OCC Guidelines Establishing Standards for Recovery Planning by Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches; Technical Amendments, 66604-66607 [2018-27952]
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66604
Federal Register / Vol. 83, No. 247 / Thursday, December 27, 2018 / Rules and Regulations
Dated: December 18, 2018.
Bao Nguyen,
Acting Senior Deputy Comptroller and Chief
Counsel.
By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority, December 17, 2018.
Ann E. Misback,
Secretary of the Board.
By order of the Board of Directors.
Dated at Washington, DC, this 13th day of
December, 2018.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2018–27791 Filed 12–26–18; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 30
[Docket ID OCC–2018–0028]
RIN 1557–AE51
OCC Guidelines Establishing
Standards for Recovery Planning by
Certain Large Insured National Banks,
Insured Federal Savings Associations,
and Insured Federal Branches;
Technical Amendments
Office of the Comptroller of the
Currency, Treasury.
ACTION: Final guidelines.
AGENCY:
The Office of the Comptroller
of the Currency (OCC) is amending its
enforceable guidelines relating to
recovery planning standards for insured
national banks, insured federal savings
associations, and insured federal
branches (Guidelines) by increasing the
average total consolidated assets
threshold for applying the Guidelines
from $50 billion to $250 billion. In
addition, the OCC is changing the
Guidelines to decrease from 18 months
to 12 months the time within which a
bank should comply with the
Guidelines after the bank becomes
subject to them. Finally, the OCC is
making technical amendments to
remove outdated compliance dates.
DATES: The final guidelines are effective
on January 28, 2019.
FOR FURTHER INFORMATION CONTACT:
Andra Shuster, Senior Counsel or Rima
Kundnani, Attorney, Chief Counsel’s
Office, (202) 649–5490; or, for persons
who are deaf or hard of hearing, TTY,
(202) 649–5597, 400 7th Street SW,
Washington, DC 20219.
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SUMMARY:
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SUPPLEMENTARY INFORMATION:
I. Background
The 2008 financial crisis provided
valuable lessons about the need for
financial institutions to have strong risk
governance frameworks, including plans
for how to respond to and recover from
the financial effects of severe stress.
This was particularly true for larger,
more complex banks given the potential
they pose for systemic risk. In response
to these lessons, on September 29, 2016,
the OCC published the Guidelines
establishing minimum standards for
recovery planning by insured national
banks, insured federal savings
associations, and insured federal
branches of foreign banks (banks) with
average total consolidated assets 1 equal
to or greater than $50 billion (covered
banks).2 The Guidelines state that a
recovery plan should identify (1)
quantitative or qualitative indicators of
the risk or existence of severe stress that
reflect a covered bank’s particular
vulnerabilities and (2) a wide range of
credible options that a covered bank
could undertake in response to the
stress to restore its financial strength
and viability.
Under the Guidelines, a recovery plan
should also address: (1) Procedures for
escalating decision-making to senior
management or the board of directors,
(2) management reports, and (3)
communication procedures. In addition,
the Guidelines explain how a bank
should calculate its average total
consolidated assets and reserve the
OCC’s authority to apply the Guidelines
to a bank below the $50 billion
threshold if the agency determines a
bank is highly complex or otherwise
presents a heightened risk. Finally, the
Guidelines set out phased-in
compliance dates based on bank size.
II. Description of the Proposal,
Comments Received, and Final
Guidelines
The OCC received three comments on
the proposal. One comment came from
an individual, one from a trade
association (Trade Association
Comment), and the other from four
regional national banks (Banks
Comment).
1 Average total consolidated assets is defined in
the Guidelines and means the average total
consolidated assets of the bank or covered bank as
reported on the bank’s or covered bank’s
Consolidated Reports of Condition and Income for
the four most recent consecutive quarters. See 12
CFR part 30, appendix E, paragraph I.E.1.
2 81 FR 66791 (Sep. 29, 2016). The Guidelines
were issued pursuant to section 39 of the Federal
Deposit Insurance Act, 12 U.S.C. 1831p-1, which
authorizes the OCC to prescribe enforceable safety
and soundness standards.
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Asset Threshold. The OCC noted in
the SUPPLEMENTARY INFORMATION section
of the Guidelines that large, complex
institutions should undertake recovery
planning to be able to respond quickly
to and recover from the financial effects
of severe stress on the institution. Based
on its experience to date in reviewing
recovery plans, the OCC believes that it
is appropriate to raise the threshold for
the Guidelines to focus on those
institutions that present greater risk to
the banking system. These larger, more
complex, or potentially more
interconnected banks present the types
of risks that could benefit most from
having the types of governance and
planning processes that identify and
assist in responding to significant stress
events.
In addition, at the time the Guidelines
were published, the $50 billion recovery
planning threshold was consistent with
the scope of Federal Deposit Insurance
Corporation and Board of Governors of
the Federal Reserve System regulations 3
that require certain entities to prepare
resolution plans under section 165 of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act.4 On May 24,
2018, the Economic Growth, Regulatory
Relief, and Consumer Protection Act
(Act) was enacted to promote economic
growth, provide tailored economic
relief, and enhance consumer
protections.5 Section 401 of the Act
raises from $50 billion to $250 billion
the section 165 resolution planning
threshold.
