Company-Run Stress Testing Requirements for FDIC-Supervised State Nonmember Banks and State Savings Associations, 67149-67155 [2018-27824]
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67149
Proposed Rules
Federal Register
Vol. 83, No. 248
Friday, December 28, 2018
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325
RIN 3064–AE84
Company-Run Stress Testing
Requirements for FDIC-Supervised
State Nonmember Banks and State
Savings Associations
Federal Deposit Insurance
Corporation.
ACTION: Notice of proposed rulemaking
with request for public comment.
AGENCY:
The Federal Deposit
Insurance Corporation (FDIC) is
requesting comment on a proposed rule
(proposed rule or NPR) that would
revise the FDIC’s requirements for stress
testing by FDIC-supervised institutions,
consistent with changes made by
Section 401 of the Economic Growth,
Regulatory Relief, and Consumer
Protection Act (EGRRCPA). Specifically,
the proposed rule would amend the
FDIC’s existing stress testing regulations
to change the minimum threshold for
applicability from $10 billion to $250
billion, revise the frequency of required
stress tests by FDIC-supervised
institutions, and reduce the number of
required stress testing scenarios from
three to two. The NPR also proposes to
make certain conforming and technical
changes, including changes that were
previously proposed in an April 2018
notice of proposed rulemaking that was
superseded, in part, by the enactment of
EGRRCPA.
DATES: Comments on the notice of
proposed rulemaking must be received
by February 19, 2019.
ADDRESSES: Interested parties are
encouraged to submit written
comments. Commenters are encouraged
to use the title ‘‘Company-Run Stress
Testing Requirements for FDICsupervised State Nonmember Banks and
State Savings Associations’’ to facilitate
the organization and distribution of
comments among the Agencies. You
may submit comments, identified by
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SUMMARY:
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RIN number, by any of the following
methods:
• Agency website: https://
www.FDIC.gov/regulations/laws/
federal/. Follow instructions for
submitting comments on the Agency
website.
• Email: Comments@FDIC.gov.
Include RIN 3064–AE84 on the subject
line of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, 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
business days between 7:00 a.m. and
5:00 p.m.
• Public Inspection: All comments
received must include the agency name
and RIN 3064–AE84 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 1 (877) 275–3342
or 1 (703) 562–2200.
FOR FURTHER INFORMATION CONTACT:
Ryan Sheller, Section Chief, (202) 412–
4861, RSheller@FDIC.gov, Large Bank
Supervision, Division of Risk
Management Supervision; Annmarie
Boyd, Counsel, (202) 898–3714, aboyd@
FDIC.gov; or Benjamin Klein, Counsel,
(202) 898–7027, bklein@FDIC.gov; Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC, 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Prior to the enactment of EGRRCPA,
section 165(i)(2) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act 1 (Dodd-Frank Act) required a
financial company, including an
insured depository institution, with
total consolidated assets of more than
$10 billion and regulated by a primary
Federal regulatory agency to conduct
annual stress tests and submit a report
to the Board of Governors of the Federal
Reserve System (Board) and to its
primary federal regulatory agency.
1 12
PO 00000
U.S.C. 5365(i).
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Section 165(i)(2)(C) required each
primary Federal regulator to issue
consistent and comparable regulations
to: (1) Implement the stress testing
requirements, including establishing
methodologies for conducting stress
tests that provided for at least three
different sets of conditions, including
baseline, adverse, and severely adverse;
(2) establish the form and content of the
required reports, and (3) require
companies to publish a summary of the
stress test results.
In October 2012, the FDIC published
in the Federal Register its rule
implementing the Dodd-Frank Act stress
testing requirement.2 The FDIC
regulation at 12 CFR part 325
implements the company-run stress test
requirements of section 165(i)(2) of the
Dodd-Frank Act with respect to state
nonmember banks and state savings
associations with more than $10 billion
in assets (covered banks). Although 12
CFR part 325 applies to all covered
banks that exceed $10 billion in assets,
the regulation differentiates between
‘‘$10 billion to $50 billion covered
banks’’ and ‘‘over $50 billion covered
banks.’’
EGRRCPA, enacted on May 24, 2018,3
amended certain aspects of the
company-run stress-testing
requirements in section 165(i)(2) of the
Dodd-Frank Act. Specifically, section
401 of EGRRCPA raises the minimum
asset threshold for the company-run
stress testing requirement from $10
billion to $250 billion; replaces the
requirement for banks to conduct stress
tests ‘‘annually’’ with the requirement to
conduct stress tests ‘‘periodically;’’ and
no longer requires the ‘‘adverse’’ stress
testing scenario, thus reducing the
number of required stress testing
scenarios from three to two. The
EGRRCPA amendments to the section
165(i)(2) stress testing requirements are
effective eighteen months after
enactment.
