable funding ratio (NSFR) 
requirement.\6\ The proposed NSFR rule would establish a quantitative 
metric to measure and help ensure the stability of the funding profile 
of a banking organization over a one-year time horizon.
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    \1\ Covered intermediate holding companies shall remain subject 
to this part as in effect on October 31, 2018, until the Board 
amends the liquidity risk measurement standards applicable to the 
subsidiaries of foreign banking organizations in effect on October 
31, 2018.
    \2\ Banking organizations subject to the agencies' capital rule 
include national banks, state member banks, insured state nonmember 
banks, savings associations, and top-tier bank holding companies and 
savings and loan holding companies domiciled in the United States 
not subject to the Board's Small Bank Holding Company and Savings 
and Loan Holding Company Policy Statement (12 CFR part 225, appendix 
C, and 12 CFR 238.9), excluding certain savings and loan holding 
companies that are substantially engaged in insurance underwriting 
or commercial activities or that are estate trusts, and bank holding 
companies and savings and loan holding companies that are employee 
stock ownership plans.
    \3\ See 79 FR 61440 (October 10, 2014), codified at 12 CFR part 
50 (OCC), 12 CFR part 249 (Board), and 12 CFR part 329 (FDIC).
    \4\ These enhanced liquidity standards require a bank holding 
company to establish and maintain robust liquidity risk management 
practices, perform internal stress tests for determining the 
adequacy of their liquidity resources, and maintain a buffer of 
highly liquid assets to cover cash flow needs under stress. See 12 
CFR part 252.
    \5\ For depository institution holding companies with $50 
billion or more, but less than $250 billion, in total consolidated 
assets and less than $10 billion in on-balance sheet foreign 
exposure, the Board separately adopted a modified LCR requirement, 
described further below. 12 CFR 249 subpart G.
    \6\ ``Net Stable Funding Ratio: Liquidity Risk Measurement 
Standards and Disclosure Requirements; Proposed Rule,'' 81 FR 35124 
(June 1, 2016). For depository institution holding companies with 
$50 billion or more, but less than $250 billion, in total 
consolidated assets and less than $10 billion in total on-balance 
sheet foreign exposure, the Board separately proposed a modified 
NSFR requirement.
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    Many of the agencies' current rules, including the capital rule, 
the LCR rule, and the proposed NSFR rule, differentiate among banking 
organizations based on one or more risk indicators, such as total asset 
size and foreign exposure. Specifically, the capital rule categorizes 
banking organizations into two groups: (i)

[[Page 66026]]

Banking organizations subject solely to the generally applicable risk-
based capital rules, which have total consolidated assets of less than 
$250 billion and total on-balance sheet foreign exposure of less than 
$10 billion (standardized approach banking organizations),\7\ and (ii) 
banking organizations with $250 billion or more in total consolidated 
assets or $10 billion or more in total on-balance sheet foreign 
exposure, together with depository institution subsidiaries of banking 
organizations meeting those thresholds (advanced approaches banking 
organizations).\8\ Standardized approach banking organizations must 
calculate risk-weighted assets using the standardized approach \9\ and 
calculate a leverage ratio that measures regulatory capital relative to 
on-balance sheet assets. Advanced approaches banking organizations must 
use both the internal models-based advanced approaches and the 
standardized approach to determine their risk-based capital ratios. 
They also must calculate a supplementary leverage ratio, which measures 
regulatory capital relative to on-balance sheet and certain off-balance 
sheet exposures, in addition to the leverage ratio described above. In 
addition, when calculating their regulatory capital levels, advanced 
approaches banking organizations are required to include most elements 
of accumulated other comprehensive income (AOCI) in regulatory capital, 
which better reflects the loss-absorbing capacity of a banking 
organization at a specific point in time, but can also result in 
regulatory capital volatility and require more sophisticated capital 
planning and asset-liability management.
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    \7\ See 12 CFR part 217, subparts D & E (Board); 12 CFR part 3 
(OCC), Subparts D & E; 12 CFR part 324, subparts D & E (FDIC).
    \8\ See 12 CFR 217.1(c), 12 CFR 217.100(b) (Board); 12 CFR 
3.1(c), 12 CFR 3.100(b) (OCC); 12 CFR 324.1(c), 12 CFR 324.100(b) 
(FDIC). U.S. global systemically important bank holding companies 
(GSIBs) form a sub-category of advanced approaches banking 
organizations.
    \9\ Also referred to as the ``generally applicable'' risk-based 
capital requirements.
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    Additional capital requirements apply to U.S. GSIBs beyond those 
applicable to advanced approaches banking organizations, which are 
intended to increase their resiliency as the largest, most 
interconnected and systemically risky banking organizations. First, a 
risk-based capital surcharge applies to U.S. GSIBs at the top-tier bank 
holding company level, calibrated to reflect their systemic footprint. 
Second, an enhanced supplementary leverage ratio standard applies to 
U.S. GSIBs and their insured depository institution subsidiaries.\10\
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    \10\ The FDIC and OCC apply an enhanced supplementary leverage 
ratio standard to insured depository institution subsidiaries of 
U.S. top-tier bank holding companies with more than $700 billion in 
total consolidated assets or more than $10 trillion in total assets 
under custody, while the Board's regulation applies these 
requirements to insured depository institution subsidiaries of U.S. 
GSIBs. There is currently no difference between the holding 
companies identified by these regulations, and the OCC has proposed 
to amend its regulation to reference the Board's U.S. GSIB 
definition. See Regulatory Capital Rules: Regulatory Capital, 
Enhanced Supplementary Leverage Ratio Standards for U.S. Global 
Systemically Important Bank Holding Companies and Certain of Their 
Subsidiary Insured Depository Institutions; Total Loss-Absorbing 
Capacity Requirements for U.S. Global Systemically Important Bank 
Holding Companies, 83 FR 17317 (proposed April 19, 2018).
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    With respect to the liquidity rules, the LCR rule also 
distinguishes between banking organizations based on total asset size 
and foreign exposure. The full LCR requirement generally applies to 
banking organizations that meet the advanced approaches thresholds and 
to their subsidiary depository institutions with total consolidated 
assets of $10 billion or more.\11\ The Board's regulations also apply a 
less stringent, modified LCR requirement to depository institution 
holding companies that do not meet the advanced approaches thresholds 
but have more than $50 billion in total consolidated assets. The 
proposed NSFR requirement would apply to the same banking organizations 
as the current LCR requirement. Similarly, under the NSFR proposal, the 
Board proposed to apply a less stringent, modified NSFR requirement to 
the same depository institution holding companies that are subject to 
the modified LCR requirement.
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    \11\ See 12 CFR 249.1.
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    The scoping criteria of the regulations described above rely on a 
definition of advanced approaches banking organization that the 
agencies introduced in 2007 in connection with the adoption of the 
advanced approaches risk-based capital rule. The thresholds established 
by the definition were designed to include the largest and most 
internationally active banking organizations. In implementing the 
liquidity rules, the agencies relied on these same thresholds, 
recognizing the applicable banking organizations have balance sheet 
compositions, off-balance sheet activities, and funding profiles that 
lead to larger and more complex liquidity profiles.
    The agencies are proposing modifications to their capital and 
liquidity rules that would revise the criteria for determining the 
prudential standards that apply to large banking organizations 
operating in the United States (the proposal).\12\ Specifically, the 
agencies are proposing to (i) amend the scope of certain aspects of the 
regulatory capital rule and the LCR rule; and (ii) re-propose the scope 
of the NSFR rule. The proposal would update the current regulatory 
distinction between advanced approaches and standardized approach 
banking organizations and further tailor the capital and liquidity 
requirements applicable to large banking organizations according to 
risk-based indicators. Specifically, for banking organizations with 
total consolidated assets of $100 billion or more, the proposal would 
establish four categories of standards based on size, cross-
jurisdictional activity, weighted short-term wholesale funding, off-
balance sheet exposure, and nonbank assets. Section II.B of this 
Supplementary Information section below discusses the proposed scoping 
criteria for each of these categories, and section II.C describes the 
capital and liquidity requirements proposed for each category of 
standards.\13\
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    \12\ This proposal is part of the agencies' ongoing effort to 
review their respective capital and liquidity requirements to 
determine how best to tailor their application based on the size, 
complexity, and overall risk profile of banking organizations. 
Consistent with these efforts, the agencies also intend to issue a 
proposal to implement section 201 of the Economic Growth, Regulatory 
Relief, and Consumer Protection Act (EGRRCPA), which requires the 
agencies to revise the capital requirements applicable to certain 
banking organizations with less than $10 billion in total 
consolidated assets. See Public Law 115-174, 132 Stat. 1296 (2018).
    \13\ Separately, the Board is requesting comment on a proposed 
rule (the Board-only proposal) that would tailor certain prudential 
standards for large domestic banking organizations based on the same 
categories. In particular, and consistent with section 401 of 
EGRRCPA, the Board-only proposal would further tailor the 
application of existing prudential standards relating to liquidity, 
risk management, stress testing, and single-counterparty credit 
limits. In order to appropriately tailor the prudential 
requirements, the Board-only proposal incorporates the four 
categories of prudential standards for banking organizations 
described in this proposal. In addition, the Board-only proposal 
would apply prudential standards to certain large savings and loan 
holding companies (other than those substantially engaged in 
insurance underwriting or commercial activities), using the same 
categories, to further their safety and soundness. The agencies 
encourage commenters to review this proposal together with the 
Board-only proposal.
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    The agencies note that there are currently additional outstanding 
notices of proposed rulemaking that make reference to the advanced 
approaches thresholds to set the scope of application, relating to 
simplifications to the agencies' capital rule (issued October 2017) 
\14\ and a standardized approach to calculating derivative

[[Page 66027]]

exposures (issued October 2018).\15\ For purposes of considering and 
commenting on those pending notices, the requirements that would apply 
to ``advanced approaches banking organizations'' under those notices of 
proposed rulemaking would be included as Category I and II standards 
under this proposal. For purposes of considering and commenting on 
those pending notices, the requirements that would apply to ``advanced 
approaches banking organizations'' under those outstanding notices of 
proposed rulemaking would be included as Category I and II standards 
under this proposal. Furthermore, the agencies note that they are still 
considering amendments to their capital rule that would take into 
account final Basel III reforms adopted by the Basel Committee on 
Banking Supervision (BCBS) in December of 2017.\16\
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    \14\ See ``Simplifications to the Capital Rule Pursuant to the 
Economic Growth and Regulatory Paperwork Reduction Act of 1996.'' 82 
FR 49984 (October 27, 2017).
    \15\ See ``Regulatory Capital Rule: Standardized Approach for 
Calculating the Exposure Amount of Derivative Contracts,'' available 
at https://www.occ.treas.gov/news-issuances/news-releases/2018/nr-ia-2018-114.html.
    \16\ See ``Basel III: Finalising post-crisis reforms,'' 
available at https://www.bis.org/bcbs/publ/d424.htm. The BCBS is a 
committee of banking supervisory authorities, which was established 
by the central bank governors of the G-10 countries in 1975. More 
information regarding the BCBS and its membership is available at 
https://www.bis.org/bcbs/about.htm. Documents issued by the BCBS are 
available through the Bank for International Settlements website at 
https://www.bis.org.
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II. Proposal

    Post-crisis regulatory reforms, which include the agencies' capital 
and liquidity standards, have resulted in significant enhancements to 
financial stability and the safety and soundness of banking 
organizations. The agencies continue to evaluate the requirements of 
these measures to ensure that they meet their objectives in a manner 
that minimizes unintended consequences and aligns with banking 
organizations' risk profiles. These efforts include assessing the costs 
and benefits of regulations as well as exploring alternative approaches 
that achieve regulatory objectives but improve upon the simplicity, 
transparency, and efficiency of the regime. The proposal builds on the 
agencies' existing practice of tailoring capital and liquidity 
requirements based on the size, complexity, and overall risk profile of 
banking organizations.
    The proposal would make changes that would further distinguish 
applicable capital and liquidity standards on the basis of risk. Under 
the proposal, the most stringent standards would continue to apply to 
banking organizations that present the greatest systemic risks. For 
other banking organizations, the proposal would refine the application 
of capital and liquidity standards based on these banking 
organizations' risk profiles, consistent with safety and soundness and 
financial stability.
    Under the proposal, the most stringent set of standards (Category 
I) would apply to U.S. GSIBs and their subsidiary depository 
institutions. These banking organizations have the potential to pose 
the greatest risks to U.S. financial stability due to their systemic 
risk profiles. The existing post-financial crisis framework for U.S. 
GSIBs has resulted in significant gains in resiliency and risk 
management. The proposal accordingly would maintain the most stringent 
standards for these banking organizations, which are generally 
consistent with the standards developed by the BCBS, subject to notice 
and comment rulemaking in the United States.
    The second set of standards (Category II) would apply to banking 
organizations that are very large or have significant international 
activity. Like Category I, the agencies intend for Category II 
standards to be consistent with standards developed by the BCBS, 
subject to notice and comment rulemaking in the United States. The 
application of consistent prudential standards across jurisdictions to 
banking organizations with significant size or cross-jurisdictional 
activity helps to promote competitive equity among U.S. banking 
organizations and their foreign peers and competitors, and to reduce 
opportunities for regulatory arbitrage, while applying standards that 
appropriately reflect the risk profiles of banking organizations in 
this category. In addition, consistency of standards can facilitate 
U.S. banking organizations' regulatory compliance in foreign markets. 
Category II standards would also reflect the risks associated with 
these banking organizations' very large size or cross-border 
operations.
    The third set of standards (Category III) would apply to banking 
organizations with total consolidated assets of $250 billion or more 
that do not meet the criteria for Category I or II, and to other 
banking organizations with total consolidated assets of $100 billion or 
more, but less than $250 billion, that meet or exceed specified 
indicators of risk. Category III standards would reflect these banking 
organizations' heightened risk profiles relative to smaller and less 
complex banking organizations.
    The fourth set of standards (Category IV) would apply to banking 
organizations with total consolidated assets of $100 billion or more 
that do not meet the thresholds for one of the other categories. These 
banking organizations generally have greater scale and operational and 
managerial complexity relative to smaller banking organizations, but 
less than banking organizations that would be subject to Category I, 
II, or III standards. In addition, the failure or distress of one or 
more banking organizations that would be subject to Category IV 
standards, while not likely to have as significant of an impact on 
financial stability as the failure or distress of a firm subject to 
Category I, II or III standards, could nonetheless have a more 
significant negative effect on economic growth and employment relative 
to the failure or distress of smaller banking organizations. Category 
IV standards are therefore less stringent than Category III standards, 
reflecting the lower risk profile of these banking organizations 
relative to other banking organizations with $100 billion or more in 
total consolidated assets. For example, based on the size and risk 
profile of these banking organizations, the proposal would remove 
applicability of the LCR rule and proposed NSFR rule for banking 
organizations subject to Category IV standards. As a result, firms 
subject to Category IV standards would generally face the same capital 
and liquidity regulatory requirements as banking organizations under 
$100 billion in total consolidated assets.\17\ Unlike firms with less 
than $100 billion in total consolidated assets, however, firms subject 
to Category IV standards would be required to monitor and report 
certain risk-based indicators, as described further below.
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    \17\ Bank holding companies and savings and loan holding 
companies with less than $3 billion in total consolidated assets and 
that meet certain additional criteria are not subject to the capital 
rule pursuant to the Board's small bank holding company policy 
statement. See 12 CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225, 
appendix C; 12 CFR 238.9.
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A. Scope of Application

    The next section II.B describes the proposed criteria for 
determining which of the four proposed categories of standards applies 
to a banking organization with total consolidated assets of $100 
billion or more and its subsidiary depository institutions. The 
proposed categories and criteria are consistent with the considerations 
and factors set forth in section 165 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act),\18\ as amended by 
EGRRCPA, and with the categories of prudential standards in the Board-
only proposal. The proposal would not amend the capital and liquidity 
requirements

[[Page 66028]]

applicable to an intermediate holding company or its subsidiary 
depository institutions or the bank holding company subsidiary of a 
foreign banking organization.\19\ This proposal also would not amend 
the requirements applicable to Federal branches or agencies of foreign 
banking organizations.
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    \18\ Public Law 111-203, 124 Stat. 1376 (2010).
    \19\ The Board continues to consider the appropriate way to 
assign the U.S. operations of foreign banking organizations to the 
categories of standards described in this proposal, in light of the 
special structures through which these banking organizations conduct 
business in the United States. The Board plans to develop a separate 
proposal relating to foreign banking organizations and their U.S. 
operations.
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    The proposal would apply the same category of standards to both the 
top-tier holding company and its subsidiary depository institutions. 
With respect to capital, the proposal would apply the same requirements 
to a subsidiary depository institution of a holding company as would 
apply at the holding company level. This treatment aligns with the 
agencies' longstanding policy of applying similar standards to holding 
companies and their subsidiary depository institutions. For example, 
since 2007 the agencies have generally required depository institutions 
to apply the advanced approaches capital requirements if their parent 
holding company is identified as an advanced approaches banking 
organization. This approach serves as an important safeguard against 
arbitrage among affiliated banks that would otherwise be subject to 
substantially different regulatory requirements. With respect to 
liquidity, subsidiary depository institutions of a holding company 
subject to the full LCR and the proposed full NSFR with $10 billion or 
more in total consolidated assets at the depository institution level 
are also subject to the LCR requirement and would be subject to the 
proposed NSFR requirement. Large subsidiary depository institutions 
play a significant role in a covered company's funding structure, and 
in the operation of the payments system. These large subsidiaries 
generally also have access to deposit insurance coverage. Accordingly, 
the proposal would maintain the application of the LCR and proposed 
NSFR requirements to these large subsidiary depository institutions.
    Question 1: The agencies invite comment on the advantages and 
disadvantages of assigning a category of standards to a subsidiary 
depository institution based on the category assigned to its top-tier 
parent holding company. What would be the advantages and disadvantages 
of relying on the top-tier holding company's categorization and, under 
this approach, how should these standards be applied at the subsidiary 
depository institution? If commenters prefer an alternative approach to 
relying on the top-tier holding company's categorization, please 
describe any alternative scoping criteria that the agencies should 
consider for categorizing subsidiary depository institutions. If an 
alternative approach were applied, what increases in compliance costs 
or operational challenges could arise if a subsidiary depository 
institution were subject to a different category of standards than its 
top-tier parent holding company?

B. Scoping Criteria for Proposed Categories

    Where possible, the proposal would rely on indicators and 
thresholds already used in the agencies' existing regulatory frameworks 
or reported by large U.S. bank holding companies or savings and loan 
holding companies. As described further below, these categories would 
be defined based on the following criteria:
     Category I standards would apply to U.S. GSIBs and their 
subsidiary depository institutions.
     Category II standards would apply to banking organizations 
with $700 billion or more in total consolidated assets or $75 billion 
or more in cross-jurisdictional activity that are not subject to 
Category I standards and to their subsidiary depository institutions.
     Category III standards would apply to banking 
organizations that are not subject to Category I or II standards and 
that have $250 billion or more in total consolidated assets or $75 
billion or more in any of the following indicators: Nonbank assets, 
weighted short-term wholesale funding, or off-balance-sheet exposures. 
Category III standards would also apply to the subsidiary depository 
institutions of any holding companies subject to Category III 
standards.
     Category IV standards would apply to banking organizations 
with at least $100 billion in total consolidated assets that do not 
meet any of the thresholds specified for Categories I through III and 
to their subsidiary depository institutions.
    To determine which banking organizations are subject to the most 
stringent standards under Category I, the agencies would use the 
existing methodology under the Board's GSIB surcharge rule.\20\ The 
proposal would not modify the requirements that currently apply to U.S. 
GSIBs and their subsidiary depository institutions.
---------------------------------------------------------------------------

    \20\ See 12 CFR part 217, subpart H; see also ``Regulatory 
Capital Rules: Implementation of Risk-Based Capital Surcharges for 
Global Systemically Important Bank Holding Companies; Final Rule,'' 
80 FR 49082 (August 14, 2015).
---------------------------------------------------------------------------

    To determine the applicability of the remaining categories of 
capital and liquidity standards, the agencies are proposing to 
differentiate requirements based on a banking organization's level of 
specific risk-based indicators.\21\ This approach is intended to allow 
banking organizations and the public to easily identify and predict 
what requirements will apply to a banking organization, and what 
requirements would apply if the characteristics of a banking 
organization change. Under the proposed approach, Categories II through 
IV would be defined by five indicators linked to a banking 
organization's risk profile: Size, cross-jurisdictional activity, 
weighted short-term wholesale funding, nonbank assets, and off-balance 
sheet exposure. By taking into consideration the relative presence or 
absence of each risk factor, the proposal would provide a basis for 
assessing a banking organization's financial stability and safety and 
soundness risks.\22\ These indicators generally track measures already 
used in the agencies' existing regulatory framework and that banking 
organizations that would be covered by the proposal already publicly 
report at the holding company level. This approach would promote 
transparency and, for banking organizations that already report this 
information, would not require additional compliance costs to track and 
report. The proposed thresholds would apply based on the level of each 
indicator over the preceding four calendar quarters, as described 
further below, in order to account for significant changes in a banking 
organization's risk profile that reflect longer term shifts in business 
activities.
---------------------------------------------------------------------------

    \21\ As an alternative, the agencies are also requesting comment 
on a score-based approach, which would differentiate requirements 
for banking organizations using an aggregated ``score'' across 
multiple measures of risk. Section II.B.3 of this Supplementary 
Information section describes this proposed alternative.
    \22\ When reviewing agency interpretations of statutes that 
require an agency to ``take into account'' or ``take into 
consideration'' a number of factors, courts generally defer to the 
expertise of the agency in determining how to apply the factors and 
the relative weight given to each factor. See, e.g., National 
Wildlife Federation v. EPA, 286 F.3d 554, 570 (D.C. Cir. 2002); 
Lignite Energy v. EPA, 198 F.3d 930, 933 (D.C. Cir. 1999); Trans 
World Airlines, Inc. v. Civil Aeronautics Board, 637 F.2d 62, 67-68 
(2d Cir. 1980); Weyerhaeuser v. EPA, 590 F.2d 1011, 1046 (D.C. Cir. 
1978); Sec'y of Agric. v. Cent. Roig Ref. Co., 338 U.S. 604, 611-12 
(1950).
---------------------------------------------------------------------------