Accordingly, the OCC proposed to
increase from $50 billion to $250 billion
the average total consolidated assets
threshold at which the Guidelines apply
to banks.6 This change would reduce
the number of covered banks to which
the Guidelines apply from 25 to 8, based
on the most recent data available.
All three of the comments received
addressed the threshold change. The
individual commenter expressed
concern that raising the Guidelines’
asset threshold would provide too much
leniency for banks in light of the 2008
financial crisis. The Trade Association
Comment strongly supported the OCC’s
proposal to raise the threshold for the
Guidelines from $50 billion to $250
billion in average total consolidated
assets because it provides burden relief
to the affected banks and permits the
OCC to allocate its resources over a
smaller number of banks. The Banks
3 See 12 CFR 381.2(f) and 243.2(f), respectively.
See also 12 CFR 360.10.
4 Public Law 111–203, 124 Stat. 1376 (July 21,
2010).
5 Public Law 115–174, 132 Stat. 1296 (May 24,
2018).
6 83 FR 47313 (Sep. 19, 2018).
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Comment suggested that the OCC
replace the threshold with a risksensitive alternative that more
accurately reflects a bank’s business
model and risk profile, like the systemic
indicator score, which was described as
a more useful and better-calibrated
measure of the complexity and risk
inherent in a bank’s business model.
The OCC believes this threshold
change is consistent with providing
necessary and appropriate burden relief
to the affected banks while retaining the
requirements for the largest, most
complex institutions. Furthermore, the
increased threshold is consistent with
section 401 of the Act’s increase in the
section 165 resolution planning
threshold applicable to systemically
important bank holding companies.
Therefore, the OCC is adopting as final
the proposed Guidelines’ $250 billion
average total consolidated assets
threshold.
Tailoring Approach for Banks Subject
to the Guidelines. Both the Trade
Association Comment and the Banks
Comment requested that the OCC
consider a tailored approach to the
application of the Guidelines to covered
banks in order to focus recovery
planning on issues that are most
relevant to the bank based on its risk
profile and business model. The trade
association also requested that the OCC
consider whether the Guidelines should
be applicable to all covered banks given
the varying degree of riskiness and
complexity of these banks.
The Guidelines already recognize that
each covered bank is unique and
expressly permit a bank to tailor its
recovery plan so that it is ‘‘specific to
that covered bank and appropriate for
its individual size, risk profile,
activities, and complexity, including the
complexity of its organizational and
legal entity structure.’’ 7 Therefore, a
covered bank that is less complex or has
less risk may tailor its recovery plan
under the Guidelines accordingly. Given
this flexibility, the OCC does not think
it is necessary to specifically tailor the
Guidelines based on different business
models and risk profiles of the covered
banks nor do we think it is appropriate
to further reduce the number of banks
subject to the Guidelines. In fact, it may
be even more important for a covered
bank that is less complex or has less risk
due to fewer interconnections to have a
robust recovery plan. Such a bank may
have identified fewer options for
recovery and therefore may be
7 Appendix E to part 30, II.A. See also
Comptroller’s Handbook for Recovery Planning,
version 1.0 April 2018 at p. 6.
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constrained in its ability to restore
financial strength in severe stress.
Biennial Cycle. Both the Trade
Association Comment and the Banks
Comment suggested that the OCC
should consider moving from an annual
to a biennial recovery plan cycle. The
Trade Association Comment noted that
as was the case with resolution
planning, this would give the OCC more
time to provide feedback and would
give the covered banks more time to
prepare the plans, likely resulting in a
better quality plan. Both commenters
also requested that the OCC allow each
covered bank to elect the timing of its
two-year recovery plan cycle. This
would permit each bank to make a
determination of whether or not to align
the preparation of its recovery plan with
the preparation of its resolution plan.
Further, the Trade Association
Comment requested that the OCC not
require re-approval of the recovery plan
by the board of directors if there has
been no material change or event that
has had a fundamental and major
impact on the covered bank’s recovery
plan since the board previously
approved the recovery plan.
The recovery plan and the recovery
planning framework are important to a
bank’s safety and soundness and
enterprise governance and, thus, the
OCC believes that covered banks should
review and revise the recovery plan as
necessary at least annually. With regard
to electing the timing of the recovery
plan cycle, the preamble to the
Guidelines noted that ‘‘management
should have flexibility to conduct its
annual reviews on its preferred
schedule’’ and that ‘‘OCC examiners
will assess the appropriateness and
adequacy of the covered bank’s ongoing
recovery planning process as part of the
agency’s regular supervisory activities
. . . [to] provide covered banks with the
flexibility they need.’’ 8 In addition to
this flexibility, the Guidelines already
permit an appropriate committee of the
board, rather than the entire board, to
review and approve the recovery plan.9
Therefore, no change has been made to
this part of the Guidelines.
Transparency of Standards and
Horizontal Review. The Trade
Association Comment suggested that
recovery planning standards should be
more transparent in the future and that
a supervisory horizontal review of
recovery plans may be difficult and less
meaningful given the differences in risk
profiles and business models among the
covered banks. The OCC believes that
the current process, which includes
8 81
FR 66797 (Sept. 29, 2016).