Prior to the enactment of EGRRCPA,
on April 2, 2018, the FDIC issued a
notice of proposed rulemaking that also
proposed certain revisions to the FDIC
2 77 FR 62417 (October 15, 2012). The Board and
the Office of the Comptroller of the Currency
contemporaneously issued comparable regulations.
See 77 FR 62380 (October 12, 2012) (Board); 77 FR
61238 (October 9, 2012) (OCC).
3 Public Law 115–174, 132 Stat. 1296–1368
(2018).
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stress testing regulations (April NPR).4
Certain changes proposed in the April
NPR, particularly those establishing a
stress testing transition process for
‘‘over $50 billion covered banks’’ are no
longer relevant as a result of EGRRCPA’s
increase in the stress testing asset
threshold to $250 billion. However,
other revisions originally proposed in
the April NPR remain necessary to
ensure the FDIC’s stress testing
regulations remain consistent with those
of the Board and the Office of the
Comptroller of the Currency (OCC).
II. Description of the Proposed Rule
A. Covered Banks
As described above, section 401 of
EGRRCPA amended section 165 of the
Dodd-Frank Act by raising the
minimum asset threshold for banks
required to conduct stress tests from $10
billion to $250 billion. The proposed
rule would implement this change by
eliminating the two existing
subcategories of ‘‘covered bank’’—‘‘$10
to $50 billion covered bank’’ and ‘‘over
$50 billion covered bank’’—and revising
the term ‘‘covered bank’’ to mean a State
nonmember bank or State savings
association with average total
consolidated assets that are greater than
$250 billion. In addition, the proposal
would make certain technical and
conforming changes to 12 CFR part 325
in order to consolidate requirements,
such as those related to reporting and
publication, that are currently
referenced separately with respect to
$10 billion to $50 billion covered banks
and over $50 billion covered banks.
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B. Frequency of Stress Testing
Section 401 of EGRRCPA also
changed the requirement under section
165 of the Dodd-Frank Act to conduct
stress tests from ‘‘annual’’ to ‘‘periodic.’’
Consistent with proposals by the Board
and the OCC, the NPR proposes that, in
general, an FDIC-supervised institution
that is a covered bank as of December
31, 2019, would be required to conduct,
report, and publish a stress test once
every two years, beginning on January 1,
2020, and continuing every evennumbered year thereafter (i.e., 2022,
2024, 2026, etc.). The proposed rule
would also add a new defined term,
‘‘reporting year,’’ to the definitions at 12
CFR 325.2. A covered bank’s reporting
year would be the year in which a
covered bank must conduct, report, and
publish its stress test. As noted above,
the ‘‘reporting year’’ for most covered
banks would generally be every evennumbered year. However, under the
4 83
FR 13880 (April 2, 2018).
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NPR, covered banks that are subsidiaries
of global systemically important bank
holding companies or bank holding
companies that have $700 billion or
more in total assets or crossjurisdictional activity of $75 billion or
more would be required to conduct,
report, and publish stress test results on
the same schedule as their bank holding
companies, which would be annually
under rules proposed by the Board.
Subsequent to these changes, some
covered banks would have a biennial
reporting year (biennial stress testing
covered banks) while others would have
an annual reporting year (annual stress
testing covered banks). In either case,
under the NPR, the dates and deadlines
in the FDIC’s stress testing rule would
apply for each reporting year for a
covered bank. For example, a biennial
stress testing covered bank preparing its
2022 stress test would rely on financial
data available as of December 31, 2021;
use stress test scenarios that would be
provided by the FDIC no later than
February 15, 2022; provide its report of
the stress test to the FDIC by April 5,
2022; and publish a summary of the
results of its stress test in the period
starting June 15 and ending July 15 of
2022.
Based on the FDIC’s experience
overseeing and reviewing the results of
company-run stress testing, the FDIC
believes that a biennial stress testing
cycle would be appropriate for most
covered banks. For covered banks that
would stress test on a biennial cycle, the
FDIC nonetheless expects this level of
frequency to provide the FDIC and the
covered bank with information that is
sufficient to satisfy the purposes of
stress testing. In addition, the FDIC
would continue to review the covered
bank’s stress testing processes and
procedures. Under the proposed rule, all
covered banks that would conduct stress
tests on a biennial basis would be
required to conduct stress tests in the
same reporting year (i.e., the reporting
years for biennial stress testing covered
banks would be synchronized). By
requiring these covered banks to
conduct their stress tests in the same
reporting year, the proposal would
continue to allow the FDIC to make
comparisons across banks for
supervisory purposes and assess
macroeconomic trends and risks to the
banking industry.