    Under the proposal, a depository institution without a holding 
company

[[Page 66029]]

would be required to calculate these risk-based indicators, apart from 
size, based upon the instructions of certain reports that are required 
to be filed by holding companies, including the Banking Organization 
Systemic Risk Report (FR Y-15) and the Parent Company Only Financial 
Statements for Large Holding Companies (FR Y-9LP). Specifically, such a 
depository institution would need to report cross-jurisdictional 
activity, weighted short-term wholesale funding, off-balance sheet 
exposure, and nonbank asset indicator data to its agency supervisory 
staff for the purpose of determining which capital and liquidity 
regulations would apply.
    Question 2: The agencies invite comment on the advantages and 
disadvantages of requiring a depository institution without a holding 
company to calculate indicators according to this approach. What 
operational complexities and challenges would arise if the agencies 
adopted this approach? What additional information could the agencies 
incorporate into the Consolidated Reports of Condition and Income (Call 
Reports), or other reports currently required of depository 
institutions, to replicate the calculation methodology for these 
indicators such as the measure of foreign assets and liabilities 
captured in the FR Y-15? What existing information is currently 
reported by depository institutions that could be used to replicate the 
calculation methodologies described under the proposal? What 
alternative indicators and related reporting requirements should the 
agencies consider to apply the proposal to large depository 
institutions without holding companies?
1. Size
    The proposal would measure size based on a banking organization's 
total consolidated assets. The agencies have previously used size as a 
simple measure of a banking organization's potential systemic impact as 
well as safety and soundness risks.\23\
---------------------------------------------------------------------------

    \23\ For example, advanced approaches capital requirements, the 
supplementary leverage ratio, and the LCR requirement generally 
apply to banking organizations with total consolidated assets of 
$250 billion or more or total consolidated on-balance sheet foreign 
exposure of $10 billion or more.
---------------------------------------------------------------------------

    The effect of a large banking organization's failure on the economy 
is likely to be greater than that which occurs when a smaller banking 
organization fails, even though the two banking organizations might be 
engaged in similar business lines.\24\ Board staff estimates that 
stress at a single large banking organization with an assumed $100 
billion in deposits would result in approximately a 107 percent decline 
in quarterly real GDP growth, whereas stress among five smaller banking 
organizations--each with an assumed $20 billion in deposits--would 
result in roughly a 22 percent decline in quarterly real GDP 
growth.\25\ Both scenarios assume $100 billion in total deposits, but 
the negative impact is greatest when larger banking organizations fail.
---------------------------------------------------------------------------

    \24\ See Amy G. Lorenc, and Jeffery Y. Zhang (2018). ``The 
Differential Impact of Bank Size on Systemic Risk,'' Finance and 
Economics Discussion Series 2018-066. Washington: Board of Governors 
of the Federal Reserve System, available at: https://doi.org/10.17016/FEDS.2018.066.
    \25\ Id.
---------------------------------------------------------------------------

    In general, a banking organization's size also provides a measure 
of the extent to which customers or counterparties may be exposed to a 
risk of loss or suffer a disruption in the provision of services if a 
banking organization were to experience distress, and the extent to 
which asset fire sales by a banking organization could transmit 
distress to other market participants, given that a larger banking 
organization has more assets to sell. In addition, the large size of a 
banking organization may give rise to challenges that may complicate 
resolution of the firm if it were to fail.
    The size of a banking organization can also be an indication of 
operational and managerial complexity, which can present safety and 
soundness risks even when a banking organization is not engaged in 
complex business lines. A larger banking organization operates on a 
larger scale, has a broader geographic scope, and generally will have 
more complex internal operations than a smaller banking organization, 
resulting in greater risks to safety and soundness.
    The proposal would establish thresholds of $700 billion, $250 
billion, and $100 billion in total consolidated assets for Category II, 
III, and IV requirements, respectively, for banking organizations that 
are not U.S. GSIBs. A holding company with $700 billion or more in 
total consolidated assets, and its subsidiary depository institutions, 
would be subject to Category II requirements in order to address the 
substantial risks that can arise from the activities and potential 
distress of very large banking organizations that are not U.S. GSIBs. 
Historical examples suggest that a banking organization of this size 
should be subject to stringent prudential standards. For example, 
during the financial crisis, significant losses at Wachovia 
Corporation, which had $780 billion in assets at the time of being 
acquired in distress, had a destabilizing effect on the financial 
system. A threshold of $700 billion or more in total consolidated 
assets would ensure that a banking organization with a size of similar 
magnitude would be subject to Category II standards.
    A holding company with $250 billion or more in total consolidated 
assets that does not meet the requirements for Category II, and its 
subsidiary depository institutions, would be subject to Category III 
requirements. As discussed above, the Board estimates that the failure 
or distress of a banking organization of this size would likely have a 
greater economic and financial stability impact than that of a smaller 
banking organization,\26\ and Category III standards would also further 
the safety and soundness of a banking organization of this size. The 
application of strong prudential standards would also be consistent 
with weaknesses and risks highlighted during the financial crisis with 
banking organizations of this size, such as Washington Mutual.\27\ A 
threshold of this level would also align with the $250 billion 
statutory asset threshold under EGRRCPA, above which the Board must 
apply enhanced prudential standards to a bank holding company.\28\
---------------------------------------------------------------------------

    \26\ Id.
    \27\ Washington Mutual, a savings and loan holding company, had 
approximately $300 billion in assets at the time of failure. After 
the collapse of Lehman Brothers, Washington Mutual experienced 
significant deposit outflows and was unable to raise funds to 
improve its liquidity position. In September 2008, the Office of 
Thrift Supervision, Washington Mutual's primary regulator, 
determined that the firm had insufficient liquidity to meet its 
obligations, closed the firm, and appointed the FDIC as the 
receiver. Washington Mutual was thereafter acquired by another firm. 
The FDIC estimated that it would have cost $42 billion to liquidate 
Washington Mutual, a sum that would have depleted the entire balance 
of the Deposit Insurance Fund at the time. See Offices of Inspector 
General, U.S. Department of Treasury and FDIC, Evaluation of Federal 
Regulatory Oversight of Washington Mutual Bank (April 2010), 
available at: https://www.fdicig.gov/sites/default/files/publications/10-002EV.pdf.
    \28\ See EGRRCPA Sec.  401.
---------------------------------------------------------------------------

    In the Board-only proposal, the Board is proposing to apply certain 
requirements as Category IV standards to bank holding companies and 
certain savings and loan holding companies with $100 billion or more in 
total consolidated assets that do not meet the criteria for Category I, 
II, or III. As discussed in section II.C.4 of this Supplementary 
Information section, based on the risk profiles of banking 
organizations that would be subject to Category IV standards, the 
agencies are proposing not to apply to banking organizations that meet 
the Category IV criteria additional requirements under

[[Page 66030]]

the capital rule relative to generally applicable requirements or the 
LCR rule or proposed NSFR rule.
    Question 3: The agencies invite comment on the advantages and 
disadvantages of using size thresholds to tailor capital and liquidity 
requirements. The agencies invite comment on whether the inclusion of 
asset size thresholds in capital and liquidity standards drives changes 
in bank business models and risk profiles in ways that differ from the 
effects of thresholds based on other risk-based indicators. As an 
alternative to size thresholds, the agencies invite comment on whether 
other factors alone can adequately differentiate between the risk 
profiles of banking organizations and serve as the primary tool to 
tailor capital and liquidity requirements.
2. Other Risk-Based Indicators
    In addition to size, the proposal would consider a banking 
organization's level of cross-jurisdictional activity, weighted short-
term wholesale funding, nonbank assets, and off-balance sheet exposure 
to determine the applicable category of standards. The agencies are 
proposing to apply a uniform threshold of $75 billion for each of these 
risk-based indicators, based on the degree of concentration this amount 
would represent for each banking organization. In each case, a 
threshold of $75 billion would represent at least 30 percent and as 
much as 75 percent of total consolidated assets for banking 
organizations with between $100 billion and $250 billion in total 
consolidated assets.\29\ In addition, setting the indicators at $75 
billion would ensure that banking organizations that account for the 
vast majority--over 85 percent--of the total amount of each risk factor 
among all U.S. depository institution holding companies with $100 
billion or more in total consolidated assets would be subject to 
prudential standards that account for the associated risks of these 
indicators, which facilitates consistent treatment of these risks 
across banking organizations. To the extent levels and the distribution 
of an indicator substantially change in the future, the agencies may 
consider modifications if appropriate.
---------------------------------------------------------------------------

    \29\ Because a size threshold of $250 billion in total 
consolidated assets also would apply for Category III, the weighted 
short-term wholesale funding, nonbank assets, and off-balance sheet 
exposure indicators would only have effect for a banking 
organization with total consolidated assets of $100 billion or more, 
but less than $250 billion. Similarly, the proposed cross-
jurisdictional activity threshold would only have effect for a 
banking organization with total consolidated assets of $100 billion 
or more, but less than $700 billion.
---------------------------------------------------------------------------

    Category II standards would apply to a banking organization with 
$100 billion or more in total consolidated assets and $75 billion or 
more in cross-jurisdictional activity to promote parallel treatment 
among banking organizations with large global operations. Category III 
standards would apply to a banking organization with $100 billion or 
more in total consolidated assets and at least $75 billion in weighted 
short-term wholesale funding, nonbank assets, or off-balance sheet 
exposure.
a. Cross-Jurisdictional Activity
    Cross-jurisdictional activity would be defined as the sum of cross-
jurisdictional assets and liabilities, as each is reported on the FR Y-
15 by holding companies. Cross-jurisdictional activity can affect the 
complexity of a banking organization and give rise to challenges that 
may complicate the resolution of such a banking organization if it were 
to fail. In particular, foreign operations and cross-border positions 
add operational complexity in normal times and complicate the ability 
of a banking organization to undergo a successful recovery in times of 
stress, generating both safety and soundness and financial stability 
risks. For example, a banking organization with significant cross-
border operations may require more sophisticated capital and liquidity 
management relating to risks of ring-fencing by one or more 
jurisdictions during stress, which could impede the banking 
organization's ability to move resources in one jurisdiction to meet 
needs in another.
    The agencies' capital and liquidity regulations currently use 
foreign exposure as a metric to determine the application of certain 
requirements, such as advanced approaches capital requirements \30\ and 
the LCR requirement.\31\ The proposal would amend these regulations to 
replace the current $10 billion foreign exposure threshold with a $75 
billion cross-jurisdictional activity threshold. Compared to the 
current foreign exposure measure, the proposed cross-jurisdictional 
activity indicator includes foreign liabilities in addition to foreign 
assets. In addition, compared to the foreign exposure measure, the 
proposed cross-jurisdictional activity indicator does not include the 
assets and liabilities from positions in derivative contracts. 
Measuring cross-jurisdictional activity using both assets and 
liabilities--instead of just assets--would provide a broader gauge of 
the scale of a banking organization's foreign operations, as it 
includes both borrowing and lending activities outside of the United 
States.
---------------------------------------------------------------------------

    \30\ See 12 CFR 217.100(b)(1) (Board), 12 CFR 324.100(b)(1) 
(FDIC), 12 CFR 3.100(b)(1) (OCC).
    \31\ See 12 CFR 249.1(b)(ii) (Board), 12 CFR 329.1(b)(ii)(FDIC), 
12 CFR 50.1(b)(ii) (OCC).
---------------------------------------------------------------------------

    Question 4: How should depository institutions report a measure of 
foreign assets and liabilities for purposes of calculating cross-
jurisdictional activity? What problems would depository institutions 
face if they used the measure of foreign assets and liabilities as 
reported on the Country Exposure Report (FFIEC 009)?
b. Weighted Short-Term Wholesale Funding
    The proposed weighted short-term wholesale funding indicator would 
track the measure currently reported on the FR Y-15 by holding 
companies and be consistent with the calculation used for purposes of 
the GSIB surcharge rule.\32\ This indicator provides a measure of a 
banking organization's liquidity risk, as reliance on short-term, 
generally uninsured funding from more sophisticated counterparties can 
make a banking organization vulnerable to the consequences of large-
scale funding runs. In particular, banking organizations that fund 
long-term assets with short-term liabilities from financial 
intermediaries such as investment funds may face large liquidity 
outflows resulting in the need to rapidly sell relatively illiquid 
assets to fund withdrawals and maintain their operations in a time of 
stress, which they may be able to do only at fire sale prices. Such 
asset fire sales can cause rapid deterioration in a banking 
organization's financial condition and negatively affect broader 
financial stability by driving down asset prices across the market. As 
a result, the short-term wholesale funding indicator reflects both 
safety and soundness and financial stability risks. This indicator also 
provides a measure of interconnectedness among market participants, 
including other financial sector entities, which can provide a 
mechanism for transmission of distress.
---------------------------------------------------------------------------

    \32\ Specifically, short-term wholesale funding is the amount of 
a banking organization's funding obtained from wholesale 
counterparties or retail brokered deposits and sweeps with a 
remaining maturity of one year or less. Categories of short-term 
wholesale funding are then weighted based on four residual maturity 
buckets; the asset class of collateral, if any, backing the funding; 
and characteristics of the counterparty. Weightings reflect risk of 
runs and attendant fire sales. See 12 CFR 217.406 and Regulatory 
Capital Rules: Implementation of Risk-Based Capital Surcharges for 
Global Systemically Important Bank Holding Companies, 80 FR 49082 
(August 14, 2015).

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[[Page 66031]]

c. Nonbank Assets
    Under the proposal, nonbank assets would be measured as the average 
amount of equity investments in nonbank subsidiaries.\33\ The level of 
a banking organization's investment in nonbank subsidiaries provides a 
measure of the organization's business and operational complexity. 
Specifically, banking organizations with significant investments in 
nonbank subsidiaries are more likely to have complex corporate 
structures, inter-affiliate transactions, and funding relationships. As 
discussed in the Board's final GSIB surcharge rulemaking, a banking 
organization's complexity is positively correlated with the impact of 
its failure or distress.\34\ Because nonbank subsidiaries may not be 
resolved through the FDIC's receivership process, significant 
investments in nonbank subsidiaries present heightened resolvability 
risk.
---------------------------------------------------------------------------

    \33\ The proposed measure of nonbank assets also would include 
the average of the assets in each Edge or Agreement Corporation, but 
would exclude nonbank assets held in a savings association.
    \34\ See Regulatory Capital Rules: Implementation of Risk-Based 
Capital Surcharges for Global Systemically Important Bank Holding 
Companies, 80 FR 49082 (August 14, 2015). See paragraph 25 of the 
``Global systemically important banks: Updated assessment 
methodology and the higher loss absorbency requirement,'' which 
provides certain revisions and clarifications to the initial GSIB 
framework. The document is available at https://www.bis.org/publ/bcbs255.htm.
---------------------------------------------------------------------------

    Nonbank activities may involve a broader range of risks than those 
associated with purely banking activities, and can increase 
interconnectedness with other financial firms, requiring sophisticated 
risk management and governance, including capital planning, stress 
testing, and liquidity risk management. If not adequately managed, the 
risks associated with nonbanking activities could present significant 
safety and soundness concerns and increase financial stability risks. 
The failure of a nonbank subsidiary could be destabilizing to a banking 
organization and cause counterparties and creditors to lose confidence 
in the banking organization. Nonbank assets also reflect the degree to 
which a banking organization may be engaged in activities through legal 
entities that are not subject to separate capital requirements or to 
the direct regulation and supervision applicable to a regulated banking 
entity.
d. Off-Balance Sheet Exposure
    Off-balance sheet exposure complements the measure of size by 
taking into consideration financial and banking activities not 
reflected on a banking organization's balance sheet. Like a banking 
organization's size, off-balance sheet exposure provides a measure of 
the extent to which customers or counterparties may be exposed to a 
risk of loss or suffer a disruption in the provision of services. In 
addition, off-balance sheet exposure can lead to significant future 
draws on capital and liquidity, particularly in times of stress. In the 
financial crisis, for example, vulnerabilities at individual banking 
organizations were exacerbated by margin calls on derivative exposures, 
calls on commitments, and support provided to sponsored funds. These 
exposures can be a source of safety and soundness risk, as banking 
organizations with significant off-balance sheet exposure may have to 
fund these positions in the market in a time of stress, which can put a 
strain on both capital and liquidity. The nature of these risks for 
banking organizations of this size and complexity can also lead to 
financial stability risk, as they can manifest rapidly and with less 
transparency to other market participants. In addition, because draws 
on off-balance sheet exposures such as committed credit and liquidity 
facilities tend to increase in times of stress, they can exacerbate the 
effects of stress on a banking organization.\35\
---------------------------------------------------------------------------

    \35\ See William F. Bassett, Simon Gilchrist, Gretchen C. 
Weinbach, Egon Zakraj[scaron]ek, ``Improving Our Ability to Monitor 
Bank Lending,'' chapter in Risk Topography: Systemic Risk and Macro 
Modeling (2014), Markus Brunnermeier and Arvind Krishnamurthy, ed., 
pp. 149-161, available at: https://www.nber.org/chapters/c12554.
---------------------------------------------------------------------------

    Off-balance sheet exposures may also serve as a measure of a 
banking organization's interconnectedness. Some off-balance sheet 
exposures, such as derivatives, are concentrated among the largest 
financial firms.\36\ The distress or failure of one party to a 
financial contract, such as a derivative or securities financing 
transaction, can trigger disruptive terminations of these contracts 
that destabilize the defaulting party's otherwise solvent 
affiliates.\37\ Such a default also can lead to disruptions in markets 
for financial contracts, including by resulting in rapid market-wide 
unwinding of trading positions.\38\ In this way, the effects of one 
party's failure or distress can be amplified by its off-balance sheet 
connections with other financial market participants.
---------------------------------------------------------------------------

    \36\ See, e.g., Sheri M. Markose, Systemic Risk from Global 
Financial Derivatives: A Network Analysis of Contagion and its 
Mitigation with Super-Spreader Tax, IMF Working Papers (Nov. 30, 
2012), available at: https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Systemic-Risk-from-Global-Financial-Derivatives-A-Network-Analysis-of-Contagion-and-Its-40130.
    \37\ To address these risks, the agencies have established 
restrictions relating to the qualified financial contracts of U.S. 
GSIBs, the insured depository institution subsidiaries of U.S. 
GSIBs, and the U.S. operations of systemically important foreign 
banking organizations. See 12 CFR part 252, subpart I (Board); 12 
CFR part 47 (OCC); and 12 CFR part 382 (FDIC). That rule does not 
apply to savings and loan holding companies, or to other large bank 
holding companies and insured depository institutions.
    \38\ See, e.g., The Orderly Liquidation of Lehman Brothers 
Holdings Inc. under the Dodd-Frank Act, 5 FDIC Quarterly No. 2, 31 
(2011), https://www.fdic.gov/bank/analytical/quarterly/2011-vol5-2/article2.pdf.
---------------------------------------------------------------------------

    The proposal would define off-balance sheet exposure based on 
measures currently reported by holding companies with more than $100 
billion in assets, specifically, as total exposure, as defined on FR Y-
15, minus total consolidated assets, as reported on the Consolidated 
Financial Statements for Holding Companies (FR Y-9C). Total exposure 
includes a banking organization's on-balance sheet assets plus certain 
off-balance sheet exposures, including derivative exposures, repo-style 
transactions, and other off-balance sheet exposures (such as 
commitments).
    Question 5: What are the advantages and disadvantages of the 
proposed risk-based indicators? What different indicators should the 
agencies use, and why?
    Question 6: At what level should the threshold for each indicator 
be set, and why? Commenters are encouraged to provide data supporting 
their recommendations.
    Question 7: The agencies are considering whether Category II 
standards should apply based on a banking organization's weighted 
short-term wholesale funding, nonbank assets, and off-balance sheet 
exposure, using a higher threshold than the $75 billion that would 
apply for Category III standards, in addition to the thresholds 
discussed above based on asset size and cross-jurisdictional activity. 
For example, a banking organization could be subject to Category II 
standards if one or more of these indicators equaled or exceeded a 
level such as $100 billion or $200 billion. A threshold of $200 billion 
would represent at least 30 percent and as much as 80 percent of total 
consolidated assets for banking organizations with between $250 billion 
and $700 billion in total consolidated assets. If the agencies were to 
adopt additional indicators for purposes of identifying banking 
organizations that should be subject to Category II standards, at what 
level should the threshold for each indicator be set, and why? 
Commenters are encouraged to provide data supporting their 
recommendations.