E to part 30, III.B.
9 Appendix
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discussion between the examiners and
the covered banks, provides the
necessary transparency for recovery
planning standards. While other
agencies may use horizontal review for
resolution planning purposes, the OCC
does not intend to use such reviews in
connection with recovery planning.
Clarification for Banks under $250
Billion. The Trade Association
Comment requested that the OCC
immediately clarify that no recovery
plans are expected of banks on or after
January 1, 2019 if they do not meet the
$250 billion average total consolidated
assets threshold in order to avoid the
significant and needless burden
associated with preparing the recovery
plan. Given that these revised final
Guidelines will be effective in a short
period of time, the OCC would not
expect banks with less than $250 billion
in average total consolidated assets to
complete the annual process for review
by management and review and
approval by the board of their 2018
recovery plans or to begin preparing a
2019 recovery plan.
Compliance Date. Under the current
Guidelines, a bank with less than $50
billion in average total consolidated
assets that subsequently becomes a
covered bank is required to comply with
the Guidelines within 18 months. The
OCC proposed amending this provision
so that a bank that has less than $250
billion in average total consolidated
assets on the effective date of the final
rule and subsequently becomes a
covered bank should comply with the
Guidelines within 12 months. Based
upon supervisory experience, the OCC
has observed that 12 months is a
sufficient period of time for any bank
that becomes a covered bank to comply
with the Guidelines. Finally, the OCC
proposed technical amendments to
remove the compliance dates listed in
the current Guidelines, as the dates have
all passed. The OCC did not receive any
comments on these changes. Therefore,
these amendments will be adopted as
proposed.
Regulatory Analysis
Regulatory Flexibility Act
In general, the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601 et seq.) requires
that in connection with a rulemaking,
an agency prepare and make available
for public comment a regulatory
flexibility analysis that describes the
impact of the rule on small entities.
Under section 605(b) of the RFA, this
analysis is not required if an agency
certifies that the rule will not have a
significant economic impact on a
substantial number of small entities and
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publishes its certification and a brief
explanatory statement in the Federal
Register along with its rule.
As part of its analysis, the OCC
considered whether these revised final
Guidelines will have a significant
economic impact on a substantial
number of small entities, pursuant to
the RFA. Because these revised final
Guidelines will generally have no
impact on banks with less than $50
billion in total consolidated assets, no
OCC-supervised small entities will be
affected. Therefore, the OCC certifies
that these revised final Guidelines will
not have a significant economic impact
on a substantial number of small
entities.
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Paperwork Reduction Act of 1995
These revised final Guidelines
include changes to an approved
collection of information pursuant to
the provisions of the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3501 et seq.). In accordance with the
PRA, the OCC may not conduct or
sponsor, and an organization is not
required to respond to, an information
collection unless the information
collection displays a currently valid
Office of Management and Budget
(OMB) control number.
The OCC submitted the information
collection requirements contained in the
rule to the OMB at the proposed rule
stage. Pursuant to 5 CFR 1320.11(c), the
OMB filed a comment on the
submission directing the OCC to
examine any public comment in
response to the information collection
requirements, prepare a description of
how the OCC has responded to the
comments (including comments on
maximizing the practical utility of the
collection and minimizing the burden),
and resubmit the information collection
requirements in connection with these
revised final Guidelines.
The Guidelines found in 12 CFR part
30, appendix E, sections II.B., II.C., and
III contain information collection
requirements previously approved by
the OMB. Section II.B. specifies the
elements of the recovery plan, including
an overview of the covered bank;
triggers; options for recovery; impact
assessments; escalation procedures;
management reports; and
communication procedures. Section
II.C. addresses the relationship of the
plan to other covered bank processes
and coordination with other plans,
including the processes and plans of its
bank holding company. Section III
outlines management’s and the board’s
responsibilities. The threshold
triggering these requirements is being
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changed under these revised final
Guidelines, resulting in a reduction in
the number of respondents under this
collection.
The following revised information
collection was submitted to OMB for
review.
Title: OCC Guidelines Establishing
Standards for Recovery Planning by
Certain Large Insured National Banks,
Insured Federal Savings Associations,
and Insured Federal Branches
OMB Control No.: 1557–0333.
Frequency of Response: On occasion.
Affected Public: Businesses or other
for-profit organizations.
Burden Estimates:
Total Number of Respondents: 8
National Banks.
Total Burden per Respondent: 7,543
hours.
Total Burden for Collection: 60,344
hours.
Comments were invited on: (1)
Whether the proposed collection of
information is necessary for the proper
performance of the OCC’s functions,
including whether the information has
practical utility; (2) the accuracy of the
OCC’s estimate of the burden of the
proposed information collection,
including the cost of compliance; (3)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (4) ways to minimize the
burden of information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
We received no comments on the
proposed information collection.
Unfunded Mandates Reform Act of 1995
The OCC analyzed these revised final
Guidelines 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 these revised final Guidelines
include 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
these revised final Guidelines do not
impose new mandates. Therefore, we
conclude that these revised final
Guidelines will not result in an
expenditure of $100 million or more
annually by State, local, and tribal
governments, or by the private sector.