As discussed above, under the
proposed rule, only certain covered
banks would be required to conduct
annual stress tests. This subset would be
limited to covered banks that are
consolidated under holding companies
that are required to conduct stress tests
more frequently than once every other
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year. This requirement reflects the
FDIC’s expectation that covered banks
that would be required to stress test on
an annual basis would be subsidiaries of
the largest and most systemically
important banking organizations, (i.e.,
subsidiaries of global systemically
important bank holding companies or
bank holding companies that have $700
billion or more in total assets or crossjurisdictional activity of $75 billion).
This treatment aligns with the agencies’
long-standing policy of applying similar
standards to holding companies and
their subsidiary banks.
C. Removal of ‘‘Adverse’’ Scenario
As enacted by the Dodd-Frank Act,
section 165(i)(2)(C) required the FDIC to
establish methodologies for conducting
stress tests and further required the
inclusion of at least three different
stress-testing scenarios: ‘‘baseline,’’
‘‘adverse,’’ and ‘‘severely adverse.’’
EGRRCPA amended section 165(i) to no
longer require the FDIC to include an
‘‘adverse’’ stress-testing scenario and to
reduce the minimum number of
required stress test scenarios from three
to two. Given that the ‘‘adverse’’ stresstesting scenario has provided limited
incremental information to the FDIC
and market participants beyond what
the ‘‘baseline’’ and ‘‘severely adverse’’
stress testing scenarios provide, the NPR
proposes to remove the ‘‘adverse’’
scenario in the FDIC’s stress testing rule
and to maintain the requirement to
conduct stress tests under the
‘‘baseline’’ and ‘‘severely adverse’’ stress
testing scenarios. The NPR would also
amend the definition of ‘‘severely
adverse scenario’’ so that the term is
defined relative to the ‘‘baseline
scenario,’’ rather than relative to the
‘‘adverse scenario.’’
D. Transition Process for Covered Banks
Currently, 12 CFR 325.3 provides for
a transition period between when a
bank becomes a covered bank and when
the bank must report its first stress test.
The NPR proposes to revise the
transition period in 12 CFR 325.3 to
conform to the other changes in this
proposal. Accordingly, proposed
paragraph (a)(2) would generally require
a state nonmember bank or state savings
association that becomes a covered bank
after December 31, 2019, to conduct its
first stress test under this part in the first
reporting year that begins more than
three calendar quarters after the date the
state nonmember bank or state savings
association becomes a covered bank. For
example, if a covered bank that
conducts stress tests on a biennial basis
becomes a covered bank on March 31 of
a non-reporting year (e.g., 2023), the
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bank would report its first stress test in
the subsequent calendar year (i.e.,
2024), which is its first reporting year.
If the same bank becomes a covered
bank on April 1 of a non-reporting year
(e.g., 2023), it would skip the
subsequent reporting calendar year and
the following, non-reporting calendar
year, and would report its first stress
test in the next reporting year (i.e.,
2026). As with other aspects of the
stress test rule, the rule reserves to the
FDIC the authority to change the
transition period for a particular
covered bank, as appropriate in light of
the nature and level of the activities,
complexity, risks, operations, and
regulatory capital of the covered bank,
in addition to any other relevant
factors.5
The NPR would not establish a
transition period for covered banks that
move from a biennial stress testing
requirement to an annual stress testing
requirement. Accordingly, a covered
bank that becomes subject to annual
stress testing would be required to begin
stress testing annually as of the next
reporting year. The FDIC expects that
covered banks would anticipate and
make arrangements for this
development. To the extent that
particular circumstances warrant the
extension of a transition period, the
FDIC would do so based on its
reservation of authority and supervisory
discretion.
E. Review by Board of Directors
Currently, 12 CFR 325.5(a)(2) requires
a covered bank’s board of directors, or
a committee thereof, to approve and
review the policies and procedures of
the stress testing processes as frequently
as economic conditions or the bank’s
condition may warrant, but no less than
annually. The NPR would revise the
frequency of this requirement from
‘‘annual’’ to ‘‘once every reporting year’’
in order to make review by the board of
directors consistent with the covered
bank’s stress testing cycle.
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F. Reservation of Authority
12 CFR 325.1(c) currently includes a
reservation of authority, pursuant to
which the FDIC may revise the
frequency and methodology of the stress
testing requirement as appropriate for a
particular covered bank. The NPR
proposes to amend the reservation of
authority by clarifying the FDIC’s
authority to exempt a covered bank from
the requirement to conduct a stress test
in a particular reporting year.
5 12
CFR 325.1(c).