[[Page 66032]]

3. Alternative Scoping Criteria
    An alternative approach for assessing the risk profile and systemic 
footprint of a banking organization for purposes of tailoring 
prudential standards would be to use a single, comprehensive score. The 
Board uses a GSIB identification methodology (scoring methodology) to 
identify global systemically important bank holding companies and apply 
risk-based capital surcharges to these banking organizations. The 
agencies could use this same scoring methodology to tailor prudential 
standards for large, but not globally systemic, banking organizations.
    The scoring methodology calculates a GSIB's capital surcharge under 
two methods.\39\ The first method is based on the sum of a firm's 
systemic indicator scores reflecting its size, interconnectedness, 
cross-jurisdictional activity, substitutability, and complexity (method 
1). The second method is based on the sum of these same measures of 
risk, except that the substitutability measures are replaced with a 
measure of the firm's reliance on short-term wholesale funding (method 
2).\40\
---------------------------------------------------------------------------

    \39\ See 12 CFR part 217, subpart H.
    \40\ For more discussion relating to the scoring methodology, 
please see the Board's final rule establishing the scoring 
methodology. See Regulatory Capital Rules: Implementation of Risk-
Based Capital Surcharges for Global Systemically Important Bank 
Holding Companies, 80 FR 49082 (Aug. 14, 2015).
---------------------------------------------------------------------------

    The Board designed the scoring methodology to provide a single, 
comprehensive, integrated assessment of a large bank holding company's 
systemic footprint. Accordingly, the indicators in the scoring 
methodology measure the extent to which the failure or distress of a 
bank holding company could pose a threat to financial stability or 
inflict material damage on the broader economy. The indicators used in 
the scoring methodology also could be used to help identify banking 
organizations that have heightened risk profiles and would closely 
align with the risk-based factors specified in section 165 of the Dodd-
Frank Act for applying enhanced prudential standards and 
differentiating among banking organizations to which the enhanced 
prudential standards apply.\41\ Importantly, large bank holding 
companies already submit to the Board periodic public reports on their 
indicator scores in the scoring methodology. Accordingly, use of the 
scoring methodology more broadly for tailoring of prudential standards 
would promote transparency and would economize on compliance costs for 
large bank holding companies.
---------------------------------------------------------------------------

    \41\ See 12 U.S.C. 5365(a)(2)(A).
---------------------------------------------------------------------------

    Under the alternative scoring approach, a banking organization's 
size and either its method 1 or method 2 score from the scoring 
methodology would be used to determine which category of standards 
would apply to the firm. In light of the changes made by EGRRCPA, the 
Board conducted an analysis of the distribution of method 1 and method 
2 scores of bank holding companies and covered savings and loan holding 
companies with at least $100 billion in total assets.\42\
---------------------------------------------------------------------------

    \42\ In conducting its analysis, the Board considered method 1 
and method 2 scores as of December 31, 2017. Consistent with the 
thresholds in EGRRCPA, the Board considered the scores of bank 
holding companies and covered savings and loan holding companies 
with total consolidated assets of $100 billion or more but less than 
$250 billion, $250 billion or more that are not GSIBs, and GSIBs.
---------------------------------------------------------------------------

    Category I: As under the proposal and under the Board's existing 
enhanced prudential standards framework, Category I standards would 
continue to apply to U.S. GSIBs, which would continue to be defined as 
U.S. banking organizations with a method 1 score of 130 or more.
    Category II: Category II banking organizations are defined in the 
proposal as those whose failure or distress could impose costs on the 
U.S. financial system and economy that are higher than the costs 
imposed by the failure or distress of an average banking organization 
with total consolidated assets of $250 billion or more.
    In selecting the ranges of method 1 or method 2 scores that could 
define the application of Category II standards, the Board considered 
the potential of a firm's material distress or failure to disrupt the 
U.S. financial system or economy. As noted in section II.B.1 of this 
Supplementary Information section, during the financial crisis, 
significant losses at Wachovia Corporation, which had $780 billion in 
total consolidated assets at the time of being acquired in distress, 
had a destabilizing effect on the financial system. The Board estimated 
method 1 and method 2 scores for Wachovia Corporation, based on 
available data, and also calculated the scores of banking organizations 
with more than $250 billion in total consolidated assets that are not 
U.S. GSIBs assuming that each had $700 billion in total consolidated 
assets (the asset size threshold used to define Category II in the 
agencies' main proposal). The Board also considered the outlier method 
1 and method 2 scores for banking organizations with more than $250 
billion in total consolidated assets that are not U.S. GSIBs.\43\
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    \43\ Outliers can be determined by a number of statistical 
methods. For these purposes, the Board computed an outlier as the 
third quartile plus three times the interquartile range of method 1 
and method 2 scores of these U.S. bank holding companies and covered 
savings and loan holding companies.
---------------------------------------------------------------------------

    Based on this analysis, the agencies would apply Category II 
standards to any non-GSIB banking organization with at least $100 
billion in total consolidated assets and with a method 1 score between 
60 and 80 or a method 2 score between 100 to 150. If the agencies adopt 
a final rule that uses the scoring methodology to establish tailoring 
thresholds, the agencies would set a single score within the listed 
ranges for application of Category II standards. The agencies invite 
comment on what score within these ranges would be appropriate.
    Category III: As noted, section 165 of the Dodd-Frank Act requires 
the Board to apply enhanced prudential standards to any bank holding 
company with total consolidated assets of $250 billion or more and 
authorizes the Board to apply these standards to bank holding companies 
with between $100 billion and $250 billion in total consolidated assets 
if the Board makes certain statutory findings. To determine a scoring 
methodology threshold for application of Category III standards to 
banking organizations with between $100 billion and $250 billion in 
total consolidated assets, the Board considered the scores of these 
banking organizations as compared to the scores of banking 
organizations with greater than $250 billion in total consolidated 
assets that are not U.S. GSIBs. Based on this analysis, the Board 
determined that, under a scoring methodology approach to tailoring, 
Category III standards would be applied to banking organizations with 
total consolidated assets between $100 billion and $250 billion that 
have a method 1 score between 25 to 45. Banking organizations with a 
score in this range would have a score similar to that of the average 
firm with greater than $250 billion in total consolidated assets. Using 
method 2 scores, the agencies would apply Category III standards to any 
banking organization with total consolidated assets between $100 
billion and $250 billion that have a method 2 score between 50 to 85. 
Again, if the agencies were to adopt the scoring methodology for 
tailoring in a final rule, the agencies would pick a single score 
within the listed ranges. The agencies invite comment on what score 
within these ranges would be appropriate.

[[Page 66033]]

    Category IV: Under a score-based approach, category IV standards 
would apply to banking organizations with at least $100 billion in 
total assets that do not meet any of the thresholds specified for 
Categories I through III (that is, a method 1 score of less than 25 to 
45 or a method 2 score of less than 50 to 85).
    Question 8: What are the advantages and disadvantages to using the 
scoring methodology and category thresholds described above relative to 
the proposed thresholds?
    Question 9: If the agencies were to use the scoring methodology to 
differentiate non-GSIB banking organizations for purposes of tailoring 
prudential standards, should the agencies use method 1 scores, method 2 
scores, or both?
    Question 10: If the agencies adopt the scoring methodology, what 
would be the advantages or disadvantages of the agencies requiring 
banking organizations to calculate their scores at a frequency greater 
than annually, including, for example, requiring a banking organization 
to calculate its score on a quarterly basis?
    Question 11: With respect to each category of banking organization 
described above, at what level should the method 1 or method 2 score 
thresholds be set and why, and discuss how those levels could be 
impacted by considering additional data, or by considering possible 
changes in the banking system. Commenters are encouraged to provide 
data supporting their recommendations.
    Question 12: What are the advantages and disadvantages in using the 
scoring methodology to categorize banking organizations with systemic 
footprints smaller than the GSIBs for purposes of tailoring prudential 
standards?
    Question 13: What other approaches should the agencies consider in 
setting thresholds for tailored prudential standards?
4. Determination of Applicable Category of Standards
    Under the proposal, a holding company with total consolidated 
assets of $100 billion or more and its subsidiary depository 
institutions would be required to determine the category of standards 
to which it is subject. The proposal would add certain defined terms to 
the agencies' capital rule and LCR rule to implement the proposed 
categories. U.S. GSIBs would continue to be identified using the 
Board's GSIB surcharge methodology, and the proposal would refer to 
these banking organizations as global systemically important bank 
holding companies, consistent with the term used elsewhere in the 
agencies' regulations.\44\ The proposal would also add defined terms 
for banking organizations subject to Category II, III, or IV standards 
as Category II banking organizations, Category III banking 
organizations, or Category IV banking organizations, respectively.
---------------------------------------------------------------------------

    \44\ See, e.g., 12 CFR part 217.
---------------------------------------------------------------------------

    Banking organizations that would be subject to the proposal would 
be required to report size and other risk-based indicators on a 
quarterly basis. In order to capture significant changes in a banking 
organization's risk profile, rather than temporary fluctuations, a 
category of standards would apply to a banking organization based on 
the average levels of each indicator over the preceding four calendar 
quarters.\45\ A banking organization would remain subject to a category 
of standards until the banking organization no longer meets the 
indicators for its current category in each of the four most recent 
calendar quarters, or until the banking organization meets the criteria 
for another category of standards based on an increase in the average 
value of one or more indicators over the preceding four calendar 
quarters. This approach would be consistent with the existing 
applicability and cessation requirements of the Board's enhanced 
prudential standards rule.\46\ Changes in requirements that result from 
a change in category generally would take effect on the first day of 
the second quarter following the change in the banking organization's 
category.\47\ For example, a banking organization that changes from 
Category IV to Category III based on an increase in the average value 
of its indicators over the first, second, third, and fourth quarters of 
a calendar year would be subject to Category III standards beginning on 
April 1 (the first day of the second quarter) of the following year.
---------------------------------------------------------------------------

    \45\ With respect to a firm that has reported an indicator for 
less than four quarters, the proposal would refer to the average of 
the most recent quarter or quarters.
    \46\ See, e.g., 12 CFR 252.43.
    \47\ The Board would maintain existing transition provisions for 
Category I and II capital standards, such as changes to a bank 
holding company's GSIB surcharge.
---------------------------------------------------------------------------

    Under the LCR rule and NSFR proposed rule, a banking organization 
that meets the thresholds for applicability measured as of the year-end 
must comply with the requirement(s) beginning on April 1 of the 
following year, or as specified by the appropriate agency.\48\ Under 
the proposal, a banking organization that becomes subject to the LCR 
rule or proposed NSFR rule would be required to comply with these 
requirements on the first day of the second quarter after the banking 
organization became subject to these requirements, consistent with the 
amount of time currently provided under the LCR rule and proposed NSFR 
rule after the year-end measurement date.
---------------------------------------------------------------------------

    \48\ 12 CFR 50.1(b)(2) (OCC); 12 CFR 249.1(b)(2) (Board); 12 CFR 
329(1)(b)(2) (FDIC); and NSFR proposed rule. See also Liquidity 
Coverage Ratio: Liquidity Risk Measurement Standards, 79 FR 61440, 
61447 (October 10, 2014).
---------------------------------------------------------------------------

    In addition, the LCR rule provides newly covered banking 
organizations with a transition period for the daily calculation 
requirement, recognizing that a daily calculation requirement could 
impose significant operational and technology demands. Specifically, a 
newly covered banking organization must calculate its LCR monthly from 
April 1 to December 1 of its first year of compliance. Beginning on 
January 1 of the following year, the banking organization must 
calculate its LCR daily.\49\ The proposal would maintain this 
transition period of three calendar quarters following initial 
applicability of the LCR requirement.
---------------------------------------------------------------------------

    \49\ See id.\
---------------------------------------------------------------------------

    The agencies are not proposing changes to the cessation provisions 
of the LCR rule, NSFR proposed rule, and advanced approaches capital 
requirements. Once a banking organization is subject to advanced 
approaches capital requirements, the LCR rule, or the NSFR proposed 
rule, it would remain subject to the rule until its primary federal 
supervisor determines that application of the rule would not be 
appropriate in light of the banking organization's asset size, level of 
complexity, risk profile, or scope of operations.
    Question 14: What are the advantages and disadvantages to a banking 
organization calculating its category on a quarterly basis? Discuss 
whether calculation on an annual basis would be more appropriate and 
why.
    Question 15: What are the advantages and disadvantages of the 
proposed transition period for each of the standards in each of the 
categories? What would be the advantages or disadvantages of providing 
additional time to conform to new requirements? If a banking 
organization changes category because of an increase in one or more 
risk-based indicators, discuss the advantages and disadvantages of 
providing an additional quarter before applying the new category's 
standards.
    Question 16: As noted above, the LCR rule currently provides that a 
banking organization becomes subject to the LCR

[[Page 66034]]

rule ``beginning on April 1 of the year in which the [banking 
organization] becomes subject to the minimum liquidity standard.'' If 
the applicability of the LCR rule is amended to be based on a four-
quarter average of indicators, what would be the advantages and 
disadvantages of removing this transition mechanism? What would be the 
advantages and disadvantages of requiring a banking organization to 
comply with the LCR and proposed NSFR requirements in the quarter 
following the quarter when it exceeds the applicability thresholds?
    Question 17: What would be the advantages and disadvantages of 
maintaining the cessation provisions in the advanced approaches rule, 
LCR rule, and NSFR proposed rule? What would be the advantages and 
disadvantages of aligning the cessation provisions in the advanced 
approaches capital requirements, LCR rule, and NSFR proposed rule with 
the transition provisions between categories of standards? For example, 
the current version of the LCR rule provides that, once a banking 
organization becomes subject to the LCR rule, it remains subject to the 
LCR rule until its regulator determines in writing that application of 
the LCR rule is no longer appropriate. What are the advantages and 
disadvantages of requiring a written determination before a banking 
organization can move to a lower category? What would be the advantages 
and disadvantages of automatically moving the category of a banking 
organization based on its size and indicators?

C. Proposed Regulatory Framework

    This section describes the capital and liquidity requirements that 
currently apply and those that would apply under the four categories in 
the proposal. Similar to certain aspects of the current capital 
requirements, the proposal would allow banking organizations to choose 
to apply the more stringent requirements of another category (e.g., a 
banking organization subject to Category III standards could choose to 
comply with the more stringent Category II standards to minimize 
compliance costs across multiple jurisdictions).
1. Category I Standards
    Currently, U.S. GSIBs are subject to the most stringent prudential 
standards relative to other banking organizations, which reflect the 
heightened risks these banking organizations pose to U.S. financial 
stability. The proposal would make no changes to the capital and 
liquidity requirements applicable to U.S. GSIBs.
    Accordingly, U.S. GSIBs would remain subject to the most stringent 
capital and liquidity requirements, including requirements based on 
standards developed by the BCBS, subject to notice and comment 
rulemaking in the United States. Their subsidiary depository 
institutions would also be subject to the most stringent requirements, 
as applicable. Category I capital standards would include a requirement 
to calculate risk-based capital ratios using both the advanced 
approaches and the standardized approach; the U.S. leverage ratio; the 
enhanced supplementary leverage ratio; the GSIB surcharge (at the 
holding company level only); the requirement to recognize most elements 
of AOCI in regulatory capital; and the requirement to expand their 
capital conservation buffer by the amount of the countercyclical 
capital buffer, if applicable. Category I liquidity standards would 
include the full LCR requirement \50\ and proposed NSFR requirement. 
These standards would continue to strengthen the capital and liquidity 
positions of U.S. GSIBs based on their significant risk profiles, to 
improve their resiliency and ability to provide consistent financial 
intermediation across market and economic conditions, and to reduce 
risks to U.S. financial stability.
---------------------------------------------------------------------------

    \50\ The full requirements of the LCR rule include the 
calculation of the LCR on each business day and the inclusion of a 
maturity mismatch add-on in the total net cash outflow amount.
---------------------------------------------------------------------------

    Consistent with current requirements, a subsidiary depository 
institution of a banking organization subject to the full LCR and 
proposed NSFR requirements with $10 billion or more in total 
consolidated assets would be required to meet the LCR and NSFR 
requirements. Currently, the $10 billion consolidated asset threshold 
is measured based on the most recent year-end Consolidated Report of 
Condition and Income. Consistent with the other proposed scoping 
criteria described in section II.B of this Supplementary Information 
section, the proposal would amend the LCR and proposed NSFR rules to 
measure this threshold based on the value of total consolidated assets 
over the four most recent calendar quarters.
2. Category II Standards
    The failure or distress of banking organizations that would be 
subject to Category II standards could impose significant costs on the 
U.S. financial system and economy, although they generally do not 
present the same degree of risk as U.S. GSIBs. Their size and cross-
jurisdictional activity present risks that require enhanced regulatory 
capital standards and greater supervisory oversight relative to other 
banking organizations. Further, size and cross-jurisdictional activity 
can present particularly heightened challenges in the case of a 
liquidity stress, which can create both financial stability and safety 
and soundness risks. For example, a very large banking organization 
that engages in asset fire sales to meet short-term liquidity needs is 
more likely to transmit distress on a broader scale because of the 
greater volume of assets it could sell in a short period of time. 
Similarly, a banking organization with significant international 
activity may be more exposed to the risk of ring-fencing of liquidity 
resources by one or more jurisdictions that could impede its ability to 
move liquidity to meet outflows.
    In this proposal, capital and liquidity requirements that are 
generally consistent with standards developed by the BCBS, subject to 
notice and comment rulemaking in the United States, would continue to 
apply to holding companies subject to Category II standards. These 
standards would include the full LCR and proposed NSFR requirements, 
advanced approaches capital requirements, and the supplementary 
leverage ratio. Similar to Category I standards, holding companies 
subject to Category II standards would also be required to recognize 
most elements of AOCI in regulatory capital. Reflecting AOCI in 
regulatory capital results in a more accurate measure of capital, which 
is important for maintaining the resilience of these banking 
organizations. Additionally, holding companies subject to Category II 
standards would be required to expand their capital conservation buffer 
by the amount of the countercyclical capital buffer, if applicable.
    As under existing requirements, the proposed Category II capital 
standards would apply to the subsidiary depository institutions of 
holding companies subject to Category II standards, and the LCR and 
proposed NSFR requirements would apply to subsidiary depository 
institutions with total consolidated assets of $10 billion or more.
3. Category III Standards
    The agencies' current regulatory framework generally applies the 
same capital and liquidity standards to all non-GSIB banking 
organizations with $250 billion or more in total consolidated assets. 
For example, advanced approaches capital

[[Page 66035]]

requirements, the supplementary leverage ratio, and the LCR requirement 
generally apply to banking organizations with $250 billion or more in 
total consolidated assets or $10 billion or more in foreign exposure. 
The proposed framework would differentiate among banking organizations 
with $250 billion or more in total consolidated assets. In particular, 
Categories I and II would include requirements generally consistent 
with standards developed by the BCBS, subject to notice and comment 
rulemaking in the United States, whereas Category III would include 
fewer such standards, based on the relatively lower risk profiles and 
lesser degree of cross-border activity of subject banking 
organizations. In particular, the agencies are proposing not to apply 
advanced approaches capital requirements and the requirement to 
recognize most elements of AOCI in regulatory capital to banking 
organizations subject to Category III (and Category IV) standards. 
However, Category III standards would also reflect the elevated risk 
profile of these banking organizations relative to smaller and less 
complex banking organizations.
    Category III standards would apply to all banking organizations 
with at least $250 billion in total consolidated assets that do not 
meet the criteria for Category I or Category II, as well as to certain 
banking organizations with less than $250 billion in total consolidated 
assets based on their risk profile. As discussed in section II.B.2 of 
this Supplementary Information section, weighted short-term wholesale 
funding, nonbank assets, and off-balance sheet exposure indicators 
contribute to the systemic risk profile and safety and soundness risk 
profile of banking organizations.
    Under the proposal, Category III capital standards would include 
generally applicable risk-based capital requirements, the U.S. leverage 
ratio, and the supplementary leverage ratio. Category III standards 
would also include the countercyclical capital buffer, given these 
banking organizations' significant role in financial intermediation in 
the United States individually and as a group. These banking 
organizations have a substantial enough footprint that they should 
expand their capital conservation buffer as necessary to support the 
prudential goals of the buffer framework. The supplementary leverage 
ratio would apply to banking organizations subject to Category III 
standards given these banking organizations' size and risk profile. For 
example, firms subject to Category III standards include banking 
organizations with material off-balance sheet exposures that are not 
accounted for in the traditional U.S. tier 1 leverage ratio. The 
supplementary leverage ratio is important for these banking 
organizations to constrain the build-up of off-balance sheet exposures, 
which can contribute to instability and undermine safety and soundness 
of individual banking organizations.
    The agencies are separately proposing to adopt the standardized 
approach for counterparty credit risk for derivatives exposures (SA-
CCR) and to require advanced approaches banking organizations (banking 
organizations subject to Category I or II standards, under this 
proposal) to use SA-CCR for calculating their risk-based capital ratios 
and a modified version of SA-CCR for calculating total leverage 
exposure under the supplementary leverage ratio. If that proposal were 
to be adopted, the agencies would allow a Category III banking 
organization to elect to use SA-CCR for calculating derivatives 
exposure in connection with its risk-based capital ratios, consistent 
with the SA-CCR proposal. Furthermore, if that proposal were to be 
adopted, the agencies intend to allow a banking organization subject to 
Category III standards to elect to use SA-CCR for calculating its total 
leverage exposure calculations used to determine the supplementary 
leverage ratio, or to continue to use the current exposure method.
    Banking organizations subject to Category III standards would not 
be required to apply advanced approaches capital requirements. The 
models for applying these requirements are costly to build and 
maintain, and the agencies do not expect that the removal of these 
requirements would materially change the amount of capital that these 
banking organizations would be required to maintain. The standardized 
approach currently represents the binding risk-based capital constraint 
for all banking organizations in the current population of banking 
organizations that would be subject to Category III standards.
    Question 18: Under the current capital rule, the agencies apply 
certain provisions, such as the supplementary leverage ratio and 
countercyclical capital buffer, based on the same applicability 
thresholds as advanced approaches capital requirements. The proposal 
would establish different applicability thresholds for the 
supplementary leverage ratio and countercyclical capital buffer by 
including them as Category III standards, while advanced approaches 
capital requirements would apply only as Category I and II standards. 
This approach would increase the risk-sensitivity of the framework and 
allow for the retention of key elements of the capital rule for banking 
organizations subject to Category III standards without requiring them 
to comply with advanced approaches capital requirements more broadly. 
However, it also increases the complexity of the capital rule. To what 
extent, if any, would this additional complexity increase compliance 
costs for large banking organizations (for example, by requiring 
banking organizations to monitor and manage the proposed risk-based 
indicator thresholds)? To what extent, if any, would the proposed 
approach add complexity for market participants when comparing the 
capital adequacy of banking organizations in different categories? The 
agencies request comment on the advantages and disadvantages of 
establishing separate regulatory capital standards for banking 
organizations that would be subject to Category III that are different 
from either Category II or IV standards, including any wider 
implications for financial stability.
    Question 19: What are the advantages and disadvantages of applying 
the supplementary leverage ratio requirement to banking organizations 
subject to Category III standards? How do these advantages and 
disadvantages compare to any costs associated with any additional 
complexity to the regulatory framework that would result from applying 
this to banking organizations subject to Category III standards? To 
what extent would application of the supplementary leverage ratio 
requirement to these banking organizations strengthen their safety and 
soundness and improve U.S. financial stability?
    Question 20: What are the advantages and disadvantages of not 
requiring banking organizations subject to Category III standards to 
recognize most elements of AOCI in regulatory capital? To what extent 
does not requiring banking organizations subject to Category III 
standards to recognize most elements of AOCI in regulatory capital 
impact safety and soundness of individual banking organizations or 
raise broader financial stability concerns? For example, to what extent 
would this approach reduce the accuracy of these banking organizations' 
reported regulatory capital? To what extent does the recognition of 
most elements of AOCI in regulatory capital improve market discipline 
and provide for a clearer picture of the financial health of banking 
organizations? To what extent does it make comparing the financial 
condition of Category III banking organizations to that of Category I 
and

[[Page 66036]]