Effective Date
The Administrative Procedure Act
(APA) requires that a substantive rule
must be published not less than 30 days
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before its effective date, unless, among
other things, the rule grants or
recognizes an exemption or relieves a
restriction. Section 302 of the Riegle
Community Development and
Regulatory Improvement Act of 1994
(RCDRIA) requires that regulations
imposing additional reporting,
disclosure, or other requirements on
insured depository institutions take
effect on the first day of the calendar
quarter after publication of the final
rule, unless, among other things, the
agency determines for good cause that
the regulations should become effective
before such time. These revised final
Guidelines will be effective 30 days
after publication in the Federal
Register, which meets the APA effective
date requirements. Given that these
revised final Guidelines do not impose
any additional reporting, disclosure, or
other requirements on insured
depository institutions, but rather
reduce reporting requirements, the
effective date of 30 days after
publication in the Federal Register,
rather than the first day of the calendar
quarter following publication, is
consistent with RCDRIA.
Section 302 of RCDRIA also requires
the OCC to consider, consistent with the
principles of safety and soundness and
the public interest, any administrative
burdens these revised final Guidelines
would place on insured depository
institutions, including small depository
institutions, and their customers as well
as the benefits of such regulations when
determining the effective date and
administrative compliance requirements
of new regulations that impose new
reporting, disclosure, or other
requirements on insured depository
institutions. The OCC has considered
the changes made by these revised final
Guidelines and believes that the
effective date of 30 days after
publication in the Federal Register is
appropriate.
Plain Language
Section 722 of the Gramm-LeachBliley Act (12 U.S.C. 4809(a)), requires
the OCC to use plain language in all
proposed and final rules published after
January 1, 2000. The OCC received no
comment on these matters and believes
that these revised final Guidelines are
written plainly and clearly.
List of Subjects in 12 CFR Part 30
Banks, Banking, Consumer protection,
National banks, Privacy, Safety and
soundness, Reporting and
recordkeeping requirements.
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Office of the Comptroller of the
Currency
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
12 CFR Chapter I
Authority and Issuance
14 CFR Part 23
For the reasons set forth in the
preamble, and under the authority of 12
U.S.C. 93a and 12 U.S.C. 1831p–1,
chapter I of title 12 of the Code of
Federal Regulations is amended as
follows:
[Docket No.FAA–2018–0918; Notice No. 23–
291–SC]
PART 30—SAFETY AND SOUNDNESS
STANDARDS
AGENCY:
1. The authority citation for part 30
continues to read as follows:
■
2. Appendix E to part 30 is amended
by:
■ a. Removing the phrase ‘‘$50 billion’’
and adding in its place the phrase ‘‘$250
billion’’ everywhere that it appears;
■ b. Revising section I.B.1;
■ c. Removing section I.B.2 and I.B.3;
■ d. Redesignating section I.B.4 as
section I.B.2;
■ e. In newly redesignated section I.B.2:
■ i. Removing ‘‘January 1, 2017’’ and
adding in its place the words‘‘January
28, 2019’’; and
■ ii. Removing the phrase ‘‘18 months’’
and adding in its place the phrase ‘‘12
months’’.
The revision reads as follows:
■
Appendix E to Part 30—OCC
Guidelines Establishing Standards for
Recovery Planning by Certain Large
Insured National Banks, Insured
Federal Savings Associations, and
Insured Federal Branches
*
*
*
*
I. * * *
B. * * *
1. A covered bank with average total
consolidated assets, calculated according to
paragraph I.E.1. of this appendix, equal to or
greater than $250 billion as of January 28,
2019 should be in compliance with this
appendix on January 28, 2019.
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*
*
*
*
*
Dated: December 18, 2018.
William A. Rowe,
Chief Risk Officer.
[FR Doc. 2018–27952 Filed 12–26–18; 8:45 am]
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Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions.
These special conditions are
issued for Textron Aviation, Inc. B200series airplanes. These airplanes as
modified by Innovative Solutions &
Support, Inc., will have a novel or
unusual design feature associated with
an autothrust system. The applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for this design feature. These special
conditions contain the additional safety
standards the Administrator considers
necessary to establish a level of safety
equivalent to that established by the
existing airworthiness standards.
DATES: These special conditions are
effective December 27, 2018.
FOR FURTHER INFORMATION CONTACT: Jeff
Pretz, AIR–691, Regulations & Policy
Section, Small Airplane Standards
Branch, Policy & Innovation Division,
Aircraft Certification Service, Federal
Aviation Administration, 901 Locust;
Kansas City, Missouri 64106; telephone
(816) 329–3239; facsimile (816) 329–
4090; email Jeff.Pretz@faa.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Authority: 12 U.S.C. 1, 93a, 371, 1462a,
1463, 1464, 1467a, 1818, 1828, 1831p–1,
1881–1884, 3102(b) and 5412(b)(2)(B); 15
U.S.C. 1681s, 1681w, 6801, and 6805(b)(1).