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G. New Range of As-of Dates for Trading
Scenario Component
Under 12 CFR 325.4(c), the FDIC may
require a covered bank with significant
trading activities to include trading and
counterparty components in its adverse
and severely adverse scenarios. The
trading data to be used in this
component is as of a date between
January 1 and March 1 of a calendar
year.6 On February 3, 2017 the Board
published a final rule that extended this
range to run from October 1 of the
calendar year preceding the year of the
stress test to March 1 of the calendar
year of the stress test.7 On February 23,
2018, the OCC published a final rule
making the same change to its stress
testing regulation.8 The proposed rule
would make the same change to the
FDIC’s stress testing regulation (as was
originally proposed in the April NPR).
Extending the as-of date range would
ensure consistency with the Board and
OCC rules and increase the FDIC’s
flexibility to choose an appropriate asof date.
H. Other Changes
As originally proposed in the April
NPR, the proposed rule would also
remove certain obsolete transitional
language in 12 CFR 325.3 that was
included to facilitate a 2014 shift in the
dates of the annual stress testing cycle.9
That transition is now complete and the
regulatory transition language is no
longer necessary.
Additionally, in order to update and
standardize the language used in part
325, references to ‘‘this subpart’’ would
be changed to ‘‘this part’’ following the
redesignation of the FDIC’s stress test
rule from subpart C of 12 CFR part 325
to occupy all of part 325.10 Finally, the
proposed rule would eliminate the
reference to supervisory guidance in 12
CFR 325.5(b)(1).11
III. Request for Comment
The FDIC invites comment on all
aspects of this proposed rule, including
the following questions:
1. The proposal would require a
covered bank that is consolidated under
a holding company that is required to
6 12
CFR 325.4(c).
FR 9308 (Feb 3, 2017).
8 83 FR 7951 (Feb. 23, 2018).
9 79 FR 69365 (Nov. 21, 2014).
10 83 FR 17737 (Apr. 24, 2018). Additional
technical amendments to part 325 were recently
proposed in a notice of proposed rulemaking to
implement the current expected credit losses
methodology for allowances. 83 FR 22312 (May 14,
2018).
11 See Interagency Statement Clarifying the Role
of Supervisory Guidance, Financial Institution
Letter 49–2018 (Sep. 11, 2018).
7 82
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conduct a stress test at least once every
calendar year to treat every calendar
year as a reporting year, unless
otherwise determined by the FDIC. Is
this the appropriate frequency for this
group of banks? What are the advantages
and disadvantages of requiring a
covered bank to conduct a stress test at
the same frequency as, or at a different
frequency than, its holding company?
2. As an alternative to the requirement
that a covered bank be required to stress
test annually based on the stress testing
requirements of its holding company,
should the FDIC establish separate
criteria to capture certain large banks
(e.g., banks above a specified asset
threshold), regardless of whether they
are consolidated under a holding
company?
3. All other covered banks that are not
required to stress test annually would be
required to stress test biennially. Is this
the appropriate frequency for this
category of banks? Should the FDIC
further subdivide covered banks into
additional categories that would be
subject to different frequency
requirements?
4. Is the length of the transition period
for new covered banks appropriate?
Should the proposal establish a
transition period for covered banks that
are already required to stress test and
that move from a biennial stress testing
requirement to an annual stress testing
requirement?
IV. Regulatory Analysis
A. Riegle Community Development and
Regulatory Improvement Act of 1994
The RCDRIA requires that the FDIC,
in determining the effective date and
administrative compliance requirements
of new regulations that impose
additional reporting, disclosure, or other
requirements on insured depository
institutions (IDIs), 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
benefits of such regulations.12 In
addition, in order to provide an
adequate transition period, new
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally must
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.
12 12
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The proposed rule imposes no
additional reporting, disclosure, or other
requirements on IDIs, including small
depository institutions, nor on the
customers of depository institutions.
The proposed rule would reduce the
frequency of company-run stress tests
for a subset of banks, raise the threshold
for covered banks from $10 billion to
$250 billion, and reduce the number of
required stress test scenarios from three
to two for all covered banks. The
requirement to conduct, report, and
publish a company-run stress testing is
a previously existing requirement
imposed by section 165(i) of the DoddFrank Act. Nonetheless, in connection
with determining an effective date for
the proposed rule, the FDIC invites
comment on any administrative burdens
that the proposed rule would place on
depository institutions, including small
depository institutions, and customers
of depository institutions.
B. The Regulatory Flexibility Act
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.13 However, a
regulatory flexibility analysis is not
required if the agency certifies that the
rule would 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 that
are independently owned and operated
or owned by a holding company with
less than $550 million in total assets.14
For the reasons described below and
under section 605(b) of the RFA, the
FDIC certifies that this proposed rule
would not have a significant economic
impact on a substantial number of small
entities.