Category II banking organizations, on the one hand, and that of 
Category IV banking organizations, on the other hand, more difficult?
    Question 21: With respect to banking organizations that currently 
recognize most elements of AOCI in regulatory capital, to what extent 
do intra-quarter variations in regulatory capital due to the inclusion 
of AOCI since the capital rule took effect differ from variations in 
reported quarter-end data over the same period? What have been the 
causes of variations in each?
    Question 22: As discussed above, the agencies are not requiring 
banking organizations subject to Category III standards to recognize 
most elements of AOCI in regulatory capital. Alternatively, the 
agencies could require only the top-tier parent holding company to 
recognize most elements of AOCI in regulatory capital while exempting 
their subsidiary depository institutions from this requirement. What 
are the advantages and disadvantages of this alternative approach? What 
would be the costs and operational challenges associated with this 
additional complexity, where the holding company and subsidiary 
depository institutions implement different standards related to AOCI? 
To what degree would this alternative approach to AOCI impose less cost 
or burden to banking organizations subject to Category III standards 
relative to their current AOCI requirement under the agencies' capital 
rule (i.e., both the top-tier holding company and subsidiary depository 
institutions are currently required to recognize most elements of AOCI 
in regulatory capital)? To what degree would this alternative approach 
provide market participants with a transparent picture of the financial 
condition of the subsidiary depository institutions and the parent 
holding company?
    Question 23: For purposes of comparability, in a final rulemaking 
should the agencies require all banking organizations subject to 
Category III standards to use SA-CCR for either risk-based or 
supplementary leverage ratio calculations and, if so, why?
    Question 24: What would be the advantages and disadvantages of no 
longer applying the countercyclical capital buffer to banking 
organizations that would be subject to Category III standards? In 
particular, how would narrowing the scope of application of the 
countercyclical buffer affect the financial stability and 
countercyclical objectives of the buffer? What other regulatory tools, 
if any, could be used to meet these objectives?
    Question 25: The proposal would apply Category III standards to a 
banking organization that exceeds certain risk-based indicators, 
including having more than $75 billion in off-balance sheet exposures. 
In light of the inclusion of off-balance sheet exposures as a threshold 
for Category III standards, discuss the advantages and disadvantages of 
including the supplementary leverage ratio as a Category III standard.
    With respect to liquidity requirements, the LCR rule and proposed 
NSFR rule provide standardized minimum liquidity requirements and 
measures of liquidity risk that enhance banking organizations' 
resiliency, improve risk management, and facilitate comparisons of 
liquidity risk across banking organizations. These standards are 
designed to achieve two separate but complementary objectives. The LCR 
rule promotes the resilience of a banking organization to liquidity 
risk by ensuring that it has sufficient liquid assets to survive a 
short-term period of stress. The proposed NSFR rule would address 
funding risks over a longer, one-year time horizon and mitigate the 
risk of disruptions to a banking organization's regular sources of 
funding by requiring banking organizations to maintain a stable funding 
profile.
    Category III standards would include full or reduced LCR and NSFR 
requirements, depending on a banking organization's level of weighted 
short-term wholesale funding. Specifically, a banking organization that 
meets the criteria for Category III standards would be subject to the 
full LCR and NSFR requirements if it has weighted short-term wholesale 
funding of $75 billion or more, or would be subject to less stringent, 
reduced LCR and NSFR requirements if it has less than $75 billion in 
weighted short-term wholesale funding.
    For banking organizations subject to Category III standards with 
weighted short-term wholesale funding of less than $75 billion, the 
agencies are proposing to reduce the stringency of the LCR and NSFR 
requirements and request comment regarding the appropriate level. These 
banking organizations would be subject to reduced LCR and NSFR 
requirements, as they have less reliance on short-term wholesale 
funding that is a source of liquidity risk. While the failure or 
distress of such a firm could pose risks to U.S. financial stability, 
their risk profile is lower than that of U.S. GSIBs and they are 
smaller or face a lesser degree of cross-border challenges than firms 
that would be subject to Category II standards. In addition, although 
the proposal would reduce the standardized LCR and NSFR requirements 
for these banking organizations, under the Board-only proposal, 
depository institution holding companies subject to Category III 
standards would be required to comply with liquidity risk management, 
stress testing, and buffer requirements, which reflect the firm's 
individual risk profile.
    The denominator of the proposed reduced LCR would equal the net 
cash outflows calculated under the full LCR requirement, multiplied by 
a factor that reduces its stringency. Similarly, the denominator of the 
NSFR would equal the required stable funding requirement calculated 
under the full NSFR requirement, multiplied by a factor that reduces 
its stringency. The agencies are requesting comment on applying reduced 
standards that would be equivalent to between 70 and 85 percent of the 
full LCR and NSFR requirements. The proposal would not alter other 
aspects of the LCR and NSFR calculations for these banking 
organizations, relative to the full LCR and proposed NSFR requirements. 
For example, these banking organizations would continue to calculate 
their LCR on each business day and include the maturity mismatch add-on 
in the calculation.\51\
---------------------------------------------------------------------------

    \51\ Section 30 of the LCR rule requires a banking organization, 
as applicable, to include in its total net cash outflow amount a 
maturity mismatch add-on, which is calculated as the difference (if 
greater than zero) between the covered company's largest net 
cumulative maturity outflow amount for any of the 30 calendar days 
following the calculation date and the net day 30 cumulative 
maturity outflow amount.
---------------------------------------------------------------------------

    Like the current LCR and NSFR requirements, the proposal would 
apply Category III LCR and NSFR requirements to a depository 
institution that has total consolidated assets of $10 billion or more 
and is a consolidated subsidiary of a company subject to Category III 
standards.\52\ The level of the LCR and NSFR requirements applicable to 
the subsidiary depository institution would be the same as the level 
that would apply to the parent banking organization. For example, a 
subsidiary depository institution with $10 billion in total 
consolidated assets of a banking organization subject to the reduced 
LCR and NSFR requirements under Category III standards would also be 
subject to the reduced LCR and NSFR requirement.\53\
---------------------------------------------------------------------------

    \52\ As discussed in section II.B.4 of this Supplementary 
Information section, the proposal would measure the total 
consolidated assets of a subsidiary depository institution based on 
the level over the previous four calendar quarters.
    \53\ In the case of a depository institution that is not a 
consolidated subsidiary of a banking organization that would be 
subject to Category I, II, III, or IV standards or a consolidated 
subsidiary of a foreign banking organization, the applicable 
category of standards would depend on the risk-based indicators of 
the depository institution. For example, if the depository 
institution meets the criteria for Category III standards but has 
weighted short-term wholesale funding of less than $75 billion, the 
depository institution would be subject to the proposed reduced LCR 
and NSFR requirements.

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[[Page 66037]]

    Question 26: In general, the proposed framework would apply 
consistent requirements to all banking organizations within each 
category of standards. For the LCR and proposed NSFR requirements, 
however, the agencies are proposing two levels of standards within 
Category III. Specifically, the proposal would apply reduced LCR and 
NSFR requirements to a banking organization subject to Category III 
standards that has less than $75 billion in weighted short-term 
wholesale funding and that is not a subsidiary of a banking 
organization subject to the full LCR or proposed NSFR requirements. 
This additional degree of tailoring is intended to reflect 
considerations specific to liquidity risk, and would allow further 
differentiation within Category III to accommodate reduced requirements 
for banking organizations with lesser liquidity risk profiles. However, 
this additional risk-sensitivity would also increase the complexity of 
the proposed framework. The agencies request comment regarding this 
proposed trade-off. In particular, what do commenters believe would be 
the advantages and disadvantages of this additional degree of 
differentiation for purposes of determining the level of LCR and NSFR 
requirements? What costs, if any, would this additional degree of 
complexity create for large banking organizations? What alternatives 
should the agencies consider to the proposed approach that would 
maintain strong standardized liquidity requirements for large banking 
organizations with significant liquidity risk exposures that do not 
meet the proposed criteria for application of Category I or Category II 
standards? What other risk-based indicators, besides short-term 
wholesale funding, should the agencies consider in prescribing the 
liquidity requirements under the proposal, and why? What would be the 
advantages or disadvantages of requiring all Category III banking 
organizations to meet the full LCR and NSFR requirements? Similarly, 
what would be the advantages or disadvantages of requiring all Category 
III banking organizations to meet the reduced LCR and NSFR 
requirements?
    Question 27: Between a range of 70 and 85 percent of the full 
requirements, what level should the agencies adopt for the reduced LCR 
and NSFR requirements for banking organizations subject to Category III 
standards that have less than $75 billion in weighted short-term 
wholesale funding, and why?
    Consistent with section 22(b) of the LCR rule, a banking 
organization subject to the proposed reduced LCR requirement would not 
be permitted to include in its HQLA amount eligible HQLA of a 
consolidated subsidiary except up to the amount of the net cash 
outflows of the subsidiary (as adjusted for the factor reducing the 
stringency of the requirement), plus any additional amount of assets, 
including proceeds from the monetization of assets, that would be 
available for transfer to the top-tier covered company during times of 
stress without statutory, regulatory, contractual, or supervisory 
restrictions.\54\ A similar restriction would apply under section 108 
of the NSFR proposed rule.\55\
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    \54\ See Sec.  __.22(b)(3) and (4) of the LCR rule (12 CFR 
50.22(b)(3) and (4) (OCC); 12 CFR 249.22(b)(3) and (4) (Board); 12 
CFR 329.22(b)(3) and (4) (FDIC).
    \55\ See NSFR proposed rule Sec.  __.108.
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    Question 28: The agencies request comment regarding this proposed 
approach, as well as potential alternative approaches to recognizing 
restrictions on the transferability of liquidity from a consolidated 
subsidiary to the top-tier covered company. What alternative approaches 
should the agencies consider?
    For example, should the agencies consider the approach the Board 
currently permits for holding companies subject to a modified LCR 
requirement? Under this approach, a company may include in its HQLA 
amount eligible HQLA held at a subsidiary up to 100 percent of the net 
cash outflows of the subsidiary, plus amounts that may be transferred 
without restriction to the top-tier covered company. In the case of the 
NSFR proposed rule, a company could include available stable funding 
amounts of the subsidiary up to 100 percent of the required stable 
funding amount of the subsidiary, plus amounts that may be transferred 
without restriction to the top-tier covered company. What would be the 
advantages and disadvantages of the proposed approach and potential 
alternatives? What incentives would each have with respect to the 
positioning of HQLA within a banking organization? What effects would 
the proposed approach or alternative approaches have on the safety and 
soundness of a holding company and its subsidiary depository 
institutions?
4. Category IV Standards
    Under the proposal, Category IV standards would apply to banking 
organizations with $100 billion or more in total consolidated assets 
that do not meet the criteria for Categories I, II, or III, and their 
subsidiary depository institutions. Relative to current requirements, 
the proposed Category IV standards would reduce liquidity and, in 
certain circumstances, capital requirements to reflect these banking 
organizations' lower risk profile and lesser degree of complexity 
relative to other large banking organizations.
    Category IV capital standards would include the generally 
applicable risk-based capital requirements and the U.S. leverage ratio. 
The proposal would not apply the countercyclical capital buffer and the 
supplementary leverage ratio applicable under Category III to Category 
IV banking organizations. In this manner, the standards applicable to 
banking organizations subject to Category IV would maintain the risk-
sensitivity of the current capital regime and resiliency of these 
banking organizations' capital positions, and would recognize that 
these banking organizations, while large, have lower indicators of risk 
relative to their larger peers, as set forth in the proposal. As a 
result, and as noted above, banking organizations subject to Category 
IV standards would generally have the same capital and liquidity 
regulatory requirements as banking organizations under $100 billion in 
total consolidated assets.
    Under the proposal, Category IV standards would not include an LCR 
or NSFR requirement. As a result, the Board is proposing to remove the 
current modified LCR requirement and the proposed modified NSFR 
requirement for domestic banking organizations.\56\ The LCR rule and 
NSFR proposed rule are important standards for Category I, Category II, 
and Category III given such banking organizations' size, complexity, 
and the resulting challenges that may complicate the resolution of such 
banking organizations. However these standardized liquidity 
requirements are less important for banking organizations subject to 
Category IV standards given

[[Page 66038]]

their smaller systemic footprint, more limited size, and other 
applicable requirements. As a class, the domestic banking organizations 
currently in this category have more traditional balance sheet 
structures, are largely funded by stable deposits, and have little 
reliance on less stable wholesale funding. All banking organizations 
that would be subject to Category IV have less than $75 billion in 
weighted short-term wholesale funding. Board estimates of stable 
funding for these banking organizations indicate they would exceed by 
roughly 40 percent the modified 70 percent NSFR requirement that would 
apply under the agencies' NSFR proposed rule. These banking 
organizations would also continue to be subject to the internal 
liquidity stress testing requirements at the consolidated holding 
company level under the Board's regulations, which include 30-day and 
1-year planning horizons, and Complex Institution Liquidity Monitoring 
Report (FR 2052a) requirements.\57\ Based on this combination of 
factors, and given the compliance and disclosure obligations under the 
LCR rule and proposed NSFR rule, the agencies are proposing to no 
longer apply the LCR rule and proposed NSFR rule to banking 
organizations subject to Category IV standards.
---------------------------------------------------------------------------

    \56\ The proposal would also remove the modified LCR and 
proposed modified NSFR requirements for banking organizations with 
total consolidated assets less than $100 billion. As previously 
noted, the Board plans to develop a separate proposal relating to 
foreign banking organizations. Accordingly, the proposal would 
maintain the current full and modified LCR requirements, as 
applicable, for banking organizations that are consolidated 
subsidiaries of a foreign banking organization until such time as 
the Board adopts a final rule to amend the requirements for these 
banking organizations.
    \57\ The Board-only proposal provides further discussion of 
liquidity standards that would apply under the Board's regulations 
to firms that would be subject to Category IV standards.
---------------------------------------------------------------------------

    Question 29: Based on the risk profiles of banking organizations 
subject to Category IV standards, what alternative capital and 
liquidity requirements should the agencies consider and why?
    Question 30: The proposal would not apply the LCR or the proposed 
NSFR rules to banking organizations subject to Category IV standards. 
What are the advantages and disadvantages of this approach? To what 
extent would scoping out banking organizations subject to Category IV 
standards from the LCR and proposed NSFR rules affect the safety and 
soundness of individual banking organizations or raise broader 
financial stability concerns? To what extent does maintaining liquidity 
risk management and internal liquidity stress testing and buffer 
requirements at the holding company level for these firms under the 
Board-only proposal mitigate these concerns? What are the advantages 
and disadvantages of maintaining standardized liquidity requirements, 
such as the current LCR requirement and proposed NSFR requirement, for 
firms subject to Category IV standards? If the Board were to apply some 
or all of the LCR and proposed NSFR requirements to these firms, what, 
if any, other regulatory requirements should the Board consider 
reducing or removing?

III. Impact Analysis

    The Board assessed the potential impact of the proposed rule, 
taking into account potential benefits in the form of increased net 
interest margins from holding higher yielding assets, reduced 
compliance costs, and increased regulatory flexibility, and potential 
costs related to increased risk to holding companies during a period of 
elevated economic stress or market volatility.\58\
---------------------------------------------------------------------------

    \58\ As noted in section IV.D of this Supplementary Information, 
the OCC also considered the potential costs of the proposed rule for 
the purpose of the Unfunded Mandates Reform Act of 1996 (2 U.S.C. 
1532).
---------------------------------------------------------------------------

    The Board expects the proposal to have no material impact on the 
capital levels of banking organizations that would be subject to 
Category I or II standards. For banking organizations that would be 
subject to Category III or IV standards, the Board expects the proposal 
to slightly lower capital requirements under current conditions (by 
approximately $8 billion, or 60 basis points of total risk-weighted 
assets among these banking organizations) and reduce compliance costs 
for certain banking organizations related to the advanced approaches 
capital requirements. The impact on capital levels for banking 
organizations subject to Category III and IV standards could vary under 
different economic and market conditions. For example, from 2001 to 
2018, the aggregate AOCI for banking organizations subject to Category 
III or Category IV standards that included AOCI in capital has ranged 
from a decrease of approximately 140 basis points of total risk-
weighted assets to an increase of approximately 50 basis points of 
total risk-weighted assets.
    For purposes of assessing the potential impact of the proposed 
changes to the liquidity standards, the Board's assessment focused on 
the impact of the proposed change in the applicability and the 
stringency of the Board's existing liquidity standards under the LCR 
rule.\59\ The Board quantified the impact of the proposed LCR tailoring 
on the HQLA of affected holding companies.\60\ In the analysis, the 
Board assumed that holding companies subject to Category III standards 
and holding companies subject to Category IV standards would respond 
differently to the new regulatory requirements. For holding companies 
subject to Category III requirements, the proposal would generally 
result in a decrease in LCR minimum requirements that could range from 
70 to 85 percent of the full LCR requirements if the firm has less than 
$75 billion in weighted short-term wholesale funding. The Board assumes 
that holding companies subject to Category III standards would adjust 
their HQLA so that they choose the higher of the following two options: 
(i) Preserve the same LCR, in percentage point terms, they had in the 
first quarter of 2018, measured using the new requirement, or (ii) meet 
their internal liquidity stress test (ILST) requirement.\61\ As holding 
companies subject to Category IV standards would no longer be subject 
to an LCR requirement under the proposal, the Board assumed that these 
firms would adjust their liquid asset holdings such that they choose 
the higher of the following: (i) Match the HQLA levels of holding 
companies that are currently not subject to the LCR rule or (ii) meet 
their internal liquidity stress test requirement. The Board assumed 
that the net cash outflows of holding companies, the denominator of the 
LCR, remains unchanged.
---------------------------------------------------------------------------

    \59\ Because the NSFR and modified NSFR requirements have not 
yet been finalized, banking organizations are not currently subject 
to those minimum requirements. As a result, the Board did not assess 
any changes in impact as a result of amending its scope of 
application.
    \60\ The Board's analysis estimates the impact of reducing the 
LCR requirement for holding companies that would be subject to 
Category III or Category IV standards using data submitted on the FR 
2052a and FR Y9-C by these holding companies for the 2018Q1 
reporting period.
    \61\ For example, in the case of a holding company that would be 
subject to Category III standards and the reduced LCR and NSFR 
requirements under the proposal, if the firm's current LCR 
requirement is greater than its ILST-based liquidity buffer 
requirement, and the firm currently maintains an LCR of 120 percent 
relative to the currently applicable full LCR requirement, the 
approach would assume the firm will reduce its HQLA by 30 percent 
under a 70 percent LCR requirement.
---------------------------------------------------------------------------

    The Board estimates that under a 70 percent LCR requirement, 
holding companies subject to Category III standards that have less than 
$75 billion in weighted short-term wholesale funding would reduce HQLA 
by approximately $43 billion.\62\ With regard to the holding companies 
subject to Category IV standards, the Board estimates a reduction in 
HQLA of approximately $34 billion. The combined reduction represents a 
2.5

[[Page 66039]]

percent reduction of aggregate HQLA among holding companies with $100 
billion or more in total consolidated assets. As a result, the Board 
projects that the reduction in LCR requirements would modestly reduce 
the liquidity buffers held at affected holding companies.
---------------------------------------------------------------------------

    \62\ The estimated drop in HQLA, assuming an 85 percent LCR for 
holding companies subject to Category III standards that have less 
than $75 billion in weighted short-term wholesale funding, would be 
approximately $20 billion (or 0.6 percent reduction of aggregate 
HQLA among holding companies with $100 billion or more in total 
consolidated assets).
---------------------------------------------------------------------------

    In the second part of the analysis, the Board estimated how the 
proposal would affect the net interest margin, loan growth, and the 
probability that these holding companies could experience liquidity 
pressure during a period of elevated stress or volatility (outcome 
variables). The Board implemented this analysis by using regression 
models for the above variables. As an input to these regression models, 
the Board used the estimates for the proposal's direct effects on HQLA 
to infer its indirect effects on the outcome variables.
    The Board estimates that the reduction in the LCR requirements 
would modestly increase the net interest margin at affected holding 
companies. Reducing the LCR calibration to 70 percent for banking 
organizations subject to Category III standards that have less than $75 
billion in weighted short-term wholesale funding and removing the LCR 
for holding companies subject to Category IV standards would moderately 
increase the likelihood that these holding companies could experience 
liquidity pressure during times of stress.\63\ The Board-only proposal 
would continue to require these holding companies to conduct internal 
liquidity stress tests and hold highly liquid assets sufficient to meet 
projected 30-day net stressed cash-flow needs under internal stress 
scenarios. In addition, the Board will continue to assess the safety 
and soundness of these holding companies through the normal course of 
supervision.
---------------------------------------------------------------------------

    \63\ If the agencies calibrate the LCR requirement at 85 percent 
for banking organizations subject to Category III standards with 
less than $75 billion in weighted short-term wholesale funding, the 
Board estimates the likelihood of experiencing material financial 
distress during a period of elevated economic stress or market 
volatility would increase only modestly.
---------------------------------------------------------------------------

IV. Administrative Law Matters

A. Paperwork Reduction Act

    Certain provisions of the proposed rule contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the agencies 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 number for the OCC is 
1557-0318, Board is 7100-0313, and FDIC is 3064-0153. The OCC and FDIC 
may need to request new control numbers if submissions are pending 
under their respective control numbers at the time of this submission. 
These information collections will be extended for three years, with 
revision. The information collection requirements contained in this 
proposed rulemaking have been submitted by the OCC and FDIC to OMB for 
review and approval under section 3507(d) of the PRA (44 U.S.C. 
3507(d)) and section 1320.11 of the OMB's implementing regulations (5 
CFR 1320). The Board reviewed the proposed rule under the authority 
delegated to the Board by OMB.
    Comments are invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the agencies' 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 comments will become a matter of public record. Comments on 
aspects of this document that may affect reporting, recordkeeping, or 
disclosure requirements and burden estimates should be sent to the 
addresses listed in the ADDRESSES section of this document. A copy of 
the comments may also be submitted to the OMB desk officer for the 
agencies by mail to U.S. Office of Management and Budget, 725 17th 
Street NW, #10235, Washington, DC 20503; facsimile to (202) 395-6974; 
or email to oira_submission@omb.eop.gov, Attention, Federal Banking 
Board Desk Officer.
Information Collection Proposed To Be Revised
    Title of Information Collection: Recordkeeping and Disclosure 
Requirements Associated with Capital Adequacy.
    Frequency: Quarterly, annual.
    Affected Public: Businesses or other for-profit.
    Respondents:
    OCC: National banks and federal savings associations.
    Board: State member banks (SMBs), bank holding companies (BHCs), 
U.S. intermediate holding companies, savings and loan holding companies 
(SLHCs), and global systemically important bank holding companies (G-
SIBs).
    FDIC: State nonmember banks and state savings associations.
    Current Actions: The proposal would establish a revised framework 
for determining applicability of requirements under the regulatory 
capital rule, the liquidity coverage ratio rule, and the proposed net 
stable funding ratio rule for large U.S. banking organizations based on 
their risk profile. The proposal would establish four categories of 
standards and apply tailored capital and liquidity requirements for 
banking organizations subject to each category. The proposal is 
consistent with a separate proposal issued by the Board that would 
apply enhanced prudential standards for large banking organizations 
based on those four categories of standards. The proposal would not 
amend the capital and liquidity requirements currently applicable to an 
intermediate holding company of a foreign banking organization or its 
subsidiary depository institutions. These changes will not result in 
changes to the PRA-related burden. Nevertheless, in order to be 
consistent across the agencies, the agencies would apply a conforming 
methodology for calculating the PRA-related burden estimates. The 
agencies would also update the number of respondents based on the 
current number of supervised entities even though this proposal only 
affects a limited number of entities. The agencies believe that any 
changes to the information collections associated with the proposed 
rule are the result of the conforming methodology and updates to the 
respondent count, and not the result of the proposed rule changes.
PRA Burden Estimates
OCC
    OMB control number: 1557-0318.
    Estimated number of respondents: 1,365 (of which 18 are advanced 
approaches institutions).
    Estimated average hours per response:
Minimum Capital Ratios (1,365 Institutions Affected)
    Recordkeeping (Ongoing)--16.