*
Special Conditions: Innovative
Solutions & Support, Inc.; Textron
Aviation, Inc. Model B200-Series
Airplanes; Autothrust Functions
Background
On December 14, 2017, Innovative
Solutions & Support, Inc. (Innovative
Solutions), applied for a supplemental
type certificate for installation of an
autothrust system (ATS)—also known as
an autothrottle system—in Textron
Aviation, Inc., (Textron) B200-series
airplanes. The B200-series airplanes are
powered by two Pratt & Whitney PT6A
turbo-propeller engines—depending on
airplane model—that can carry thirteen
passengers, including two flightcrew
members. These airplanes have a service
ceiling up to 35,000-feet and a
maximum takeoff weight of up to 12,500
pounds in the normal category. These
airplanes are approved for single-pilot
operation.
The installation of an ATS in Textron
B200-series airplanes is intended to
reduce pilot workload. The ATS is
useable in all phases of flight except
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66607
below decision height on approach. The
system includes torque control and
airspeed modes along with monitors to
prevent the system from exceeding
critical engine or airspeed limits.
Throttle movement is provided by a
stepper motor acting through a linear
actuator, which acts as a link between
the stepper motor and throttle. The liner
actuator can be overridden by pilot
movement of the throttle and
automatically disengages upon
disagreement in the expected throttle
position versus its actual position.
Section 23.1329, amendment 23–49,
only contained requirements for
automatic pilot systems that act on the
airplane flight controls. Autothrust
systems are automatic systems that act
on the thrust controls. These systems
provide enhanced automation and
safety, but may also introduce pilot
confusion, countering the safety benefit.
Transport Airplane regulation 14 CFR
25.1329, amendment 25–119, addresses
these concerns. Therefore, these special
conditions are based on § 25.1329 and
provide additional requirements to
standardize the pilot interface and
system behavior and enhance pilot
awareness of system active and armed
modes.
Type Certification Basis
Under the provisions of § 21.101,
Innovative Solutions must show that
B200-series airplanes, as changed,
continue to meet the applicable
provisions of the regulations
incorporated by reference in Type
Certificate (TC) No. A24CE 2 or the
applicable regulations in effect on the
date of application for the change. The
regulations incorporated by reference in
the type certificate are commonly
referred to as the ‘‘original type
certification basis.’’ The regulations
incorporated by reference in TC No.
A24CE are as follows: 14 CFR part 23,
amendments 23–1 through 23–9, plus
various later part 23 amendments—
depending on the model and serial
number of the airplane—as noted on
Type Certification Data Sheet A24CE.
If the Administrator finds the
applicable airworthiness regulations
(i.e., 14 CFR part 23) do not contain
adequate or appropriate safety standards
for B200-series airplanes because of a
novel or unusual design feature, special
conditions are prescribed under the
provisions of § 21.16.
Special conditions are initially
applicable to the model(s) for which
they are issued. Should the applicant
apply for a supplemental type certificate
to modify any other model included on
2 See
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Agencies
[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Rules and Regulations]
[Pages 66604-66607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27952]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 30
[Docket ID OCC-2018-0028]
RIN 1557-AE51
OCC Guidelines Establishing Standards for Recovery Planning by
Certain Large Insured National Banks, Insured Federal Savings
Associations, and Insured Federal Branches; Technical Amendments
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final guidelines.
-----------------------------------------------------------------------
SUMMARY: The Office of the Comptroller of the Currency (OCC) is
amending its enforceable guidelines relating to recovery planning
standards for insured national banks, insured federal savings
associations, and insured federal branches (Guidelines) by increasing
the average total consolidated assets threshold for applying the
Guidelines from $50 billion to $250 billion. In addition, the OCC is
changing the Guidelines to decrease from 18 months to 12 months the
time within which a bank should comply with the Guidelines after the
bank becomes subject to them. Finally, the OCC is making technical
amendments to remove outdated compliance dates.
DATES: The final guidelines are effective on January 28, 2019.
FOR FURTHER INFORMATION CONTACT: Andra Shuster, Senior Counsel or Rima
Kundnani, Attorney, Chief Counsel's Office, (202) 649-5490; or, for
persons who are deaf or hard of hearing, TTY, (202) 649-5597, 400 7th
Street SW, Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
I. Background
The 2008 financial crisis provided valuable lessons about the need
for financial institutions to have strong risk governance frameworks,
including plans for how to respond to and recover from the financial
effects of severe stress. This was particularly true for larger, more
complex banks given the potential they pose for systemic risk. In
response to these lessons, on September 29, 2016, the OCC published the
Guidelines establishing minimum standards for recovery planning by
insured national banks, insured federal savings associations, and
insured federal branches of foreign banks (banks) with average total
consolidated assets \1\ equal to or greater than $50 billion (covered
banks).\2\ The Guidelines state that a recovery plan should identify
(1) quantitative or qualitative indicators of the risk or existence of
severe stress that reflect a covered bank's particular vulnerabilities
and (2) a wide range of credible options that a covered bank could
undertake in response to the stress to restore its financial strength
and viability.
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\1\ Average total consolidated assets is defined in the
Guidelines and means the average total consolidated assets of the
bank or covered bank as reported on the bank's or covered bank's
Consolidated Reports of Condition and Income for the four most
recent consecutive quarters. See 12 CFR part 30, appendix E,
paragraph I.E.1.