The FDIC has considered the potential
impact of the proposed rule on small
entities in accordance with the RFA.
The FDIC supervises 3,533 depository
institutions,15 of which, 2,726 are
defined as small banking entities by the
terms of the RFA.16 As discussed in the
Background Section, 12 CFR part 325
implements company-run stress test
requirements for all state nonmember
banks and state savings associations
with more than $10 billion in assets
(covered banks). The proposed rule
would raise the threshold for covered
banks required to conduct company-run
stress testing from $10 billion to $250
billion. No FDIC-supervised institutions
with total consolidated assets of $550
million or less are or would, as a result
of the proposed rule, be subject to 12
CFR part 325. Therefore, the proposed
rule would not affect any small, FDICsupervised institutions.
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. The Paperwork Reduction Act
The FDIC has determined that this
proposed rule involves a collection of
information pursuant to the provisions
of the Paperwork Reduction Act of 1995
(the PRA) (44 U.S.C. 3501 et seq.).
A Federal agency may not conduct or
sponsor, and an organization is not
required to respond to, this information
collection unless the information
collection displays a currently valid
Office of Management and Budget
(OMB) control number. The FDIC has
obtained an OMB control number for
this information collection (3064–0189)
and will make a submission to OMB in
connection with the proposed rule.
Revised Information Collection Title:
Stress Test Reporting Templates and
Documentation for Covered Banks with
Total Consolidated Assets of $250
Billion or More.
OMB Number: 3064–0189.
Form Number: FDIC DFAST 14A
Summary; FDIC DFAST 14A Scenario.
Affected Public: Insured state
nonmember banks.
Burden Estimate:
SUMMARY OF ANNUAL BURDEN
Estimated
number of
respondents
Estimated
frequency of
responses
Estimated time
per response
(hours)
Estimated
annual burden
(hours)
Information collection description
Type of burden
Obligation to
respond
Methodologies and Practices .........
Stress Test Reporting ....................
Publications ....................................
Recordkeeping ..
Reporting ...........
Disclosure ..........
Mandatory .........
Mandatory .........
Mandatory .........
1*
1*
1*
Annually
Annually
Annually
640
240
160
640
240
160
Estimated Total Annual Burden.
............................
............................
........................
........................
........................
1,040
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* Note: FDIC estimates that none of the existing FDIC-supervised institutions are currently subject to the recordkeeping, reporting or disclosure
requirements in the proposed rule. However, FDIC is reporting one respondent as a placeholder to preserve the burden estimate in case an institution becomes subject to these requirements in the future.
Comments are invited on:
1. Whether the information
collections are necessary for the proper
performance of the Agencies’ functions,
including whether the information has
practical utility;
2. The accuracy of the Agencies’
estimates of the burden of the
information collections, including the
13 5
U.S.C. 601 et seq.
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
14 The
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validity of the methodology and
assumptions used;
3. Ways to enhance the quality,
utility, and clarity of the information to
be collected;
4. Ways to minimize the burden of
information collections on respondents,
including through the use of automated
collection techniques or other forms of
information technology; and
5. Estimates of capital or start-up costs
and costs of operation, maintenance,
and purchase of services to provide
information.
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.
15 FDIC-supervised institutions are set forth in 12
U.S.C. 1813(q)(2).
16 FDIC Call Report, September 30, 2018.
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D. Plain Language
Section 722 of the Gramm-LeachBliley Act requires the FDIC to use plain
language in all proposed and final rules
published after January 1, 2000. The
FDIC invites comment on how to make
this proposed rule easier to understand.
For example:
• Has the FDIC organized the material
to inform your needs? If not, how could
it present the proposed rule more
clearly?
• Are the requirements in the
proposed rule clearly stated? If not, how
could the proposal be more clearly
stated?
• Does the proposed regulation
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 proposed
regulation easier to understand? If so,
what changes would achieve that?
• Is this section format adequate? If
not, which of the sections should be
changed and how?
• What other changes can the FDIC
incorporate to make the proposed
regulation easier to understand?
List of Subjects in 12 CFR Part 325
Administrative practice and
procedure, Banks, banking, Reporting
and recordkeeping requirements, State
savings associations, Stress tests.
Authority and Issuance
For the reasons stated in the
preamble, the FDIC proposes to amend
12 CFR part 325 as follows:
PART 325—STRESS TESTING
1. The authority citation for part 325
continues to read as follows:
■
Authority: 12 U.S.C. 5365(i)(2), 12 U.S.C.