[[Page 66040]]

Standardized Approach (1,365 Institutions Affected for Ongoing)
    Recordkeeping (Initial setup)--122.
    Recordkeeping (Ongoing)--20.
    Disclosure (Initial setup)--226.25.
    Disclosure (Ongoing quarterly)--131.25.
Advanced Approach (18 Institutions Affected for Ongoing)
    Recordkeeping (Initial setup)--460.
    Recordkeeping (Ongoing)--540.77.
    Recordkeeping (Ongoing quarterly)--20.
    Disclosure (Initial setup)--280.
    Disclosure (Ongoing)--5.78.
    Disclosure (Ongoing quarterly)--35.
    Estimated annual burden hours: 1,088 hours initial setup, 64,929 
hours for ongoing.
Board
    Agency form number: FR Q.
    OMB control number: 7100-0313.
    Estimated number of respondents: 1,431 (of which 17 are advanced 
approaches institutions).
    Estimated average hours per response:
Minimum Capital Ratios (1,431 Institutions Affected for Ongoing)
    Recordkeeping (Ongoing)--16.
Standardized Approach (1,431 Institutions Affected for Ongoing)
    Recordkeeping (Initial setup)--122.
    Recordkeeping (Ongoing)--20.
    Disclosure (Initial setup)--226.25.
    Disclosure (Ongoing quarterly)--131.25.
Advanced Approach (17 Institutions Affected)
    Recordkeeping (Initial setup)--460.
    Recordkeeping (Ongoing)--540.77.
    Recordkeeping (Ongoing quarterly)--20.
    Disclosure (Initial setup)--280.
    Disclosure (Ongoing)--5.78.
    Disclosure (Ongoing quarterly)--35.
    Disclosure (Table 13 quarterly)--5.
Risk-Based Capital Surcharge for GSIBs (21 Institutions Affected)
    Recordkeeping (Ongoing)--0.5.
    Estimated annual burden hours: 1,088 hours initial setup, 78,183 
hours for ongoing.
FDIC
    OMB control number: 3064-0153.
    Estimated number of respondents: 3,575 (of which 2 are advanced 
approaches institutions).
    Estimated average hours per response:
Minimum Capital Ratios (3,575 Institutions Affected)
    Recordkeeping (Ongoing)--16.
Standardized Approach (3,575 Institutions Affected for Ongoing)
    Recordkeeping (Initial setup)--122.
    Recordkeeping (Ongoing)--20.
    Disclosure (Initial setup)--226.25.
    Disclosure (Ongoing quarterly)--131.25.
Advanced Approach (2 Institutions Affected for Ongoing)
    Recordkeeping (Initial setup)--460.
    Recordkeeping (Ongoing)--540.77.
    Recordkeeping (Ongoing quarterly)--20.
    Disclosure (Initial setup)--280.
    Disclosure (Ongoing)--5.78.
    Disclosure (Ongoing quarterly)--35.
    Estimated annual burden hours: 1,088 hours initial setup, 130,758 
hours for ongoing.
    The proposed rule would also require changes to the Consolidated 
Reports of Condition and Income (Call Reports) (FFIEC 031, FFIEC 041, 
and FFIEC 051; OMB Nos. 1557-0081 (OCC), 7100-0036 (Board), and 3064-
0052 (FDIC)) and Risk-Based Capital Reporting for Institutions Subject 
to the Advanced Capital Adequacy Framework (FFIEC 101; OMB Nos. 1557-
0239 (OCC), 7100-0319 (Board), and 3064-0159 (FDIC)), which will be 
addressed in a separate Federal Register notice.

B. Regulatory Flexibility Act Analysis

    OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), 
requires an agency, in connection with a proposed rule, to prepare an 
Initial Regulatory Flexibility Analysis describing the impact of the 
rule on small entities (defined by the SBA for purposes of the RFA to 
include commercial banks and savings institutions with total 
consolidated assets of $550 million or less and trust companies with 
total consolidated assets of $38.5 million of less) or to certify that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    As of June 30, 2018, the OCC supervises 886 small entities.\64\
---------------------------------------------------------------------------

    \64\ The OCC calculated the number of small entities using the 
SBA's size thresholds for commercial banks and savings institutions, 
and trust companies, which are $550 million and $38.5 million, 
respectively. Consistent with the General Principles of Affiliation, 
13 CFR 121.103(a), the OCC counted the assets of affiliated 
financial institutions when determining whether to classify a 
national bank or Federal savings association as a small entity.
---------------------------------------------------------------------------

    As part of our analysis, we consider whether the proposal will have 
a significant economic impact on a substantial number of small 
entities, pursuant to the RFA. This proposal only applies to large 
banking organizations, therefore, it will not impact any OCC-supervised 
small entities. For this reason, the OCC certifies that the proposed 
rule would not have a significant economic impact on a substantial 
number of OCC-supervised small entities.
    Board: The RFA requires an agency to either provide an initial 
regulatory flexibility analysis with a proposal or certify that the 
proposal will not have a significant impact on a substantial number of 
small entities. Under regulations issued by the SBA, a small entity 
includes a bank, bank holding company, or savings and loan holding 
company with assets of $550 million or less (small banking 
organization).\65\ As of June 30, 2018, there were approximately 3,304 
small bank holding companies, 216 small savings and loan holding 
companies, and 535 small SMBs.
---------------------------------------------------------------------------

    \65\ See 13 CFR 121.201. Effective July 14, 2014, the SBA 
revised the size standards for banking organizations to $550 million 
in assets from $500 million in assets. 79 FR 33647 (June 12, 2014).
---------------------------------------------------------------------------

    The Board has considered the potential impact of the proposed rule 
on small entities in accordance with the RFA. Based on the Board's 
analysis, and for the reasons stated below, the Board believes that 
this proposed rule will not have a significant economic impact on a 
substantial of number of small entities. Nevertheless, the Board is 
providing an initial regulatory flexibility analysis with respect to 
this proposed rule. A final regulatory flexibility analysis will be 
conducted after comments received during the public comment period have 
been considered. The Board welcomes comment on all aspects of its 
analysis. In particular, the Board requests that commenters describe 
the nature of any impact on small entities and provide empirical data 
to illustrate and support the extent of the impact.
    As discussed in the SUPPLEMENTARY INFORMATION, the Board is 
proposing to adopt amendments to the Board's capital rule \66\ and LCR 
rule.\67\ The capital rule applies to all state member banks, bank 
holding companies, and covered savings and loan holding companies, 
except for institutions that are subject to the Board's Small Bank 
Holding Company and Small Savings and Loan Holding Company Policy 
Statement, which apply to bank holding companies and savings and loan 
holding companies with less than $3 billion in total consolidated 
assets that also meet certain additional criteria.\68\ The proposed 
changes to the capital rule

[[Page 66041]]

generally affect state member banks, bank holding companies, and 
covered savings and loan holding companies with $50 billion or more in 
total consolidated assets. Thus, most state member banks, bank holding 
companies, and covered savings and loan holding companies that would be 
subject to the proposed rule exceed the $550 million asset threshold at 
which a banking organization would qualify as a small banking 
organization.
---------------------------------------------------------------------------

    \66\ See 12 CFR part 217.
    \67\ See 12 CFR part 249.
    \68\ See 12 CFR 217.1(c)(1)(ii) and (iii); 12 CFR part 225, 
appendix C; 12 CFR 238.9.
---------------------------------------------------------------------------

    The Board is also proposing changes to regulatory requirements 
under the LCR rule. The LCR rule applies to state member banks, bank 
holding companies and covered savings and loan holding companies with 
(i) $250 billion or more in total consolidated assets; or (ii) total 
consolidated on-balance sheet foreign exposure equal to $10 billion or 
more. The LCR rule also applies to state member banks with total 
consolidated assets equal to $10 billion or more that are consolidated 
subsidiaries of a covered bank holding company. The modified LCR, which 
is part of the LCR rule, applies to certain bank holding companies and 
covered savings and loan holding companies with $50 billion or more in 
total consolidated assets. Most institutions that are affected by the 
proposal therefore substantially exceed the $550 million asset 
threshold at which a banking entity is considered a ``small entity'' 
under SBA regulations.
    The agencies anticipate proposing updates to the relevant reporting 
forms at a later date to the extent necessary to align with the 
proposed changes to the capital rule and LCR rule. Given that the 
proposed rule does not impact the recordkeeping and reporting 
requirements to which that affected small banking organizations are 
currently subject, there would be no change to the information that 
small banking organizations must track and report.
    The Board does not believe that the proposed rule duplicates, 
overlaps, or conflicts with any other Federal rules. In addition, there 
are no significant alternatives to the proposed rule. In light of the 
foregoing, the Board does not believe that the proposed rule, if 
adopted in final form, would have a significant economic impact on a 
substantial number of small entities.
    FDIC: The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires an agency, in connection with a proposed rule, to 
prepare and make available for public comment an initial regulatory 
flexibility analysis that describes the impact of a proposed rule on 
small entities.\69\ However, a regulatory flexibility analysis is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Small Business Administration (SBA) has defined ``small entities'' 
to include banking organizations with total assets of less than or 
equal to $550 million who are independently owned and operated or owned 
by a holding company with less than $550 million in total assets.\70\ 
For the reasons described below and under section 605(b) of the RFA, 
the FDIC certifies that the proposed rule will not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \69\ 5 U.S.C. 601 et seq.
    \70\ The SBA defines a small banking organization as having $550 
million or less in assets, where ``a financial institution's assets 
are determined by averaging the assets reported on its four 
quarterly financial statements for the preceding year.'' See 13 CFR 
121.201 (as amended, effective December 2, 2014). ``SBA counts the 
receipts, employees, or other measure of size of the concern whose 
size is at issue and all of its domestic and foreign affiliates.'' 
See 13 CFR 121.103. Following these regulations, the FDIC uses a 
covered entity's affiliated and acquired assets, averaged over the 
preceding four quarters, to determine whether the covered entity is 
``small'' for the purposes of RFA.
---------------------------------------------------------------------------

    The FDIC supervises 3,575 institutions, of which 2,763 are 
considered small entities for the purposes of RFA.\71\
---------------------------------------------------------------------------

    \71\ Call Report data, June 30th, 2018.
---------------------------------------------------------------------------

    This proposed rule will affect all institutions subject to the 
current advanced approaches regulations and their subsidiaries. The 
FDIC does not supervise any advanced approaches banking organizations 
or subsidiaries thereof that have $550 million or less in total 
consolidated assets.\72\ Since this proposal does not affect any 
institutions that are defined as small entities for the purposes of the 
RFA, the FDIC certifies that the proposed rule will not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \72\ Call Report data, June 30th 2018.
---------------------------------------------------------------------------

    The FDIC invites comments on all aspects of the supporting 
information provided in this RFA section. In particular, would this 
rule have any significant effects on small entities that the FDIC has 
not identified?

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \73\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The agencies have sought to present 
the proposed rule in a simple and straightforward manner, and invite 
comment on the use of plain language. For example:
---------------------------------------------------------------------------

    \73\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
---------------------------------------------------------------------------

     Have the agencies organized the material to suit your 
needs? If not, how could they present the proposed rule more clearly?
     Are the requirements in the proposed rule clearly stated? 
If not, how could the proposed rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would achieve that?
     Would more, but shorter, sections be better? If so, which 
sections should be changed?''
     What other changes can the agencies incorporate to make 
the regulation easier to understand?

D. OCC Unfunded Mandates Reform Act of 1995 Determination

    The OCC analyzed the proposed rule under the factors set forth in 
the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under 
this analysis, the OCC considered whether the proposed rule includes a 
Federal mandate that may result in the expenditure by State, local, and 
Tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted for inflation). The OCC has 
determined that this proposed rule would not result in expenditures by 
State, local, and Tribal governments, or the private sector, of $100 
million or more in any one year. Accordingly, the OCC has not prepared 
a written statement to accompany this proposal.

E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\74\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured depository institutions, each Federal banking agency must 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the

[[Page 66042]]

benefits of such regulations. In addition, section 302(b) of RCDRIA 
requires new regulations and amendments to regulations that impose 
additional reporting, disclosures, or other new requirements on insured 
depository institutions generally to take effect on the first day of a 
calendar quarter that begins on or after the date on which the 
regulations are published in final form.\75\
---------------------------------------------------------------------------

    \74\ 12 U.S.C. 4802(a).
    \75\ Id.

The agencies note that comment on these matters has been solicited in 
other sections of this SUPPLEMENTARY INFORMATION section, and that the 
requirements of RCDRIA will be considered as part of the overall 
rulemaking process. In addition, the agencies also invite any other 
comments that further will inform the agencies' consideration of 
RCDRIA.

12 CFR Part 3

    Administrative practice and procedure, Asset risk-weighting 
methodologies, Banking, Banks, Capital adequacy, Capital requirements, 
Federal savings associations, National banks, Reporting and 
recordkeeping requirements, Risk.

12 CFR Part 50

    Administrative practice and procedure, Banking, Banks, Liquidity, 
Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 217

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

12 CFR Part 249

    Administrative practice and procedure, Banking, Banks, Federal 
Reserve System, Holding companies, Liquidity, Reporting and 
recordkeeping requirements.

12 CFR Part 324

    Administrative practice and procedure, Banking, Banks, Capital 
adequacy, Reporting and recordkeeping requirements, Savings 
associations, State non-member banks.

12 CFR Part 329

    Administrative practice and procedure, Banking, Banks, Federal 
Deposit Insurance Corporation, Liquidity, Reporting and recordkeeping 
requirements, Savings associations.

Authority and Issuance

    For the reasons stated in the Supplementary Information, chapter I 
of title 12 of the Code of Federal Regulations is proposed to be 
amended as follows:

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR CHAPTER I

PART 3--CAPITAL ADEQUACY STANDARDS

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

    Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).

0
2. In Sec.  3.2 add the definitions of Category II national bank or 
Federal savings association, and Category III national bank or Federal 
savings association, FR Y-9LP, and FR Y-15 in alphabetical order to 
read as follows:


Sec.  3.2  Definitions.

* * * * *
    Category II national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a Category II banking organization, as defined pursuant 
to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or
    (2) A national bank or Federal savings association that:
    (i) (A) Has total consolidated assets, calculated based on the 
average of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Consolidated Report of Condition and Income (Call 
Report), equal to $700 billion or more. If the national bank or Federal 
savings association has not filed the Call Report for each of the four 
most recent calendar quarters, total consolidated assets means the 
average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, of $100 billion or more but less than $700 billion. If the 
national bank or Federal savings association has not filed the Call 
Report for each of the four most recent quarters, total consolidated 
assets means the average of its total consolidated assets, as reported 
on the Call Report, for the most recent quarter or quarters, as 
applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR 
Y-15 or equivalent reporting form;
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, a national bank or Federal savings association continues to be 
a Category II national bank or Federal savings association until the 
national bank or Federal savings association has:
    (A) (1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a subsidiary of a global systemically important BHC. 
Category III national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a Category III banking organization as defined pursuant 
to 12 CFR 252.5 or 12 CFR 238.10, as applicable; or
    (2) A national bank or Federal savings association that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Call Report, equal to $250 billion or more. If the 
national bank or Federal savings association has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, of $100 billion or more but less than

[[Page 66043]]

$250 billion. If the national bank or Federal savings association has 
not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; and
    (2) At least one of the following, each calculated as the average 
of the four most recent consecutive quarters, or if the national bank 
or Federal savings association has not filed each applicable reporting 
form for each of the four most recent calendar quarters, for the most 
recent quarter or quarters, as applicable:
    (i) Total nonbank assets, calculated in accordance with the 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure equal to $75 billion or more. Off-
balance sheet exposure is a national bank's or Federal savings 
association's total exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the national bank or Federal savings 
association, as reported on the Call Report; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (ii) After meeting the criteria in paragraphs (2)(i) of this 
definition, a national bank or Federal savings association continues to 
be a Category III national bank or Federal savings association until 
the national bank or Federal savings association has:
    (A)(1) Less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is a 
national bank's or Federal savings association's total exposure, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
national bank or Federal savings association, as reported on the Call 
Report; or
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (C) Is a Category II national bank or Federal savings association; 
or
    (D) Is a subsidiary of a global systemically important BHC.
    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
0
3. In Sec.  3.10, revise paragraphs (a)(6), (c) introductory text, and 
(c)(4)(i) introductory text to read as follows:


Sec.  3.10   Minimum capital requirements.

    (a) * * *
    (6) For advanced approaches national banks and Federal savings 
associations, and for Category III national banks and Federal savings 
associations, a supplementary leverage ratio of 3 percent.
* * * * *
    (c) Advanced approaches capital ratio calculations. An advanced 
approaches national bank or Federal savings association that has 
completed the parallel run process and received notification from the 
OCC pursuant to Sec.  3.121(d) must determine its regulatory capital 
ratios as described in paragraphs (c)(1) through (3) of this section. 
An advanced approaches national bank or Federal savings association 
must determine its supplementary leverage ratio in accordance with 
paragraph (c)(4) of this section, beginning with the calendar quarter 
immediately following the quarter in which the national bank or Federal 
savings association institution meets any of the criteria in Sec.  
3.100(b)(1). A Category III national bank or Federal savings 
association must determine its supplementary leverage ratio in 
accordance with paragraph (c)(4) of this section, beginning with the 
calendar quarter immediately following the quarter in which the 
national bank or Federal savings association is identified as a 
Category III national bank or Federal savings association.
* * * * *
    (4) Supplementary leverage ratio. (i) An advanced approaches 
national bank's or Federal savings association's or a Category III 
national bank's or Federal savings association's supplementary leverage 
ratio is the ratio of its tier 1 capital to total leverage exposure, 
the latter which is calculated as the sum of:
* * * * *
0
4. Amend Sec.  3.11 as follows:
0
a. Revise the section heading;
0
b. Revise paragraph (b)(1) introductory text; and
0
c. Revise paragraph (b)(1)(ii).
    The revisions read as follows:


Sec.  3.11  Capital conservation buffer, countercyclical capital buffer 
amount, and GSIB surcharge.

* * * * *
    (b) Countercyclical capital buffer amount--(1) General. An advanced 
approaches national bank or Federal savings association, and a Category 
III national bank or Federal savings association, must calculate a 
countercyclical capital buffer amount in accordance with the following 
paragraphs for purposes of determining its maximum payout ratio under 
Table 1 to Sec.  3.11.
* * * * *
    (ii) Amount. An advanced approaches national bank or Federal 
savings association, and a Category III national bank or Federal 
savings association, has a countercyclical capital buffer amount 
determined by calculating the weighted average of the countercyclical 
capital buffer amounts established for the national jurisdictions where 
the national bank's or Federal savings association's private sector 
credit exposures are located, as specified in paragraphs (b)(2) and (3) 
of this section.
* * * * *
0
5. In Sec.  3.100, revise paragraphs (b)(1) introductory text and 
(b)(1)(i) through (v) to read as follows:


Sec.  3.100  Purpose, applicability, and principle of conservatism.

* * * * *
    (b) Applicability. (1) This subpart applies to a national bank or 
Federal savings association that:
    (i) Is a subsidiary of a global systemically important BHC, as 
identified pursuant to 12 CFR 217.402;
    (ii) Is a Category II national bank or Federal savings association;
    (iii) Is a subsidiary of a depository institution that uses the 
advanced approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12 
CFR part 217 (Board), or 12 CFR part 324 (FDIC) to calculate its risk-
based capital requirements; or
    (iv) Is a subsidiary of a bank holding company or savings and loan 
holding company that uses the advanced approaches pursuant to subpart E 
of 12 CFR part 217 to calculate its risk-based capital requirements; or
    (v) Elects to use this subpart to calculate its total risk-weighted 
assets; or
* * * * *

[[Page 66044]]

PART 50--LIQUIDITY RISK MEASUREMENT STANDARDS

0
6. The authority citation for part 50 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 93a, 481, 1818, and 1462 et seq.

0
7. In Sec.  50.1, revise paragraphs (b)(1) and (2) to read as follows:


Sec.  50.1  Purpose and applicability.

* * * * *
    (b) Applicability of Minimum Liquidity Standards. (1) A national 
bank or Federal savings association is subject to the minimum liquidity 
standard and other requirements of this part if:
    (i) It is a GSIB depository institution, a Category II national 
bank or Federal savings association, or a Category III national bank or 
Federal savings association;
    (ii) It is an national bank or Federal savings association that has 
total consolidated assets equal to $10 billion or more, as reported on 
the most recent year-end Call Report, and it is a consolidated 
subsidiary of a covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated total 
consolidated assets as of the most recent year end, calculated in 
accordance with the instructions to the FR Y-9C; or
    (2) Call Report; or
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report); or
    (iii) It is a national bank or Federal savings association for 
which the OCC has determined that application of this part is 
appropriate in light of the national bank's or Federal savings 
association's asset size, level of complexity, risk profile, scope of 
operations, affiliation with foreign or domestic covered entities, or 
risk to the financial system.
    (2)(i) A national bank or Federal savings association becomes 
subject to the minimum liquidity standard and other requirements of 
this part under paragraphs (b)(1)(i) of this section must comply with 
the requirements of this part beginning on the first day of the second 
calendar quarter after which the national bank or Federal savings 
association becomes subject to the minimum liquidity standard and other 
requirements of this part, except:
    (A) A national bank or Federal savings association must calculate 
and maintain a liquidity coverage ratio monthly, on each calculation 
date that is the last business day of the applicable calendar month, 
for the first three calendar quarters after the national bank or 
Federal savings association begins complying with the minimum liquidity 
standard and other requirements of this part;
    (B) Beginning one year after the first year in which the national 
bank or Federal savings association becomes subject to the minimum 
liquidity standard and other requirements of this part under paragraph 
(b)(1)(i) of this section, and thereafter, the national bank or Federal 
savings association must calculate and maintain a liquidity coverage 
ratio on each calculation date;
    (ii) A national bank or Federal savings association that becomes 
subject to this part under paragraph (b)(1)(ii) of this section must 
comply with the requirements of this part beginning on April 1 of the 
year in which the national bank or Federal savings association becomes 
subject to the minimum liquidity standard and other requirements of 
this part, except:
    (A) From April 1 to December 31 of the year in which the national 
bank or Federal savings association becomes subject to the minimum 
liquidity standard and other requirements of this part, the national 
bank or Federal savings association must calculate and maintain a 
liquidity coverage ratio monthly, on each calculation date that is the 
last business day of the applicable calendar month; and
    (B) Beginning January 1 of the year after the first year in which 
the national bank or Federal savings association becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1) of this section, and thereafter, the national bank or 
Federal savings association must calculate and maintain a liquidity 
coverage ratio on each calculation date.
    (iii) A national bank or Federal savings association that becomes 
subject to the minimum liquidity standard and other requirements of 
this part under (b)(1)(iii) of this section must comply with the 
requirements of this part subject to a transition period specified by 
the OCC.
* * * * *
0
8. In Sec.  50.3, add the definitions of Average weighted short-term 
wholesale funding, Call Report, Category II national bank or Federal 
savings association, Category III national bank or Federal savings 
association, Covered intermediate holding company, FR Y-9LP, FR Y-15, 
Global systemically important BHC, and GSIB depository institution, in 
alphabetical order to read as follows:


Sec.  50.3   Definitions.