\2\ 81 FR 66791 (Sep. 29, 2016). The Guidelines were issued
pursuant to section 39 of the Federal Deposit Insurance Act, 12
U.S.C. 1831p-1, which authorizes the OCC to prescribe enforceable
safety and soundness standards.
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Under the Guidelines, a recovery plan should also address: (1)
Procedures for escalating decision-making to senior management or the
board of directors, (2) management reports, and (3) communication
procedures. In addition, the Guidelines explain how a bank should
calculate its average total consolidated assets and reserve the OCC's
authority to apply the Guidelines to a bank below the $50 billion
threshold if the agency determines a bank is highly complex or
otherwise presents a heightened risk. Finally, the Guidelines set out
phased-in compliance dates based on bank size.
II. Description of the Proposal, Comments Received, and Final
Guidelines
The OCC received three comments on the proposal. One comment came
from an individual, one from a trade association (Trade Association
Comment), and the other from four regional national banks (Banks
Comment).
Asset Threshold. The OCC noted in the SUPPLEMENTARY INFORMATION
section of the Guidelines that large, complex institutions should
undertake recovery planning to be able to respond quickly to and
recover from the financial effects of severe stress on the institution.
Based on its experience to date in reviewing recovery plans, the OCC
believes that it is appropriate to raise the threshold for the
Guidelines to focus on those institutions that present greater risk to
the banking system. These larger, more complex, or potentially more
interconnected banks present the types of risks that could benefit most
from having the types of governance and planning processes that
identify and assist in responding to significant stress events.
In addition, at the time the Guidelines were published, the $50
billion recovery planning threshold was consistent with the scope of
Federal Deposit Insurance Corporation and Board of Governors of the
Federal Reserve System regulations \3\ that require certain entities to
prepare resolution plans under section 165 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.\4\ On May 24, 2018, the
Economic Growth, Regulatory Relief, and Consumer Protection Act (Act)
was enacted to promote economic growth, provide tailored economic
relief, and enhance consumer protections.\5\ Section 401 of the Act
raises from $50 billion to $250 billion the section 165 resolution
planning threshold.
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\3\ See 12 CFR 381.2(f) and 243.2(f), respectively. See also 12
CFR 360.10.
\4\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
\5\ Public Law 115-174, 132 Stat. 1296 (May 24, 2018).
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Accordingly, the OCC proposed to increase from $50 billion to $250
billion the average total consolidated assets threshold at which the
Guidelines apply to banks.\6\ This change would reduce the number of
covered banks to which the Guidelines apply from 25 to 8, based on the
most recent data available.
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\6\ 83 FR 47313 (Sep. 19, 2018).
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All three of the comments received addressed the threshold change.
The individual commenter expressed concern that raising the Guidelines'
asset threshold would provide too much leniency for banks in light of
the 2008 financial crisis. The Trade Association Comment strongly
supported the OCC's proposal to raise the threshold for the Guidelines
from $50 billion to $250 billion in average total consolidated assets
because it provides burden relief to the affected banks and permits the
OCC to allocate its resources over a smaller number of banks. The Banks
[[Page 66605]]
Comment suggested that the OCC replace the threshold with a risk-
sensitive alternative that more accurately reflects a bank's business
model and risk profile, like the systemic indicator score, which was
described as a more useful and better-calibrated measure of the
complexity and risk inherent in a bank's business model.
The OCC believes this threshold change is consistent with providing
necessary and appropriate burden relief to the affected banks while
retaining the requirements for the largest, most complex institutions.
Furthermore, the increased threshold is consistent with section 401 of
the Act's increase in the section 165 resolution planning threshold
applicable to systemically important bank holding companies. Therefore,
the OCC is adopting as final the proposed Guidelines' $250 billion
average total consolidated assets threshold.
Tailoring Approach for Banks Subject to the Guidelines. Both the
Trade Association Comment and the Banks Comment requested that the OCC
consider a tailored approach to the application of the Guidelines to
covered banks in order to focus recovery planning on issues that are
most relevant to the bank based on its risk profile and business model.
The trade association also requested that the OCC consider whether the
Guidelines should be applicable to all covered banks given the varying
degree of riskiness and complexity of these banks.
The Guidelines already recognize that each covered bank is unique
and expressly permit a bank to tailor its recovery plan so that it is
``specific to that covered bank and appropriate for its individual
size, risk profile, activities, and complexity, including the
complexity of its organizational and legal entity structure.'' \7\
Therefore, a covered bank that is less complex or has less risk may
tailor its recovery plan under the Guidelines accordingly. Given this
flexibility, the OCC does not think it is necessary to specifically
tailor the Guidelines based on different business models and risk
profiles of the covered banks nor do we think it is appropriate to
further reduce the number of banks subject to the Guidelines. In fact,
it may be even more important for a covered bank that is less complex
or has less risk due to fewer interconnections to have a robust
recovery plan. Such a bank may have identified fewer options for
recovery and therefore may be constrained in its ability to restore
financial strength in severe stress.
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\7\ Appendix E to part 30, II.A. See also Comptroller's Handbook
for Recovery Planning, version 1.0 April 2018 at p. 6.
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Biennial Cycle. Both the Trade Association Comment and the Banks
Comment suggested that the OCC should consider moving from an annual to
a biennial recovery plan cycle. The Trade Association Comment noted
that as was the case with resolution planning, this would give the OCC
more time to provide feedback and would give the covered banks more
time to prepare the plans, likely resulting in a better quality plan.