5412(b)(2)(C), 12 U.S.C. 1818, 12 U.S.C.
1819(a)(Tenth), 12 U.S.C. 1831o, and 12
U.S.C. 1831p–1.
2. The heading for part 325 is revised
to read as set forth above.
■ 3. In part 325, revise all references to
‘‘subpart’’ to read ‘‘part’’.
■ 4. Amend § 325.1 by:
■ a. Revising paragraph (b); and
■ b. Redesignating current paragraphs
(c)(4), (5), and (6) as (c)(5), (6), and (7),
and adding new paragraph (c)(4).
The revisions read as follows:
amozie on DSK3GDR082PROD with PROPOSALS1
■
§ 325.1 Authority, purpose, and
reservation of authority.
*
*
*
*
*
(b) Purpose. This part implements 12
U.S.C. 5365(i)(2), which requires the
Corporation (in coordination with the
Board of Governors of the Federal
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16:22 Dec 27, 2018
Jkt 247001
Reserve System (Board) and the Federal
Insurance Office) to issue regulations
that require each covered bank to
conduct periodic stress tests, and
establishes a definition of stress test,
methodologies for conducting stress
tests, and reporting and disclosure
requirements.
(c) * * *
*
*
*
*
*
(4) The Corporation may also exempt
a covered bank from the requirement to
conduct a stress test in a particular
reporting year.
*
*
*
*
*
■ 4. Amend § 325.2 by:
■ a. Removing paragraph (a) and
redesignating current paragraphs (b)
through (h) as paragraphs (a) through
(g);
■ b. Revising the definitions of ‘‘covered
bank’’ in paragraph (c),
■ c. Adding the definition of ‘‘reporting
year’’ as paragraph (h);
■ d. Revising the definitions of
‘‘scenarios’’ in paragraph (i),
■ e. Revising the definitions of ‘‘severely
adverse scenario’’ in paragraph (j), and
■ f. Revising the definitions of ‘‘stress
testing cycle’’ in paragraph (m).
The revisions and additions read as
follows:
§ 325.2
Definitions.
For purposes of this part—
*
*
*
*
*
(c) Covered bank means any state
nonmember bank or state savings
association with average total
consolidated assets calculated as
required under this part that are greater
than $250 billion.
*
*
*
*
*
(h) Reporting year means the calendar
year in which a covered institution must
conduct, report, and publish its stress
test, as required under 12 CFR 325.4(d).
(i) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a covered
bank that the Corporation determines
are appropriate for use in the companyrun stress tests, including, but not
limited to, baseline and severely adverse
scenarios.
(j) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered bank and that overall are
significantly more severe than those
associated with the baseline scenario
and may include trading or other
additional components.
*
*
*
*
*
(m) Stress test cycle means the period
beginning January 1 of a reporting year
and ending on December 31 of that
reporting year.
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Sfmt 4702
■
67153
5. Revise § 325.3 to read as follows:
§ 325.3
Applicability.
(a) Covered banks subject to stress
testing. (1) A state nonmember bank or
state savings association that is a
covered bank as of December 31, 2019,
is subject to the requirements of this
subpart for the 2020 reporting year.
(2) A state nonmember bank or state
savings association that becomes a
covered bank after December 31, 2019,
shall conduct its first stress test under
this part in the first reporting year that
begins more than three calendar
quarters after the date the state
nonmember bank or state savings
association becomes a covered bank,
unless otherwise determined by the
Corporation in writing.
(b) Ceasing to be a covered bank. A
covered bank shall remain subject to the
stress test requirements of this part
unless and until total consolidated
assets of the covered bank falls to $250
billion or less for each of four
consecutive quarters as reported on the
covered bank’s most recent Call Reports.
The calculation will be effective on the
as-of date of the fourth consecutive Call
Report.
(c) Covered bank subsidiaries of a
bank holding company or savings and
loan holding company subject to
periodic stress test requirements. (1)
Notwithstanding the requirements
applicable to covered banks under this
section, a covered bank that is a
consolidated subsidiary of a bank
holding company or savings and loan
holding company that is required to
conduct a periodic company-run stress
test under applicable regulations of the
Board of Governors of the Federal
Reserve System may elect to conduct its
stress test and report to the FDIC on the
same timeline as its parent bank holding
company or savings and loan holding
company.
(2) A covered bank that elects to
conduct its stress test under paragraph
(c)(1) of this section will remain subject
to the same timeline requirements of its
parent company until otherwise
approved by the FDIC.
■ 6. Revise § 325.4 to read as follows:
§ 325.4
Periodic stress tests required.
Each covered bank must conduct the
periodic stress test under this part
subject to the following requirements:
(a) Financial data—A covered bank
must use financial data as of December
31 of the calendar year prior to the
reporting year.