* * * * *
    Average weighted short-term wholesale funding has the same meaning 
as in 12 CFR 252.2.
* * * * *
    Call Report means the Consolidated Reports of Condition and Income.
    Category II national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a depository institution holding company that is defined 
as a Category II Board-regulated institution pursuant to 12 CFR 249.3 
and has total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, equal to $10 billion or more. If the national bank or 
Federal savings association has not filed the Call Report for each of 
the four most recent calendar quarters, total consolidated assets means 
the average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable. After 
meeting the criteria under this paragraph (1), a national bank or 
Federal savings association continues to be a Category II national bank 
or Federal savings association until the national bank or Federal 
savings association has less than $10 billion in total consolidated 
assets, as reported on the Call Report, for each of the four most 
recent calendar quarters, or the national bank or Federal savings 
association is no longer a consolidated subsidiary of a category II 
Board-regulated institution; or
    (2) A national bank or Federal savings association that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Consolidated

[[Page 66045]]

Report of Condition and Income (Call Report), equal to $700 billion or 
more. If the national bank or Federal savings association has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, of $100 billion or more but less than $700 billion. If the 
national bank or Federal savings association has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent 
consecutive quarters, of $75 billion or more. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, a national bank or Federal savings association continues to be 
a Category II national bank or Federal savings association until the 
national bank or Federal savings association has:
    (A)(1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a GSIB depository institution.
    Category III national bank or Federal savings association means:
    (1) A national bank or Federal savings association that is a 
subsidiary of a depository institution holding company that is defined 
as a Category III Board-regulated institution pursuant to 12 CFR 249.3 
and has total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, equal to $10 billion or more. If the national bank or 
Federal savings association has not filed the Call Report for each of 
the four most recent calendar quarters, total consolidated assets means 
the average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable. After 
meeting the criteria under this paragraph (1), a national bank or 
Federal savings association continues to be a Category III national 
bank or Federal savings association until the national bank or Federal 
savings association has less than $10 billion in total consolidated 
assets, as reported on the Call Report, for each of the four most 
recent calendar quarters, or the national bank or Federal savings 
association is no longer a consolidated subsidiary of a Category III 
Board-regulated institution; or
    (2) A national bank or Federal savings association that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the national bank's or Federal savings association's total 
consolidated assets for the four most recent calendar quarters as 
reported on the Consolidated Report of Condition and Income (Call 
Report), equal to $250 billion or more. If the national bank or Federal 
savings association has not filed the Call Report for each of the four 
most recent calendar quarters, total consolidated assets means the 
average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the national bank's or Federal savings association's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report, of at least $100 billion but less than $700 billion. If 
the national bank or Federal savings association has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; and
    (2) One or more of the following, each measured as the average of 
the four most recent quarters, or if the national bank or Federal 
savings bank has not filed each applicable reporting form for each of 
the four most recent calendar quarters, for the most recent quarter or 
quarters, as applicable:
    (i) Total nonbank assets, calculated in accordance with 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the national bank or Federal savings 
association, as reported on the Call Report, equal to $75 billion or 
more; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, a national bank or Federal savings association continues to be 
a Category III national bank or Federal savings association until the 
national bank or Federal savings association has:
    (A)(1) Less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is a 
national bank's or Federal savings association's total exposure, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
national bank or Federal savings association, as reported on the Call 
Report; or
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a Category II national bank or Federal savings bank; or
    (D) Is a GSIB depository institution.
* * * * *
    Covered intermediate holding company means a U.S. intermediate 
holding company that:
    (1) Was established or designated by a foreign banking organization 
pursuant to 12 CFR 252.153; and
    (2) Is a covered depository institution holding company.
* * * * *

[[Page 66046]]

    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
    Global systemically important BHC means a bank holding company 
identified as a global systemically important BHC pursuant to 12 CFR 
217.402.
    GSIB depository institution means a depository institution that is 
a consolidated subsidiary of a global systemically important BHC and 
has total consolidated assets equal to $10 billion or more, calculated 
based on the average of the depository institution's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report. If the depository institution has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent calendar quarter or 
quarters, as applicable. After meeting the criteria under this 
definition, a depository institution continues to be a GSIB depository 
institution until the depository institution has less than $10 billion 
in total consolidated assets, as reported on the Call Report, for each 
of the four most recent calendar quarters, or the depository 
institution is no longer a consolidated subsidiary of a global 
systemically important BHC.
* * * * *
0
9. In Sec.  50.30:
0
a. Revise paragraph (a); and
0
b. Add paragraph (c) and Table 1.
    The revision and additions read as set forth below.


Sec.  50.30   Total net cash outflow amount.

    (a) Calculation of total net cash outflow amount. As of the 
calculation date, a national bank's or Federal savings association's 
total net cash outflow amount equals the national bank's or Federal 
savings association's outflow adjustment percentage as determined under 
paragraph (c) of this section multiplied by:
    (1) The sum of the outflow amounts calculated under Sec.  50.32(a) 
through (l); minus
    (2) The lesser of:
    (i) The sum of the inflow amounts calculated under Sec.  50.33(b) 
through (g); and
    (ii) 75 percent of the amount calculated under paragraph (a)(1) of 
this section; plus
    (3) The maturity mismatch add-on as calculated under paragraph (b) 
of this section.
* * * * *
    (c) Outflow adjustment percentage. A national bank's or Federal 
savings association's outflow adjustment percentage is determined 
pursuant to Table 1 to Sec.  50.30.

         Table 1 to Sec.   50.30--Outflow Adjustment Percentages
------------------------------------------------------------------------
                                                     Outflow adjustment
                                                         percentage
------------------------------------------------------------------------
A GSIB depository institution.....................                   100
Category II national bank or Federal savings                         100
 association......................................
Category III national bank or Federal savings                        100
 association that:................................
    (1) Is a consolidated subsidiary of a Category
     III banking organization pursuant to 12 CFR
     252.5 or 12 CFR 238.10 with $75 billion or
     more in average weighted short-term wholesale
     funding; or
    (2) Has $75 billion or more in average
     weighted short-term wholesale funding and is
     not consolidated under a holding company
Category III national bank or Federal savings                 [70 to 85]
 association that:................................
    (1) Is a consolidated subsidiary of a Category
     III banking organization pursuant to 12 CFR
     252.5 or 12 CFR 238.10 with less than $75
     billion in average weighted short-term
     wholesale funding; or
    (2) Has less than $75 billion in average
     weighted short-term wholesale funding and is
     not consolidated under a holding company
A national bank or Federal savings association                       100
 that is described in section .50(b)(1)(ii).......
------------------------------------------------------------------------

[Re-proposal of Net Stable Funding Ratio's Applicability]

PART 50--LIQUIDITY RISK MEASUREMENT STANDARDS

0
10. In Sec.  50.1, add paragraph (c) to read as follows:


Sec.  50.1   Purpose and applicability.

* * * * *
    (c) Applicability of the minimum stable funding standard. (1) A 
national bank or Federal savings association is subject to the minimum 
stable funding and other requirements of subparts K through M if:
    (i) It is a GSIB depository institution, a Category II national 
bank or Federal savings association, a Category III national bank or 
Federal savings association that is the consolidated subsidiary of a 
Category III Board-regulated institution pursuant to 12 CFR 249.3 with 
$75 billion or more in average weighted short-term wholesale funding, 
or a Category III national bank or Federal savings association with $75 
billion or more in average weighted short-term wholesale funding that 
is not consolidated under a holding company;
    (ii) It is a national bank or Federal savings association that has 
total consolidated assets equal to $10 billion or more, or reported on 
the most recent year-end Call Report, and is a consolidated subsidiary 
of a covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated 
consolidated assets as of the most recent year end, calculated in 
accordance with the instructions to the FR Y-9C;
    (2) Call Report; or
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report);
    (iii) It is a Category III national bank or Federal savings 
association that meets the criteria in Sec.  50.120(a) but does not 
meet the criteria in paragraph

[[Page 66047]]

(d)(1)(i) of this section, and is subject to the requirements of this 
part in accordance with subpart M of this part;
    (iv) The OCC has determined that application of this part is 
appropriate in light of the national bank's or Federal savings 
association's asset size, level of complexity, risk profile, scope of 
operations, affiliation with foreign or domestic covered entities, or 
risk to the financial system.
    (2)(i) A national bank or Federal savings association that becomes 
subject to the minimum stable funding standard and other requirements 
of subparts K through M of this part under paragraph (d)(1)(i) of this 
section on the effective date, must comply with the requirements of 
these subparts beginning on the first day of the second calendar 
quarter after which the national bank or Federal savings association 
becomes subject to the minimum stable funding standard and other 
requirements of this part.
    (ii) A national bank or Federal savings association that becomes 
subject to the minimum stable funding standard and other requirements 
of subparts K through M of this part under paragraphs (d)(1)(ii) of 
this section after the effective date must comply with the requirements 
of subparts K through M of this part beginning on April 1 of the year 
in which the national bank or Federal savings association becomes 
subject to the minimum stable funding standard and other requirements 
of subparts K through M of this part: and
    (iii) A national bank or Federal savings association that becomes 
subject to the minimum stable funding standard and other requirements 
of subparts K through M of this part under paragraph (d)(1)(iv) of this 
section after the effective date must comply with the requirements of 
subparts K through M of this part on the date specified by the OCC.
    (3) Subparts K through M do not apply to:
    (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), 
or a subsidiary of a bridge financial company; or
    (ii) A new depository institution or a bridge depository 
institution, as defined in 12 U.S.C. 1813(i).
    (4) A national bank or Federal savings association subject to a 
minimum liquidity standard under this part shall remain subject until 
the OCC determines in writing that application of this part to the 
national bank or Federal savings association is not appropriate in 
light of the national bank's or Federal savings association's asset 
size, level of complexity, risk profile, scope of operations, 
affiliation with foreign or domestic covered entities, or risk to the 
financial system.
    (5) In making a determination under paragraphs (d)(1)(iv) or (d)(4) 
of this section, the OCC will apply, as appropriate, notice and 
response procedures in the same manner and to the same extent as the 
notice and response procedures set forth in 12 CFR 3.404.
0
11. Add subpart M to part 50 to read as follows:
Subpart M--Net stable funding ratio for certain national banks and 
Federal savings associations
Sec.
50.120 Applicability.
50.121 Net stable funding ratio requirement.

Subpart M--Net stable funding ratio for certain national banks and 
Federal savings associations


Sec.  50.120   Applicability.

    (a) Scope. This subpart applies to a national bank or Federal 
savings association that:
    (1) Is a Category III national bank or Federal savings association 
that is a consolidated subsidiary of a depository institution holding 
company with less than $75 billion in average weighted short-term 
wholesale funding that is a Category III Board-regulated institution, 
pursuant to 12 CFR 249.3; or
    (2) Is a Category III national bank or Federal savings association 
with less than $75 billion in average weighted short-term wholesale 
funding that is not consolidated under a holding company.
    (b) Applicable provisions. Except as otherwise provided in this 
subpart, the provisions of subparts A, K, and L of this part apply to 
national banks and Federal savings associations that are subject to 
this subpart.
    (c) Applicability. A national bank or Federal savings association 
that meets the threshold for applicability of this subpart under 
paragraph (a) of this section after the effective date must comply with 
the requirements of this subpart beginning on the first day of the 
second calendar quarter after which it meets the threshold set forth in 
paragraph (a) of this section.


Sec.  50.121  Net stable funding ratio requirement.

    (a) Calculation of the net stable funding ratio. A national bank or 
Federal savings association subject to this subpart must calculate and 
maintain a net stable funding ratio in accordance with Sec.  50.100 and 
this subpart.
    (b) Available stable funding amount. A national bank or Federal 
savings association subject to this subpart must calculate its ASF 
amount in accordance with subpart K of this part.
    (c) Required stable funding amount. A national bank or Federal 
savings association subject to this subpart must calculate its RSF 
amount in accordance with subpart K of this part, provided, however, 
that the RSF amount of a national bank or Federal savings association 
subject to this subpart equals [70 to 85] percent of the RSF amount 
calculated in accordance with subpart K of this part.

Board of Governors of the Federal Reserve System

12 CFR CHAPTER II

Authority and Issuance

    For the reasons set forth in the Supplementary Information, chapter 
II of title of the Code of Federal Regulations is proposed to be 
amended as follows:

PART 217--CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND 
LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q)

0
12. The authority citation for part 217 continues to read as follows:

    Authority: 12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 
1818, 1828, 1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1851, 3904, 
3906-3909, 4808, 5365, 5368, 5371.

0
13. In Sec.  217.2, revise the definition of Advanced approaches Board-
regulated institution and add the definitions of Category II Board-
regulated institution, Category III Board-regulated institution, FR Y-
9LP, and FR Y-15 in alphabetical order to read as follows:


Sec.  217.2   Definitions.

* * * * *
    Advanced-approaches Board-regulated institution means:
    (1) A Board-regulated institution that is described Sec.  
217.100(b)(1); or
    (2) A U.S. intermediate holding company that was established or 
designated by a foreign banking organization pursuant to 12 CFR 252.153
    (i) That:
    (A) Has total consolidated assets (excluding assets held by an 
insurance underwriting subsidiary), as defined on schedule HC-K of the 
FR Y-9C, equal to $250 billion or more;
    (B) Has consolidated total on-balance sheet foreign exposure on its 
most recent year-end Federal Financial Institutions Examination Council 
(FFIEC) 009 Report equal to $10 billion or more (where total on-balance 
sheet

[[Page 66048]]

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 FFIEC 009 Country Exposure Report; or
    (C) Has a subsidiary depository institution that is required, or 
has elected, to use 12 CFR part 3, subpart E (OCC), 12 CFR part 217, 
subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate 
its risk-based capital requirements.
    (ii) Reserved.
* * * * *
    Category II Board-regulated institution means:
    (1) A depository institution holding company that is identified as 
a Category II banking organization pursuant to 12 CFR 252.5 or 12 CFR 
238.10, as applicable;
    (2) A state member bank that is a subsidiary of a company 
identified in paragraph (1) of this definition; or
    (3) A state member bank that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the state member bank's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, 
equal to $700 billion or more. If the state member bank has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the state member bank's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 
billion or more but less than $700 billion. If the state member bank 
has not filed the Call Report for each of the four most recent 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR 
Y-15 or equivalent reporting form.
    (ii) After meeting the criteria in paragraph (3)(i) of this 
section, a state member bank continues to be a Category II Board-
regulated institution until the state member bank:
    (A) Has:
    (1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a subsidiary of a global systemically important BHC.
    Category III Board-regulated institution means:
    (1) A depository institution holding company that is identified as 
a Category III banking organization pursuant to 12 CFR 252.5 or 12 CFR 
238.10, as applicable;
    (2) A state member bank that is a subsidiary of a company 
identified in paragraph (1) of this definition; or
    (3) A state member bank that:
    (i) (A) Has total consolidated assets, calculated based on the 
average of the state member bank's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, 
equal to $250 billion or more. If the state member bank has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the state member bank's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 
billion or more but less than $250 billion. If the state member bank 
has not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; and
    (2) At least one of the following, each calculated as the average 
of the four most recent calendar quarters, or if the state member bank 
has not filed each applicable reporting form for each of the four most 
recent calendar quarters, for the most recent quarter or quarters, as 
applicable:
    (i) Total nonbank assets, calculated in accordance with the 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure equal to $75 billion or more. Off-
balance sheet exposure is a state member bank's total exposure, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, minus the total consolidated assets of the 
state member bank, as reported on the Call Report; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (ii) After meeting the criteria in paragraph (3)(i) of this 
section, a state member bank continues to be a Category III Board-
regulated institution until the state member bank:
    (A) Has:
    (1) Less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is a 
state member bank's total exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the state member bank, as reported on the 
Call Report; or
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (C) Is a Category II Board-regulated institution; or
    (D) Is a subsidiary of a global systemically important BHC.
    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
0
14. In Sec.  217.10, revise paragraphs (a)(5), (c) introductory text, 
and (c)(4)(i) introductory text to read as follows:

[[Page 66049]]

Sec.  217.10  Minimum capital requirements.

    (a) * * *
    (5) For advanced approaches Board-regulated institutions or, for 
Category III Board-regulated institutions, a supplementary leverage 
ratio of 3 percent.
* * * * *
    (c) Advanced approaches capital ratio calculations. An advanced 
approaches Board-regulated institution that has completed the parallel 
run process and received notification from the Board pursuant to Sec.  
217.121(d) must determine its regulatory capital ratios as described in 
paragraphs (c)(1) through (3) of this section. An advanced approaches 
Board-regulated institution must determine its supplementary leverage 
ratio in accordance with paragraph (c)(4) of this section, beginning 
with the calendar quarter immediately following the quarter in which 
the Board-regulated institution meets any of the criteria in Sec.  
217.100(b)(1). A Category III Board-regulated institution must 
determine its supplementary leverage ratio in accordance with paragraph 
(c)(4) of this section, beginning with the calendar quarter immediately 
following the quarter in which the Board-regulated institution is 
identified as a Category III Board-regulated institution.
* * * * *
    (4) Supplementary leverage ratio. (i) An advanced approaches Board-
regulated institution's or a Category III Board-regulated institution's 
supplementary leverage ratio is the ratio of its tier 1 capital to 
total leverage exposure, the latter which is calculated as the sum of:
* * * * *
0
15. In Sec.  217.11, revise paragraphs (b)(1) introductory text and 
(b)(1)(ii) as follows:


Sec.  217.11   Capital conservation buffer, countercyclical capital 
buffer amount, and GSIB surcharge.

* * * * *
    (b) Countercyclical capital buffer amount--(1) General. An advanced 
approaches Board-regulated institution or a Category III Board-
regulated institution must calculate a countercyclical capital buffer 
amount in accordance with the following paragraphs for purposes of 
determining its maximum payout ratio under Table 1 to Sec.  217.11.
    (i) * * *
    (ii) Amount. An advanced approaches Board-regulated institution or 
a Category III Board-regulated institution has a countercyclical 
capital buffer amount determined by calculating the weighted average of 
the countercyclical capital buffer amounts established for the national 
jurisdictions where the Board-regulated institution's private sector 
credit exposures are located, as specified in paragraphs (b)(2) and (3) 
of this section.
* * * * *
0
16. In Sec.  217.100, paragraph (b)(1) is revised to read as follows:


Sec.  217.100  Purpose, applicability, and principle of conservatism.

* * * * *
    (b) Applicability. (1) This subpart applies to:
    (i) A top-tier bank holding company or savings and loan holding 
company domiciled in the United States that:
    (A) Is not a consolidated subsidiary of another bank holding 
company or savings and loan holding company that uses 12 CFR part 217, 
subpart E, to calculate its risk-based capital requirements; and
    (B) That:
    (1) Is identified as a global systemically important BHC pursuant 
to 12 CFR 217.402;
    (2) Is identified as a Category II banking organization pursuant to 
12 CFR 252.5 or 12 CFR 238.10; or
    (3) Has a subsidiary depository institution that is required, or 
has elected, to use 12 CFR part 3, subpart E (OCC), 12 CFR part 217, 
subpart E (Board), or 12 CFR part 324, subpart E (FDIC) to calculate 
its risk-based capital requirements;
    (ii) A state member bank that:
    (A) Is a subsidiary of a global systemically important BHC;
    (B) Is a Category II Board-regulated institution;
    (C) Is a subsidiary of a depository institution that uses 12 CFR 
part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR 
part 324, subpart E (FDIC) to calculate its risk-based capital 
requirements; or
    (D) Is a subsidiary of a bank holding company or savings and loan 
holding company that uses 12 CFR part 217, subpart E, to calculate its 
risk-based capital requirements; or
    (iii) Any Board-regulated institution that elects to use this 
subpart to calculate its risk-based capital requirements.
* * * * *
0
17. In Sec.  217.406, paragraph (b)(2) introductory text is revised to 
read as follows:


Sec.  217.406  Short-term wholesale funding score.

* * * * *
    (b) * * *
    (2) Short-term wholesale funding includes the following components:
* * * * *

PART 249--LIQUIDITY RISK MEASUREMENT STANDARDS (REGULATION WW)

0
18. The authority citation for part 249 continues to read as follows:

    Authority:  12 U.S.C. 248(a), 321-338a, 481-486, 1467a(g)(1), 
1818, 1828, 1831p-1, 1831o-1, 1844(b), 5365, 5366, 5368.

0
19. In Sec.  249.1, revise paragraphs (b)(1) and (2), and add paragraph 
(d) to read as follows:


Sec.  249.1   Purpose and applicability.