Both commenters also requested that the OCC allow each covered bank to
elect the timing of its two-year recovery plan cycle. This would permit
each bank to make a determination of whether or not to align the
preparation of its recovery plan with the preparation of its resolution
plan. Further, the Trade Association Comment requested that the OCC not
require re-approval of the recovery plan by the board of directors if
there has been no material change or event that has had a fundamental
and major impact on the covered bank's recovery plan since the board
previously approved the recovery plan.
The recovery plan and the recovery planning framework are important
to a bank's safety and soundness and enterprise governance and, thus,
the OCC believes that covered banks should review and revise the
recovery plan as necessary at least annually. With regard to electing
the timing of the recovery plan cycle, the preamble to the Guidelines
noted that ``management should have flexibility to conduct its annual
reviews on its preferred schedule'' and that ``OCC examiners will
assess the appropriateness and adequacy of the covered bank's ongoing
recovery planning process as part of the agency's regular supervisory
activities . . . [to] provide covered banks with the flexibility they
need.'' \8\ In addition to this flexibility, the Guidelines already
permit an appropriate committee of the board, rather than the entire
board, to review and approve the recovery plan.\9\ Therefore, no change
has been made to this part of the Guidelines.
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\8\ 81 FR 66797 (Sept. 29, 2016).
\9\ Appendix E to part 30, III.B.
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Transparency of Standards and Horizontal Review. The Trade
Association Comment suggested that recovery planning standards should
be more transparent in the future and that a supervisory horizontal
review of recovery plans may be difficult and less meaningful given the
differences in risk profiles and business models among the covered
banks. The OCC believes that the current process, which includes
discussion between the examiners and the covered banks, provides the
necessary transparency for recovery planning standards. While other
agencies may use horizontal review for resolution planning purposes,
the OCC does not intend to use such reviews in connection with recovery
planning.
Clarification for Banks under $250 Billion. The Trade Association
Comment requested that the OCC immediately clarify that no recovery
plans are expected of banks on or after January 1, 2019 if they do not
meet the $250 billion average total consolidated assets threshold in
order to avoid the significant and needless burden associated with
preparing the recovery plan. Given that these revised final Guidelines
will be effective in a short period of time, the OCC would not expect
banks with less than $250 billion in average total consolidated assets
to complete the annual process for review by management and review and
approval by the board of their 2018 recovery plans or to begin
preparing a 2019 recovery plan.
Compliance Date. Under the current Guidelines, a bank with less
than $50 billion in average total consolidated assets that subsequently
becomes a covered bank is required to comply with the Guidelines within
18 months. The OCC proposed amending this provision so that a bank that
has less than $250 billion in average total consolidated assets on the
effective date of the final rule and subsequently becomes a covered
bank should comply with the Guidelines within 12 months. Based upon
supervisory experience, the OCC has observed that 12 months is a
sufficient period of time for any bank that becomes a covered bank to
comply with the Guidelines. Finally, the OCC proposed technical
amendments to remove the compliance dates listed in the current
Guidelines, as the dates have all passed. The OCC did not receive any
comments on these changes. Therefore, these amendments will be adopted
as proposed.
Regulatory Analysis
Regulatory Flexibility Act
In general, the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.) requires that in connection with a rulemaking, an agency prepare
and make available for public comment a regulatory flexibility analysis
that describes the impact of the rule on small entities. Under section
605(b) of the RFA, this analysis is not required if an agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities and
[[Page 66606]]
publishes its certification and a brief explanatory statement in the
Federal Register along with its rule.
As part of its analysis, the OCC considered whether these revised
final Guidelines will have a significant economic impact on a
substantial number of small entities, pursuant to the RFA. Because
these revised final Guidelines will generally have no impact on banks
with less than $50 billion in total consolidated assets, no OCC-
supervised small entities will be affected. Therefore, the OCC
certifies that these revised final Guidelines will not have a
significant economic impact on a substantial number of small entities.
Paperwork Reduction Act of 1995
These revised final Guidelines include changes to an approved
collection of information pursuant to the provisions of the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). In accordance
with the PRA, the OCC may not conduct or sponsor, and an organization
is not required to respond to, an information collection unless the
information collection displays a currently valid Office of Management
and Budget (OMB) control number.
The OCC submitted the information collection requirements contained
in the rule to the OMB at the proposed rule stage. Pursuant to 5 CFR
1320.11(c), the OMB filed a comment on the submission directing the OCC
to examine any public comment in response to the information collection
requirements, prepare a description of how the OCC has responded to the
comments (including comments on maximizing the practical utility of the
collection and minimizing the burden), and resubmit the information
collection requirements in connection with these revised final
Guidelines.
The Guidelines found in 12 CFR part 30, appendix E, sections II.B.,
II.C., and III contain information collection requirements previously
approved by the OMB. Section II.B. specifies the elements of the
recovery plan, including an overview of the covered bank; triggers;
options for recovery; impact assessments; escalation procedures;
management reports; and communication procedures. Section II.C.
addresses the relationship of the plan to other covered bank processes
and coordination with other plans, including the processes and plans of
its bank holding company. Section III outlines management's and the
board's responsibilities. The threshold triggering these requirements
is being changed under these revised final Guidelines, resulting in a
reduction in the number of respondents under this collection.