(b) Scenarios provided by the
Corporation. In conducting the stress
test under this part, each covered bank
must use the scenarios provided by the
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28DEP1
67154
Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Proposed Rules
Corporation. The scenarios provided by
the Corporation will reflect a minimum
of two sets of economic and financial
conditions, including baseline and
severely adverse scenarios. The
Corporation will provide a description
of the scenarios required to be used by
each covered bank no later than
February 15 of the reporting year.
(c) Significant trading activities. The
Corporation may require a covered bank
with significant trading activities, as
determined by the Corporation, to
include trading and counterparty
components in its severely adverse
scenarios. The trading and counterparty
position data used in this component
will be as of a date between October 1
of the year preceding the reporting year
and March 1 of the reporting year, and
the Corporation will communicate a
description of the component to the
covered bank no later than March 1 of
the reporting year.
(d) Frequency. A covered bank that is
consolidated under a holding company
that is required, pursuant to applicable
regulations of the Board of Governors of
the Federal Reserve System, to conduct
a stress test at least once every calendar
year must treat every calendar year as a
reporting year, unless otherwise
determined by the Corporation. All
other covered banks must treat every
even-numbered calendar year beginning
January 1, 2020 (i.e., 2022, 2024, 2026,
etc.), as a reporting year, unless
otherwise determined by the
Corporation.
■ 7. Amend § 325.5 by revising
paragraph (b) to read as follows:
§ 325.5
Methodologies and practices.
amozie on DSK3GDR082PROD with PROPOSALS1
*
*
*
*
*
(b) Controls and oversight of stress
testing processes. (1) The senior
management of a covered bank must
establish and maintain a system of
controls, oversight, and documentation,
including policies and procedures, that
are designed to ensure that its stress test
processes satisfy the requirements in
this part. These policies and procedures
must, at a minimum, describe the
covered bank’s stress test practices and
methodologies, and processes for
validating and updating the covered
bank’s stress test practices and
methodologies consistent with
applicable laws and regulations.
(2) The board of directors, or a
committee thereof, of a covered bank
must approve and review the policies
and procedures of the stress testing
processes as frequently as economic
conditions or the condition of the
covered bank may warrant, but no less
than once every reporting year. The
board of directors and senior
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16:22 Dec 27, 2018
Jkt 247001
management of the covered bank must
receive a summary of the results of the
stress test.
(3) The board of directors and senior
management of each covered bank must
consider the results of the stress tests in
the normal course of business, including
but not limited to, the covered bank’s
capital planning, assessment of capital
adequacy, and risk management
practices.
■ 8. Revise § 325.6 to read as follows:
§ 325.6 Required reports of stress test
results to the FDIC and the Board of
Governors of the Federal Reserve System.
(a) Report required for periodic stress
test results. A covered bank must report
to the FDIC and to the Board of
Governors of the Federal Reserve
System, on or before April 5 of the
reporting year, the results of the stress
test in the manner and form specified by
the FDIC.
(b) Content of reports. (1) The reports
required under paragraph (a) of this
section must include under the baseline
scenario, severely adverse scenario, and
any other scenario required by the
Corporation under this part, a
description of the types of risks being
included in the stress test, a summary
description of the methodologies used
in the stress test, and, for each quarter
of the planning horizon, estimates of
aggregate losses, pre-provision net
revenue, provision for loan and lease
losses, net income, and pro forma
capital ratios (including regulatory and
any other capital ratios specified by the
FDIC). In addition, the report must
include an explanation of the most
significant causes for the changes in
regulatory capital ratios and any other
information required by the
Corporation.
(2) The description of aggregate losses
and net income must include the
cumulative losses and cumulative net
income over the planning horizon, and
the description of each regulatory
capital ratio must include the beginning
value, ending value, and minimum
value of each ratio over the planning
horizon.
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Corporation under this part and
related materials will be determined in
accordance with applicable law
including any available exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the FDIC’s Rules
and Regulations regarding the
Disclosure of Information (12 CFR part
309).
■ 9. Revise § 325.7 to read as follows:
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Fmt 4702
Sfmt 4702
§ 325.7
Publication of stress test results.
(a) Publication date—(1) A covered
bank must publish a summary of the
results of its stress tests in the period
starting June 15 and ending July 15 of
the reporting year, provided:
(A) Unless the Corporation
determines otherwise, if the covered
bank is a consolidated subsidiary of a
bank holding company or savings and
loan holding company subject to
supervisory stress tests conducted by
the Board of Governors of the Federal
Reserve System under 12 CFR part 252,
then, within the June 15 to July 15
period, such covered bank may not
publish the required summary of its
periodic stress test earlier than the date
that the Board of Governors of the
Federal Reserve System publishes the
supervisory stress test results of the
covered bank’s parent holding company.