* * * * *
    (b) Applicability of Minimum Liquidity Standards. (1) A Board-
regulated institution is subject to the minimum liquidity standard and 
other requirements of this part if:
    (i) It is a global systemically important BHC, a GSIB depository 
institution, a Category II Board-regulated institution, or a Category 
III Board-regulated institution;
    (ii) It is a covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated total 
consolidated assets as of the most recent year-end, calculated in 
accordance with the instructions to the FR Y-9C; or
    (2) Call Report; or
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report);
    (iii) It is a depository institution that is a consolidated 
subsidiary of a covered intermediate holding company described in 
paragraph (b)(1)(ii) of this section and has total consolidated assets 
equal to $10 billion or more, as reported on the most recent year-end 
Call Report;
    (iv) It is a covered nonbank company;
    (v) It is a covered intermediate holding company that meets the 
criteria in Sec.  249.60(a) but does not meet the criteria in paragraph 
(b)(1)(ii) of this

[[Page 66050]]

section, and is subject to complying with the requirements of this part 
in accordance with subpart G of this part; or
    (vi) The Board has determined that application of this part is 
appropriate in light of the Board-regulated institution's asset size, 
level of complexity, risk profile, scope of operations, affiliation 
with foreign or domestic covered entities, or risk to the financial 
system.
    (2)(i) A Board-regulated institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1)(i) of this section must comply with the requirements 
of this part beginning on the first day of the second calendar quarter 
after which the Board-regulated institution becomes subject to the 
minimum liquidity standard and other requirements of this part, except:
    (A) A Board-regulated institution must calculate and maintain a 
liquidity coverage ratio monthly, on each calculation date that is the 
last business day of the applicable calendar month, for the first three 
calendar quarters after the Board-regulated institution begins 
complying with the minimum liquidity standard and other requirements of 
this part;
    (B) Beginning one year after the first year in which the Board-
regulated institution becomes subject to the minimum liquidity standard 
and other requirements of this part under paragraph (b)(1)(i) of this 
section, and thereafter, the Board-regulated institution must calculate 
and maintain a liquidity coverage ratio on each calculation date;
    (ii) A Board-regulated institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraphs (b)(1)(ii) or (b)(1)(iii) of this section after September 
30, 2014, must comply with the requirements of this part beginning on 
April 1 of the year in which the Board-regulated institution becomes 
subject to the minimum liquidity standard and other requirements of 
this part, except:
    (A) From April 1 to December 31 of the year in which the Board-
regulated institution becomes subject to the minimum liquidity standard 
and other requirements of this part, the Board-regulated institution 
must calculate and maintain a liquidity coverage ratio monthly, on each 
calculation date that is the last business day of the applicable 
calendar month; and
    (B) Beginning January 1 of the year after the first year in which 
the Board-regulated institution becomes subject to the minimum 
liquidity standard and other requirements of this part under paragraph 
(b)(1) of this section, and thereafter, the Board-regulated institution 
must calculate and maintain a liquidity coverage ratio on each 
calculation date; and
    (iii) A Board-regulated institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1)(vi) of this section after September 30, 2014, must 
comply with the requirements of this part subject to a transition 
period specified by the Board.
* * * * *
    (d) Applicability of the minimum stable funding standard. (1) A 
Board-regulated institution is subject to the minimum stable funding 
standard and other requirements of subparts K through N if:
    (i) It is a global systemically important BHC, a GSIB depository 
institution, a Category II Board-regulated institution, or a Category 
III Board-regulated institution with $75 billion or more in average 
weighted short-term wholesale funding,
    (ii) It is a covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated total 
consolidated assets as of the most recent year end, calculated in 
accordance with the instructions to the FR Y-9C; or
    (2) Call Report;
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report);
    (iii) It is a depository institution that is:
    (A) A Category III Board-regulated institution; and
    (B) A consolidated subsidiary of a Category III Board-regulated 
institution with $75 billion or more in average weighted short-term 
wholesale funding;
    (iv) It is a depository institution that is a consolidated 
subsidiary of a covered intermediate holding company described in 
paragraph (d)(1)(ii) of this section and has total consolidated assets 
equal to $10 billion or more, as reported on the most recent year-end 
Call Report;
    (v) It is a covered nonbank company;
    (vi) It is a Category III Board-regulated institution or a covered 
intermediate holding company that meets the criteria in Sec.  
249.120(a) but does not meet the criteria in paragraphs (d)(1)(i) or 
(ii) of this section, and is subject to complying with the requirements 
of this part in accordance with subpart M of this part; or
    (vii) The Board has determined that application of this part is 
appropriate in light of the Board-regulated institution's asset size, 
level of complexity, risk profile, scope of operations, affiliation 
with foreign or domestic covered entities, or risk to the financial 
system.
    (2)(i) A Board-regulated institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through N of this part under paragraphs (d)(1)(i) or (d)(1)(iii) of 
this section after the effective date, must comply with the 
requirements of these subparts beginning on the first day of the second 
calendar quarter after which the Board-regulated institution becomes 
subject to the minimum stable funding standard and other requirements 
of this part.
    (ii) A Board-regulated institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through N of this part under paragraphs (d)(1)(ii) or (d)(1)(iv) of 
this section after the effective date must comply with the requirements 
of subparts K through N of this part beginning on April 1 of the year 
in which the Board-regulated institution becomes subject to the minimum 
stable funding standard and requirements of subparts K through N of 
this part; and,
    (iii) A Board-regulated institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through N of this part under paragraph (d)(1)(vii) of this section 
after the effective date must comply with the requirements of subparts 
K through N of this part on the date specified by the Board.
    (3) Subparts K through N do not apply to:
    (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), 
or a subsidiary of a bridge financial company; or
    (ii) A new depository institution or a bridge depository 
institution, as defined in 12 U.S.C. 1813(i).

[[Page 66051]]

    (4) A Board-regulated institution subject to a minimum stable 
funding standard under this part shall remain subject until the Board 
determines in writing that application of this part to the Board-
regulated institution is not appropriate in light of the Board-
regulated institution's asset size, level of complexity, risk profile, 
scope of operations, affiliation with foreign or domestic covered 
entities, or risk to the financial system.
    (5) In making a determination under paragraphs (d)(1)(vii) or 
(d)(4) of this section, the Board will apply, as appropriate, notice 
and response procedures in the same manner and to the same extent as 
the notice and response procedures set forth in 12 CFR 263.202.
0
20. In Sec.  249.3, add the definitions of Average weighted short-term 
wholesale funding, Call Report, Category II Board-regulated 
institution, Category III Board-regulated institution, Covered 
intermediate holding company, FR Y-9LP, FR Y-15, Global systemically 
important BHC, and GSIB depository institution in alphabetical order to 
read as follows:


Sec.  249.3   Definitions.

* * * * *
    Average weighted short-term wholesale funding has the same meaning 
as in 12 CFR 252.2.
* * * * *
    Call Report means the Consolidated Reports of Condition and Income.
    Category II Board-regulated institution means:
    (1) A covered depository institution holding company that is 
identified as a Category II banking organization pursuant to 12 CFR 
252.5 or 12 CFR 238.10;
    (2) A state member bank that is a consolidated subsidiary of a 
company described in paragraphs (1) or (3) and that has total 
consolidated assets, calculated based on the average of the state 
member bank's total consolidated assets for the four most recent 
calendar quarters as reported on the Call Report, equal to $10 billion 
or more. If the state member bank has not filed the Call Report for 
each of the four most recent calendar quarters, total consolidated 
assets means the average of its total consolidated assets, as reported 
on the Call Report, for the most recent quarter or quarters, as 
applicable. After meeting the criteria under this paragraph (2), a 
state member bank continues to be a Category II Board-regulated 
institution until the state member bank has less than $10 billion in 
total consolidated assets, as reported on the Call Report, for each of 
the four most recent calendar quarters, or the state member bank is no 
longer a consolidated subsidiary of a company described in paragraphs 
(1) or (3); or
    (3) A state member bank that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the state member bank's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, 
equal to $700 billion or more. If the state member bank has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the state member bank's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, of $100 
billion or more but less than $700 billion. If the state member bank 
has not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR 
Y-15 or equivalent reporting form.
    (ii) After meeting the criteria in paragraph (3)(i) of this 
section, a state member bank continues to be a Category II Board-
regulated institution until the state member bank:
    (A)(1) Has less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Has less than $75 billion in cross-jurisdictional activity for 
each of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a GSIB depository institution.
    Category III Board-regulated institution means:
    (1) A covered depository institution holding company that is 
identified as a Category III banking organization pursuant to 12 CFR 
252.5 or 12 CFR 238.10, as applicable;
    (2) A state member bank that is a consolidated subsidiary of a 
company described in paragraphs (1) or (3) and that has total 
consolidated assets, calculated based on the average of the state 
member bank's total consolidated assets for the four most recent 
calendar quarters as reported on the Call Report, equal to $10 billion 
or more. If the state member bank has not filed the Call Report for 
each of the four most recent calendar quarters, total consolidated 
assets means the average of its total consolidated assets, as reported 
on the Call Report, for the most recent quarter or quarters, as 
applicable. After meeting the criteria under this paragraph (2), a 
state member bank continues to be a Category III Board-regulated 
institution until the state member bank has less than $10 billion in 
total consolidated assets, as reported on the Call Report, for each of 
the four most recent calendar quarters, or the state member bank is no 
longer a consolidated subsidiary of a company described in paragraphs 
(1) or (3); or
    (3) A state member bank that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the state member bank's total consolidated assets in the 
four most recent quarters as reported quarterly on the most recent Call 
Report, equal to $250 billion or more. If the state member bank has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the state member bank's total consolidated assets in the four most 
recent calendar quarters as reported quarterly on the most recent Call 
Report, of $100 billion or more but less than $250 billion. If the 
state member bank has not filed the Call Report for each of the four 
most recent calendar quarters, total consolidated assets means the 
average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable; and
    (2) One or more of the following, each measured as the average of 
the four most recent calendar quarters, or if the state member bank has 
not filed the FR Y-9LP or equivalent reporting form, Call Report, or FR 
Y-15 or equivalent reporting form, as applicable, for each of the four 
most recent calendar quarters, for the most recent quarter or quarters, 
as applicable:

[[Page 66052]]

    (i) Total nonbank assets, calculated in accordance with 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the state member bank, as reported on the 
Call Report, equal to $75 billion or more; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (ii) After meeting the criteria in paragraph (3)(i) of this 
section, a state member bank continues to be a Category III Board-
regulated institution until the state member bank:
    (A)(1) Has less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Has less than $75 billion in total nonbank assets, calculated 
in accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Has less than $75 billion in weighted short-term wholesale 
funding, calculated in accordance with the instructions to the FR Y-15 
or equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Has less than $75 billion in off-balance sheet exposure for 
each of the four most recent calendar quarters. Off-balance sheet 
exposure is a state member bank's total exposure, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, minus the total consolidated assets of the state member bank, as 
reported on the Call Report; or
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (C) Is a Category II Board-regulated institution; or
    (D) Is a GSIB depository institution.
* * * * *
    Covered intermediate holding company means a U.S. intermediate 
holding company that: (1) Was established or designated by a foreign 
banking organization pursuant to 12 CFR 252.153; and
    (2) Is a covered depository institution holding company.
* * * * *
    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
    Global systemically important BHC means a bank holding company 
identified as a global systemically important BHC pursuant to 12 CFR 
217.402.
    GSIB depository institution means a depository institution that is 
a consolidated subsidiary of a global systemically important BHC and 
has total consolidated assets equal to $10 billion or more, calculated 
based on the average of the depository institution's total consolidated 
assets for the four most recent calendar quarters as reported on the 
Call Report. If the depository institution has not filed the Call 
Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent calendar quarter or 
quarters, as applicable. After meeting the criteria under this 
definition, a depository institution continues to be a GSIB depository 
institution until the depository institution has less than $10 billion 
in total consolidated assets, as reported on the Call Report, for each 
of the four most recent calendar quarters, or the depository 
institution is no longer a consolidated subsidiary of a global 
systemically important BHC.
* * * * *
0
21. In Sec.  249.30, revise paragraph (a), and add paragraph (c) to 
read as follows:


Sec.  249.30  Total net cash outflow amount.

    (a) Calculation of total net cash outflow amount. As of the 
calculation date, a Board-regulated institution's total net cash 
outflow amount equals the Board-regulated institution's outflow 
adjustment percentage as determined under paragraph (c) of this section 
multiplied by:
    (1) The sum of the outflow amounts calculated under Sec.  249.32(a) 
through (l); minus
    (2) The lesser of:
    (i) The sum of the inflow amounts calculated under Sec.  249.33(b) 
through (g); and
    (ii) 75 percent of the amount calculated under paragraph (a)(1) of 
this section; plus
    (3) The maturity mismatch add-on as calculated under paragraph (b) 
of this section.
* * * * *
    (c) Outflow adjustment percentage. A Board-regulated institution's 
outflow adjustment percentage is determined pursuant to Table 1 to 
Sec.  249.30.

        Table 1 to Sec.   249.30--Outflow Adjustment Percentages
------------------------------------------------------------------------
                                                     Outflow adjustment
                                                         percentage
------------------------------------------------------------------------
Global systemically important BHC or GSIB                            100
 depository institution...........................
Category II Board-regulated institution...........                   100
Category III Board-regulated institution with $75                    100
 billion or more in average weighted short-term
 wholesale funding and any Category III Board-
 regulated institution that is a consolidated
 subsidiary of such a Category III Board-regulated
 institution......................................
Category III Board-regulated institution with less            [70 to 85]
 than $75 billion in average weighted short-term
 wholesale funding and any Category III Board-
 regulated institution that is a consolidated
 subsidiary of such a Category III Board-regulated
 institution......................................
Covered intermediate holding company that meets                      100
 the criteria under Sec.   249.1(b)(1)(ii) and any
 Board-regulated institution subject to this part
 that is a consolidated subsidiary of such a
 covered intermediate holding company \1\.........
------------------------------------------------------------------------
\1\ Covered intermediate holding companies shall remain subject to this
  part as in effect on October 3, 2018, until the Board amends the
  liquidity risk measurement standards applicable to the subsidiaries of
  foreign banking organizations in effect on October 31, 2018.

0
22. Section 249.60, is revised to read as follows:


Sec.  249.60  Applicability.

    (a) Scope. This subpart applies to a covered intermediate holding 
company that has total consolidated assets equal to $50 billion or 
more, based on the average of the Board-regulated institution's four 
most recent FR Y-9Cs

[[Page 66053]]

and does not meet the applicability criteria set forth in Sec.  
249.1(b)(1)(ii).
    (b) Applicable provisions. Except as otherwise provided in this 
subpart, the provisions of subparts A through E of this part apply to 
covered intermediate holding companies that are subject to this 
subpart.
    (c) Applicability. Subject to the transition periods set forth in 
Sec.  249.61, a Board-regulated institution that first meets the 
threshold for applicability of this subpart under paragraph (a) of this 
section after September 30, 2014, must comply with the requirements of 
this subpart one year after the date it meets the threshold set forth 
in paragraph (a) of this section; except that a Board-regulated 
institution that met the applicability criteria in Sec.  249.1(b) 
immediately prior to meeting this threshold must comply with the 
requirements of this subpart beginning on the first day of the first 
quarter after which it meets the threshold set forth in paragraph (a) 
of this section.
0
23. In Sec.  249.90, paragraph (b)(3) is revised to read as follows:


Sec.  249.90   Timing, method and retention of disclosures.

* * * * *
    (b) * * *
    (3) A covered depository institution holding company or covered 
nonbank company that is subject to the minimum liquidity standard and 
other requirements of this part pursuant to Sec.  249.1(b)(2)(i) or 
(ii) must provide the disclosures required by this subpart for the 
first calendar quarter beginning no later than the date it is first 
required to comply with the requirements of this part pursuant to Sec.  
249.1(b)(2)(i) or (ii).
* * * * *
0
24. Add subpart M to part 249 to read as follows:
Subpart M--Net stable funding ratio for certain Board-regulated 
institutions
Sec.
249.120 Applicability.
249.121 Net stable funding ratio requirement.

Subpart M--Net stable funding ratio for certain Board-regulated 
institutions


Sec.  249.120   Applicability.

    (a) Scope. This subpart applies to:
    (1) A Category III Board-regulated institution with less than $75 
billion in average weighted short-term wholesale funding;
    (2) A depository institution that is:
    (i) A consolidated subsidiary of a Category III Board-regulated 
institution described in (a)(1) of this section; and
    (ii) A Category III Board-regulated institution.
    (3) A covered intermediate holding company that has total 
consolidated assets equal to $50 billion or more, based on the average 
of the covered intermediate holding company's total consolidated assets 
in the four most recent quarters as reported on the FR Y-9C and does 
not meet the applicability criteria set forth in Sec.  249.1(d).
    (b) Applicable provisions. Except as otherwise provided in this 
subpart, the provisions of subparts A, K, L, and N of this part apply 
to Board-regulated institutions that are subject to this subpart.
    (c) Applicability.
    (1) A Board-regulated institution that meets the threshold for 
applicability of this subpart under paragraphs (a)(1) or (2) of this 
section after the effective date must comply with the requirements of 
this subpart beginning on the first day of the second calendar quarter 
after which it meets the thresholds set forth in paragraph (a) of this 
section.
    (2) A Board-regulated institution that meets the threshold for 
applicability of this subpart under paragraph (a)(3) of this section 
after the effective date must comply with the requirements of this 
subpart beginning one year after the date it meets the threshold set 
forth in paragraph (a) of this section.


Sec.  249.121  Net stable funding ratio requirement.

    (a) Calculation of the net stable funding ratio. A Board-regulated 
institution subject to this subpart must calculate and maintain a net 
stable funding ratio in accordance with Sec.  249.100 and this subpart.
    (b) Available stable funding amount. A Board-regulated institution 
subject to this subpart must calculate its ASF amount in accordance 
with subpart K of this part.
    (c) Required stable funding amount. A Board-regulated institution 
subject to this subpart must calculate its RSF amount in accordance 
with subpart K of this part, provided, however, that the RSF amount of 
a Board-regulated institution subject to this subpart equals [70 to 85] 
percent of the RSF amount calculated in accordance with subpart K of 
this part.\1\
---------------------------------------------------------------------------

    \1\ Under the proposed rule to implement the net stable funding 
ratio (NSFR), the RSF amount of a Board-regulated institution that 
is a covered intermediate holding company subject to this part would 
have equaled 70 percent of the RSF amount calculated in accordance 
with subpart K of this part. Upon adoption of the final NSFR rule, 
covered intermediate holding companies would remain subject to this 
part as proposed in June 1, 2016, until the Board adopts regulations 
that directly relate to the application of liquidity risk 
measurement and net stable funding standards to foreign banking 
organizations.
---------------------------------------------------------------------------

Federal Deposit Insurance Corporation

12 CFR CHAPTER III

    For the reasons set out in the joint preamble, the FDIC proposes to 
amend 12 CFR chapter III as follows.

PART 324--CAPITAL ADEQUACY OF FDIC-SUPERVISED INSTITUTIONS

0
25. The authority citation for part 324 continues to read as follows:

    Authority:  12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; 5371; 5412; Pub. L. 102-233, 
105 Stat. 1761, 1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 
105 Stat. 2236, 2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 
2233 (12 U.S.C. 1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, 
as amended by Pub. L. 102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 
note); Pub. L. 111-203, 124 Stat. 1376, 1887 (15 U.S.C. 78o-7 note).

0
26. In Sec.  324.2, add the definitions of Category II FDIC-supervised 
institution and Category III FDIC-supervised institution, FR Y-9LP, and 
FR Y-15 in alphabetical order to read as follows:


Sec.  324.2  Definitions.

* * * * *
    Category II FDIC-supervised institution means:
    (1) An FDIC-supervised institution that is a subsidiary of a 
depository institution holding company that is identified as a Category 
II banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as 
applicable; or
    (2) An FDIC-supervised institution that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the FDIC-supervised institution's total consolidated assets 
for the four most recent calendar quarters as reported on the 
Consolidated Report of Condition and Income (Call Report), equal to 
$700 billion or more. If the FDIC-supervised institution has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the FDIC-supervised institution's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, of 
$100 billion or more but less than $700 billion. If the FDIC-supervised 
institution has not filed the Call Report for each of the four most 
recent quarters, total consolidated assets means the average of its 
total

[[Page 66054]]

consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR 
Y-15 or equivalent reporting form;
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, an FDIC-supervised institution continues to be a Category II 
FDIC-supervised institution until the FDIC-supervised institution:
    (A) Has:
    (1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Has less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a subsidiary of a global systemically important BHC pursuant 
to 12 CFR 217.402.
    Category III FDIC-supervised institution means:
    (1) An FDIC-supervised institution that is a subsidiary of a 
depository institution holding company that is identified as a Category 
III banking organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as 
applicable; or
    (2) An FDIC-supervised institution that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the FDIC-supervised institution's total consolidated assets 
for the four most recent calendar quarters as reported on the Call 
Report, equal to $250 billion or more. If the FDIC-supervised 
institution has not filed the Call Report for each of the four most 
recent calendar quarters, total consolidated assets means the average 
of its total consolidated assets, as reported on the Call Report, for 
the most recent quarter or quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the FDIC-supervised institution's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, of 
$100 billion or more but less than $250 billion. If the FDIC-supervised 
institution has not filed the Call Report for each of the four most 
recent calendar quarters, total consolidated assets means the average 
of its total consolidated assets, as reported on the Call Report, for 
the most recent quarter or quarters, as applicable; and
    (2) At least one of the following, each calculated as the average 
of the four most recent calendar quarters, or if the FDIC-supervised 
institution has not filed each applicable reporting form for each of 
the four most recent calendar quarters, for the most recent quarter or 
quarters, as applicable:
    (i) Total nonbank assets, calculated in accordance with the 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure equal to $75 billion or more. Off-
balance sheet exposure is an FDIC-supervised institution's total 
exposure, calculated in accordance with the instructions to the FR Y-15 
or equivalent reporting form, minus the total consolidated assets of 
the FDIC-supervised institution, as reported on the Call Report; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more.
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, an FDIC-supervised institution continues to be a Category III 
FDIC-supervised institution until the FDIC-supervised institution:
    (A) Has:
    (1) Less than $250 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is a 
FDIC-supervised institution's total exposure, calculated in accordance 
with the instructions to the FR Y-15 or equivalent reporting form, 
minus the total consolidated assets of the FDIC-supervised institution, 
as reported on the Call Report; or
    (B) Has Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (C) Is a Category II FDIC-supervised institution; or
    (D) Is a subsidiary of a global systemically important BHC pursuant 
to 12 CFR 217.402.
* * * * *
    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
0
27. In Sec.  324.10, revise paragraphs (a)(5), (c), and (c)(4)(i) 
introductory text to read as follows:


Sec.  324.10   Minimum capital requirements.