The following revised information collection was submitted to OMB
for review.
Title: OCC Guidelines Establishing Standards for Recovery Planning
by Certain Large Insured National Banks, Insured Federal Savings
Associations, and Insured Federal Branches
OMB Control No.: 1557-0333.
Frequency of Response: On occasion.
Affected Public: Businesses or other for-profit organizations.
Burden Estimates:
Total Number of Respondents: 8 National Banks.
Total Burden per Respondent: 7,543 hours.
Total Burden for Collection: 60,344 hours.
Comments were invited on: (1) Whether the proposed collection of
information is necessary for the proper performance of the OCC's
functions, including whether the information has practical utility; (2)
the accuracy of the OCC's estimate of the burden of the proposed
information collection, including the cost of compliance; (3) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (4) ways to minimize the burden of information
collection on respondents, including through the use of automated
collection techniques or other forms of information technology. We
received no comments on the proposed information collection.
Unfunded Mandates Reform Act of 1995
The OCC analyzed these revised final Guidelines 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 these revised
final Guidelines include 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 these revised
final Guidelines do not impose new mandates. Therefore, we conclude
that these revised final Guidelines will not result in an expenditure
of $100 million or more annually by State, local, and tribal
governments, or by the private sector.
Effective Date
The Administrative Procedure Act (APA) requires that a substantive
rule must be published not less than 30 days before its effective date,
unless, among other things, the rule grants or recognizes an exemption
or relieves a restriction. Section 302 of the Riegle Community
Development and Regulatory Improvement Act of 1994 (RCDRIA) requires
that regulations imposing additional reporting, disclosure, or other
requirements on insured depository institutions take effect on the
first day of the calendar quarter after publication of the final rule,
unless, among other things, the agency determines for good cause that
the regulations should become effective before such time. These revised
final Guidelines will be effective 30 days after publication in the
Federal Register, which meets the APA effective date requirements.
Given that these revised final Guidelines do not impose any additional
reporting, disclosure, or other requirements on insured depository
institutions, but rather reduce reporting requirements, the effective
date of 30 days after publication in the Federal Register, rather than
the first day of the calendar quarter following publication, is
consistent with RCDRIA.
Section 302 of RCDRIA also requires the OCC to consider, consistent
with the principles of safety and soundness and the public interest,
any administrative burdens these revised final Guidelines would place
on insured depository institutions, including small depository
institutions, and their customers as well as the benefits of such
regulations when determining the effective date and administrative
compliance requirements of new regulations that impose new reporting,
disclosure, or other requirements on insured depository institutions.
The OCC has considered the changes made by these revised final
Guidelines and believes that the effective date of 30 days after
publication in the Federal Register is appropriate.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act (12 U.S.C. 4809(a)),
requires the OCC to use plain language in all proposed and final rules
published after January 1, 2000. The OCC received no comment on these
matters and believes that these revised final Guidelines are written
plainly and clearly.
List of Subjects in 12 CFR Part 30
Banks, Banking, Consumer protection, National banks, Privacy,
Safety and soundness, Reporting and recordkeeping requirements.
[[Page 66607]]
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set forth in the preamble, and under the authority
of 12 U.S.C. 93a and 12 U.S.C. 1831p-1, chapter I of title 12 of the
Code of Federal Regulations is amended as follows:
PART 30--SAFETY AND SOUNDNESS STANDARDS
0
1. The authority citation for part 30 continues to read as follows:
Authority: 12 U.S.C. 1, 93a, 371, 1462a, 1463, 1464, 1467a,
1818, 1828, 1831p-1, 1881-1884, 3102(b) and 5412(b)(2)(B); 15 U.S.C.
1681s, 1681w, 6801, and 6805(b)(1).
0
2. Appendix E to part 30 is amended by:
0
a. Removing the phrase ``$50 billion'' and adding in its place the
phrase ``$250 billion'' everywhere that it appears;
0
b. Revising section I.B.1;
0
c. Removing section I.B.2 and I.B.3;
0
d. Redesignating section I.B.4 as section I.B.2;
0
e. In newly redesignated section I.B.2:
0
i. Removing ``January 1, 2017'' and adding in its place the
words``January 28, 2019''; and
0
ii. Removing the phrase ``18 months'' and adding in its place the
phrase ``12 months''.
The revision reads as follows:
Appendix E to Part 30--OCC Guidelines Establishing Standards for
Recovery Planning by Certain Large Insured National Banks, Insured
Federal Savings Associations, and Insured Federal Branches
* * * * *
I. * * *
B. * * *
1. A covered bank with average total consolidated assets,
calculated according to paragraph I.E.1. of this appendix, equal to
or greater than $250 billion as of January 28, 2019 should be in
compliance with this appendix on January 28, 2019.
* * * * *
Dated: December 18, 2018.
William A. Rowe,
Chief Risk Officer.
[FR Doc. 2018-27952 Filed 12-26-18; 8:45 am]
BILLING CODE 4810-33-P