    (a) * * *
    (5) For advanced approaches FDIC-supervised institutions or, for 
Category III FDIC-supervised institutions, a supplementary leverage 
ratio of 3 percent.
* * * * *
    (c) Advanced approaches capital ratio calculations. An advanced 
approaches FDIC-supervised institution that has completed the parallel 
run process and received notification from the FDIC pursuant to Sec.  
324.121(d) must determine its regulatory capital ratios as described in 
paragraphs (c)(1) through (3) of this section. An advanced approaches 
FDIC-supervised institution must determine its supplementary leverage 
ratio in accordance with paragraph (c)(4) of this section, beginning 
with the calendar quarter immediately following the quarter in which 
the FDIC-supervised institution meets any of the criteria in Sec.  
324.100(b)(1). A Category III FDIC-supervised institution must 
determine its supplementary leverage ratio in accordance with paragraph 
(c)(4) of this section, beginning with the calendar quarter immediately 
following the quarter in which the FDIC-supervised institution is 
identified as a Category III FDIC-supervised institution.
* * * * *
    (4) Supplementary leverage ratio. (i) An advanced approaches FDIC-
supervised institution's or a Category III FDIC-supervised 
institution's supplementary leverage ratio is the ratio of its tier 1 
capital to total leverage exposure, the latter which is calculated as 
the sum of:
* * * * *
0
28. In Sec.  324.11, revise paragraphs (b)(1) and (b)(1)(ii) as 
follows:


Sec.  324.11   Capital conservation buffer and countercyclical capital 
buffer amount.

* * * * *

[[Page 66055]]

    (b) Countercyclical capital buffer amount--(1) General. An advanced 
approaches FDIC-supervised institution or a Category III FDIC-
supervised institution must calculate a countercyclical capital buffer 
amount in accordance with the following paragraphs for purposes of 
determining its maximum payout ratio under Table 1 to Sec.  324.11.
* * * * *
    (ii) Amount. An advanced approaches FDIC-supervised institution or 
a Category III FDIC-supervised institution has a countercyclical 
capital buffer amount determined by calculating the weighted average of 
the countercyclical capital buffer amounts established for the national 
jurisdictions where the FDIC-supervised institution's private sector 
credit exposures are located, as specified in paragraphs (b)(2) and (3) 
of this section.
* * * * *
0
29. In Sec.  324.100, paragraph (b)(1) is revised to read as follows:


Sec.  324.100   Purpose, applicability, and principle of conservatism.

* * * * *
    (b) Applicability. (1) This subpart applies to an FDIC-supervised 
institution that:
    (i) Is a subsidiary of a global systemically important BHC pursuant 
to 12 CFR 217.402;
    (ii) Is a Category II FDIC-supervised institution;
    (iii) Is a subsidiary of a depository institution that uses 12 CFR 
part 3, subpart E (OCC), 12 CFR part 217, subpart E (Board), or 12 CFR 
part 324, subpart E (FDIC) to calculate its risk-based capital 
requirements;
    (iv) Is a subsidiary of a bank holding company or savings and loan 
holding company that uses 12 CFR part 217, subpart E, to calculate its 
risk-based capital requirements; or
    (v) Elects to use this subpart to calculate its total risk-weighted 
assets.
* * * * *

PART 329--LIQUIDITY RISK MEASUREMENT STANDARDS

0
30. The authority citation for part 329 continues to read as follows:

    Authority:  12 U.S.C. 1815, 1816, 1818, 1819, 1828, 1831p-1, 
5412.

0
31. In Sec.  329.1, paragraphs (b)(1) and (2) are revised to read as 
follows:


Sec.  329.1   Purpose and applicability.

* * * * *
    (b) Applicability of Minimum Liquidity Standards. (1) An FDIC-
supervised institution is subject to the minimum liquidity standard and 
other requirements of this part if:
    (i) It is a GSIB FDIC-supervised institution, Category II FDIC-
supervised institution or a Category III FDIC-supervised institution;
    (ii) It is an FDIC-supervised institution that has total 
consolidated assets equal to $10 billion or more, as reported on the 
most recent year-end Call Report, and it is a consolidated subsidiary 
of a covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated total 
consolidated assets as of the most recent year end, calculated in 
accordance with the instructions to the FR Y-9C; or
    (2) Call Report; or
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report); or
    (iii) It is an FDIC-supervised institution for which the FDIC has 
determined that application of this part is appropriate in light of the 
FDIC-supervised institution's asset size, level of complexity, risk 
profile, scope of operations, affiliation with foreign or domestic 
covered entities, or risk to the financial system.
    (2)(i) An FDIC-supervised institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1)(i) of this section must comply with the requirements 
of this part beginning on the first day of the second calendar quarter 
after which the FDIC-supervised institution becomes subject to the 
minimum liquidity standard and other requirements of this part, except:
    (A) An FDIC-supervised institution must calculate and maintain a 
liquidity coverage ratio monthly, on each calculation date that is the 
last business day of the applicable calendar month, for the first three 
calendar quarters after the FDIC-supervised institution begins 
complying with the minimum liquidity standard and other requirements of 
this part;
    (B) Beginning one year after the first year in which the FDIC-
supervised institution becomes subject to the minimum liquidity 
standard and other requirements of this part under paragraph (b)(1)(i) 
of this section, and thereafter, the FDIC-supervised institution must 
calculate and maintain a liquidity coverage ratio on each calculation 
date;
    (ii) An FDIC-supervised institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1)(ii) of this section after September 30, 2014, must 
comply with the requirements of this part beginning on April 1 of the 
year in which the FDIC-supervised institution becomes subject to the 
minimum liquidity standard and other requirements of this part, except:
    (A) From April 1 to December 31 of the year in which the FDIC-
supervised institution becomes subject to the minimum liquidity 
standard and other requirements of this part, the FDIC-supervised 
institution must calculate and maintain a liquidity coverage ratio 
monthly, on each calculation date that is the last business day of the 
applicable calendar month; and
    (B) Beginning January 1 of the year after the first year in which 
the FDIC-supervised institution becomes subject to the minimum 
liquidity standard and other requirements of this part under paragraph 
(b)(1) of this section, and thereafter, the FDIC-supervised institution 
must calculate and maintain a liquidity coverage ratio on each 
calculation date; and
    (iii) An FDIC-supervised institution that becomes subject to the 
minimum liquidity standard and other requirements of this part under 
paragraph (b)(1)(iii) of this section after September 30, 2014, must 
comply with the requirements of this part subject to a transition 
period specified by the FDIC.
* * * * *
0
32. In Sec.  329.3, add the definitions of Average weighted short-term 
wholesale funding, Call Report, Category II Board-regulated 
institution, Category III Board-regulated institution, Covered 
intermediate holding company, FR Y-9LP, FR Y-15, Global systemically 
important BHC, and GSIB FDIC-supervised institution in alphabetical 
order to read as follows:

[[Page 66056]]

Sec.  329.3  Definitions.

* * * * *
    Average weighted short-term wholesale funding has the same meaning 
as in 12 CFR 252.2.
* * * * *
    Call Report means the Consolidated Reports of Condition and Income.
    Category II FDIC-supervised institution means:
    (1) An FDIC-supervised institution that is a consolidated 
subsidiary of a company that is identified as a Category II banking 
organization pursuant to 12 CFR 252.5 or 12 CFR 238.10 and has total 
consolidated assets, calculated based on the average of the FDIC-
supervised institution's total consolidated assets for the four most 
recent calendar quarters as reported on the Call Report, equal to $10 
billion or more. If the FDIC-supervised institution has not filed the 
Call Report for each of the four most recent calendar quarters, total 
consolidated assets means the average of its total consolidated assets, 
as reported on the Call Report, for the most recent quarter or 
quarters, as applicable. After meeting the criteria under this 
paragraph (1), an FDIC-supervised institution continues to be a 
Category II FDIC-supervised institution until the FDIC-supervised 
institution has less than $10 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters, or the FDIC-supervised institution is no longer a 
consolidated subsidiary of a Category II banking organization pursuant 
to 12 CFR 252.5 or 12 CFR 238.10; or
    (2) An FDIC-supervised institution that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the FDIC-supervised institution's total consolidated assets 
for the four most recent calendar quarters as reported on the 
Consolidated Report of Condition and Income (Call Report), equal to 
$700 billion or more. If the FDIC-supervised institution has not filed 
the Call Report for each of the four most recent calendar quarters, 
total consolidated assets means the average of its total consolidated 
assets, as reported on the Call Report, for the most recent quarter or 
quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the FDIC-supervised institution's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, of 
$100 billion or more but less than $700 billion. If the FDIC-supervised 
institution has not filed the Call Report for each of the four most 
recent calendar quarters, total consolidated assets means the average 
of its total consolidated assets, as reported on the Call Report, for 
the most recent quarter or quarters, as applicable; and
    (2) Cross-jurisdictional activity, calculated based on the average 
of its cross-jurisdictional activity for the four most recent calendar 
quarters, of $75 billion or more. Cross-jurisdictional activity is the 
sum of cross-jurisdictional claims and cross-jurisdictional 
liabilities, calculated in accordance with the instructions to the FR 
Y-15 or equivalent reporting form;
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, an FDIC-supervised institution continues to be a Category II 
FDIC-supervised institution until the FDIC-supervised institution has:
    (A)(1) Less than $700 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; and
    (2) Less than $75 billion in cross-jurisdictional activity for each 
of the four most recent calendar quarters. Cross-jurisdictional 
activity is the sum of cross-jurisdictional claims and cross-
jurisdictional liabilities, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form;
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters; or
    (C) Is a GSIB FDIC-supervised institution.
    Category III FDIC-supervised institution means:
    (1) An FDIC-supervised institution that is a consolidated 
subsidiary of a company that is identified as a Category III banking 
organization pursuant to 12 CFR 252.5 or 12 CFR 238.10, as applicable 
and has total consolidated assets, calculated based on the average of 
the FDIC-supervised institution's total consolidated assets for the 
four most recent calendar quarters as reported on the Call Report, 
equal to $10 billion or more. If the FDIC-supervised institution has 
not filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent quarter or quarters, as applicable. After meeting the criteria 
under this paragraph (1), an FDIC-supervised institution continues to 
be a Category III FDIC-supervised institution until the FDIC-supervised 
institution has less than $10 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters, or the FDIC-supervised institution is no longer a 
consolidated subsidiary of a Category III banking organization pursuant 
to 12 CFR 252.5 or 12 CFR 238.10; or
    (2) An FDIC-supervised institution that:
    (i)(A) Has total consolidated assets, calculated based on the 
average of the FDIC-supervised institution's total consolidated assets 
in the four most recent quarters as reported quarterly on the most 
recent Call Report, equal to $250 billion or more. If the FDIC-
supervised institution has not filed the Call Report for each of the 
four most recent calendar quarters, total consolidated assets means the 
average of its total consolidated assets, as reported on the Call 
Report, for the most recent quarter or quarters, as applicable; or
    (B) Has:
    (1) Total consolidated assets, calculated based on the average of 
the FDIC-supervised institution's total consolidated assets in the four 
most recent calendar quarters as reported quarterly on the most recent 
Call Report, of at least $100 billion but less than $250 billion. If 
the FDIC-supervised institution has not filed the Call Report for each 
of the four most recent calendar quarters, total consolidated assets 
means the average of its total consolidated assets, as reported on the 
Call Report, for the most recent quarter or quarters, as applicable; 
and
    (2) One or more of the following, each measured as the average of 
the four most recent quarters, or if the FDIC-supervised institution 
has not filed each applicable reporting form for each of the four most 
recent calendar quarters, for the most recent quarter or quarters, as 
applicable:
    (i) Total nonbank assets, calculated in accordance with 
instructions to the FR Y-9LP or equivalent reporting form, equal to $75 
billion or more;
    (ii) Off-balance sheet exposure, calculated in accordance with the 
instructions to the FR Y-15 or equivalent reporting form, minus the 
total consolidated assets of the FDIC-supervised institution, as 
reported on the Call Report, equal to $75 billion or more; or
    (iii) Weighted short-term wholesale funding, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, equal to $75 billion or more;
    (ii) After meeting the criteria in paragraph (2)(i) of this 
section, an FDIC-supervised institution continues to be a Category III 
FDIC-supervised institution until the FDIC-supervised institution has:
    (A)(1) Less than $250 billion in total consolidated assets, as 
reported on the

[[Page 66057]]

Call Report, for each of the four most recent calendar quarters;
    (2) Less than $75 billion in total nonbank assets, calculated in 
accordance with the instructions to the FR Y-9LP or equivalent 
reporting form, for each of the four most recent calendar quarters;
    (3) Less than $75 billion in weighted short-term wholesale funding, 
calculated in accordance with the instructions to the FR Y-15 or 
equivalent reporting form, for each of the four most recent calendar 
quarters; and
    (4) Less than $75 billion in off-balance sheet exposure for each of 
the four most recent calendar quarters. Off-balance sheet exposure is 
an FDIC-supervised institution's total exposure, calculated in 
accordance with the instructions to the FR Y-15 or equivalent reporting 
form, minus the total consolidated assets of the FDIC-supervised 
institution, as reported on the Call Report; or
    (B) Less than $100 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters;
    (C) Is a Category II FDIC-supervised institution; or
    (D) Is a GSIB FDIC-supervised institution.
* * * * *
    Covered intermediate holding company means a U.S. intermediate 
holding company that: (1) Was established or designated by a foreign 
banking organization pursuant to 12 CFR 252.153; and
    (2) Is a bank holding company or savings and loan holding company.
* * * * *
    FR Y-15 means the Banking Organization Systemic Risk Report.
    FR Y-9LP means the Parent Company Only Financial Statements for 
Large Holding Companies.
* * * * *
    Global systemically important BHC means a bank holding company 
identified as a global systemically important BHC pursuant to 12 CFR 
217.402.
    GSIB FDIC-supervised institution means an FDIC-supervised 
institution that is a consolidated subsidiary of a global systemically 
important BHC and has total consolidated assets equal to $10 billion or 
more, calculated based on the average of the depository institution's 
total consolidated assets for the four most recent calendar quarters as 
reported on the Call Report. If the FDIC-supervised institution has not 
filed the Call Report for each of the four most recent calendar 
quarters, total consolidated assets means the average of its total 
consolidated assets, as reported on the Call Report, for the most 
recent calendar quarter or quarters, as applicable. After meeting the 
criteria under this definition, an FDIC-supervised institution 
continues to be a GSIB FDIC-supervised institution until the depository 
institution has less than $10 billion in total consolidated assets, as 
reported on the Call Report, for each of the four most recent calendar 
quarters, or the FDIC-supervised institution is no longer a 
consolidated subsidiary of a global systemically important BHC.
* * * * *
0
33. In Sec.  329.30, paragraph (a) is revised to read as follows:


Sec.  329.30   Total net cash outflow amount.

    (a) Calculation of total net cash outflow amount. As of the 
calculation date, an FDIC-supervised institution's total net cash 
outflow amount equals the FDIC-supervised institution's outflow 
adjustment percentage as determined under paragraph (c) of this section 
multiplied by:
    (1) The sum of the outflow amounts calculated under Sec.  329.32(a) 
through (l); minus
    (2) The lesser of:
    (i) The sum of the inflow amounts calculated under Sec.  329.33(b) 
through (g); and
    (ii) 75 percent of the amount calculated under paragraph (a)(1) of 
this section; plus
    (3) The maturity mismatch add-on as calculated under paragraph (b) 
of this section.
* * * * *
0
34. In Sec.  329.30, paragraph (c) is added to read as follows:
    (c) Outflow adjustment percentage. A FDIC-supervised institution's 
outflow adjustment percentage is determined pursuant to Table 1 to 
Sec.  329.30.

        Table 1 to Sec.   329.30--Outflow Adjustment Percentages
------------------------------------------------------------------------
                                                     Outflow adjustment
                                                         percentage
------------------------------------------------------------------------
GSIB FDIC-supervised institution..................                   100
Category II FDIC-supervised institution...........                   100
Category III FDIC-supervised institution that:....                   100
    (1) Is a consolidated subsidiary of a Category
     III banking organization pursuant to 12 CFR
     252.5 or 12 CFR 238.10 with $75 billion or
     more in average weighted short-term wholesale
     funding; or
    (2) Has $75 billion or more in average
     weighted short-term wholesale funding and is
     not consolidated under a holding company
Category III FDIC-supervised institution that:....            [70 to 85]
    (1) Is a consolidated subsidiary of a Category
     III banking organization pursuant to 12 CFR
     252.5 or 12 CFR 238.10 with less than $75
     billion in average weighted short-term
     wholesale funding; or
    (2) Has less than $75 billion in average
     weighted short-term wholesale funding and is
     not consolidated under a holding company
FDIC-supervised institution that is described in                     100
 Sec.   329.1(b)(1)(ii)...........................
------------------------------------------------------------------------

* * * * *
[Re-Proposal of Net Stable Funding Ratio's Applicability]

PART 329--LIQUIDITY RISK MEASUREMENT STANDARDS

0
35. In Sec.  329.1, add paragraph (c) to read as follows:


Sec.  329.1  Purpose and applicability.

* * * * *
    (c) Applicability of the minimum stable funding standard. (1) An 
FDIC-supervised institution is subject to the minimum stable funding 
standard and other requirements of subparts K through M if:
    (i) It is a GSIB FDIC-supervised institution, Category II FDIC-
supervised institution, Category III FDIC-supervised institution that 
is the consolidated subsidiary of a Category III banking organization 
pursuant to 12 CFR 252.5 or 12 CFR 238.10 with $75 billion or more in 
average weighted short-term wholesale funding, or a Category III

[[Page 66058]]

FDIC-supervised institution with $75 billion or more in average 
weighted short-term wholesale funding that is not consolidated under a 
holding company; or
    (ii) It is an FDIC-supervised institution that has total 
consolidated assets equal to $10 billion or more, as reported on the 
most recent year-end Call Report, and is a consolidated subsidiary of a 
covered intermediate holding company that:
    (A) Has total consolidated assets of $250 billion or more, as 
reported on the most recent year-end (as applicable):
    (1) Consolidated Financial Statements for Holding Companies 
reporting form (FR Y-9C), or, if the covered intermediate holding 
company is not required to report on the FR Y-9C, its estimated 
consolidated assets as of the most recent year end, calculated in 
accordance with the instructions to the FR Y-9C;
    (2) Call Report; or
    (B) Has total consolidated on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with a head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of the head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative transaction products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report);
    (iii) It is a Category III FDIC-supervised institution that meets 
the criteria in Sec.  329.120(a) but does not meet the criteria in 
paragraph (c)(1)(i) of this section, and is subject to the requirements 
of this part in accordance with subpart M of this part;
    (iv) The FDIC has determined that application of this part is 
appropriate in light of the FDIC-supervised institution's asset size, 
level of complexity, risk profile, scope of operations, affiliation 
with foreign or domestic covered entities, or risk to the financial 
system.
    (2)(i) An FDIC-supervised institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through M of this part under paragraph (c)(1)(i) of this section on the 
effective date, must comply with the requirements of these subparts 
beginning on the first day of the second calendar quarter after which 
the FDIC-supervised institution becomes subject to the minimum stable 
funding standard and other requirements of this part.
    (ii) An FDIC-supervised institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through M of this part under paragraph (c)(1)(ii) of this section after 
the effective date must comply with the requirements of subparts K 
through M of this part beginning on April 1 of the year in which the 
FDIC-supervised institution becomes subject to the minimum stable 
funding standard and other requirements of subparts K through M of this 
part: and
    (iii) An FDIC-supervised institution that becomes subject to the 
minimum stable funding standard and other requirements of subparts K 
through M of this part under paragraph (c)(1)(iv) of this section after 
the effective date must comply with the requirements of subparts K 
through M of this part on the date specified by the FDIC.
    (3) Subparts K through M of this part do not apply to:
    (i) A bridge financial company as defined in 12 U.S.C. 5381(a)(3), 
or a subsidiary of a bridge financial company; or
    (ii) A new depository institution or a bridge depository 
institution, as defined in 12 U.S.C. 1813(i).
    (4) An FDIC-supervised institution subject to a minimum stable 
funding standard under this part shall remain subject until the FDIC 
determines in writing that application of this part to the FDIC-
supervised institution is not appropriate in light of the FDIC-
supervised institution's asset size, level of complexity, risk profile, 
scope of operations, affiliation with foreign or domestic covered 
entities, or risk to the financial system.
    (5) In making a determination under paragraphs (c)(1)(iv) or (c)(4) 
of this section, the FDIC will apply, as appropriate, notice and 
response procedures in the same manner and to the same extent as the 
notice and response procedures set forth in 12 CFR 324.5.
* * * * *
0
36. Add subpart M to part 329 to read as follows:
Subpart M--Net Stable Funding Ratio for FDIC-Supervised Institutions
Sec.
329.120 Applicability.
329.121 Net stable funding ratio requirement.

Subpart M--Net Stable Funding Ratio for FDIC-Supervised 
Institutions


Sec.  329.120  Applicability.

    (a) Scope. This subpart applies to an FDIC-supervised institution 
that:
    (1) Is a Category III FDIC-supervised institution that is a 
consolidated subsidiary of a Category III banking organization pursuant 
to 12 CFR 252.5 or 12 CFR 238.10 with less than $75 billion in average 
weighted short-term wholesale funding; or
    (2) Is a Category III FDIC-supervised institution with less than 
$75 billion in average weighted short-term wholesale funding that is 
not consolidated under a holding company.
    (b) Applicable provisions. Except as otherwise provided in this 
subpart, the provisions of subparts A, K, and L of this part apply to 
FDIC-supervised institutions that are subject to this subpart.
    (c) Applicability. An FDIC-supervised institution that meets the 
threshold for applicability of this subpart under paragraph (a) of this 
section after the effective date must comply with the requirements of 
this subpart beginning on the first day of the second calendar quarter 
after which it meets the thresholds set forth in paragraph (a) of this 
section.


Sec.  329.121  Net stable funding ratio requirement.

    (a) Calculation of the net stable funding ratio. An FDIC-supervised 
institution subject to this subpart must calculate and maintain a net 
stable funding ratio in accordance with Sec.  329.100 and this subpart.
    (b) Available stable funding amount. An FDIC-supervised institution 
subject to this subpart must calculate its ASF amount in accordance 
with subpart K of this part.
    (c) Required stable funding amount. An FDIC-supervised institution 
subject to this subpart must calculate its RSF amount in accordance 
with subpart K of this part, provided, however, that the RSF amount of 
an FDIC-supervised institution subject to this subpart equals [70 to 
85] percent of the RSF amount calculated in accordance with subpart K 
of this part.

    Dated: October 30, 2018.
Joseph M. Otting,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, November 30, 2018.
Yao Chin-Chao,
Assistant Secretary of the Board.

    Dated at Washington, DC, on November 20, 2018.

    By order of the Board of Directors.


[[Page 66059]]


Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2018-27177 Filed 12-20-18; 8:45 am]
 BILLING CODE 4810-33-P 6210-01-P 6714-01-P

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