(B) If the Board of Governors of the
Federal Reserve System publishes the
supervisory stress test results of the
covered bank’s parent holding company
prior to June 15, then such covered bank
may publish its stress test results prior
to June 15, but no later than July 15,
through actual publication by the
covered bank or through publication by
the parent holding company under
paragraph (b) of this section.
(b) Publication method. The summary
required under this section may be
published on the covered bank’s website
or in any other forum that is reasonably
accessible to the public. A covered bank
that is a consolidated subsidiary of a
bank holding company or savings and
loan holding company that is required
to conduct a company-run stress test
under applicable regulations of the
Board of Governors of the Federal
Reserve System will be deemed to have
satisfied the public disclosure
requirements under this subpart if it
publishes a summary of its stress test
results with its parent bank holding
company’s or savings and loan holding
company’s summary of stress test
results. Subsidiary covered banks
electing to satisfy their public disclosure
requirement in this manner must
include a summary of changes in
regulatory capital ratios of such covered
bank over the planning horizon, and an
explanation of the most significant
causes for the changes in regulatory
capital ratios.
(c) Information to be disclosed in the
summary. A covered bank must disclose
the following information regarding the
severely adverse scenario if it is not a
consolidated subsidiary of a parent bank
holding company or savings and loan
holding company that has elected to
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Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Proposed Rules
make its disclosure under 12 CFR
325.3(d):
*
*
*
*
*
Dated at Washington, DC, on December 18,
2018.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018–27824 Filed 12–27–18; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2018–1010; Product
Identifier 2018–NM–148–AD]
RIN 2120–AA64
Airworthiness Directives; Dassault
Aviation Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to remove
Airworthiness Directive (AD) 2012–02–
18, which applies to all Dassault
Aviation Model MYSTERE–FALCON 50
airplanes. AD 2012–02–18 requires
revising the maintenance program to
include revised airworthiness
limitations. AD 2012–02–18 is no longer
necessary because we have since issued
AD 2017–09–03 to address the unsafe
condition. Accordingly, we propose to
remove AD 2012–02–18.
DATES: We must receive comments on
this proposed AD by February 11, 2019.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
amozie on DSK3GDR082PROD with PROPOSALS1
SUMMARY:
Examining the AD Docket
You may examine the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2018–
VerDate Sep<11>2014
16:22 Dec 27, 2018
Jkt 247001
1010; or in person at Docket Operations
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
The AD docket contains this proposed
AD, the regulatory evaluation, any
comments received, and other
information. The street address for
Docket Operations (phone: 800–647–
5527) is in the ADDRESSES section.
Comments will be available in the AD
docket shortly after receipt.
FOR FURTHER INFORMATION CONTACT: Tom
Rodriguez, Aerospace Engineer,
International Section, Transport
Standards Branch, FAA, 2200 South
216th St., Des Moines, WA 98198;
telephone and fax 206–231–3226.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposal. Send your comments to
an address listed under the ADDRESSES
section. Include ‘‘Docket No. FAA–
2018–1010; Product Identifier 2018–
NM–148–AD’’ at the beginning of your
comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this proposed AD. We will
consider all comments received by the
closing date and may amend this
proposed AD because of those
comments.
We will post all comments we
receive, without change, to https://
www.regulations.gov, including any
personal information you provide. We
will also post a report summarizing each
substantive verbal contact we receive
about this proposed AD.
Discussion
We issued AD 2012–02–18,
Amendment 39–16941 (77 FR 12175,
February 29, 2012) (‘‘AD 2012–02–18’’),
for all Dassault Aviation Model
MYSTERE–FALCON 50 airplanes. AD
2012–02–18 requires revising the
maintenance program to include revised
airworthiness limitations. AD 2012–02–
18 was prompted by reports of cracking
of the flap tracks. We issued AD 2012–
02–18 to address cracking of the flap
tracks, which could lead to flap
asymmetry and loss of control of the
airplane.
Actions Since AD 2012–02–18 Was
Issued
Since we issued AD 2012–02–18, we
have issued AD 2017–09–03,
Amendment 39–18865 (82 FR 21467,
May 9, 2017) (‘‘AD 2017–09–03’’),
which addresses the unsafe condition.
AD 2017–09–03 requires revising the
maintenance or inspection program, as
applicable, to incorporate new and more
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
67155
restrictive maintenance requirements
and airworthiness limitations, which
include an eddy current inspection of
flap tracks 2 and 5 to address cracking.
FAA’s Conclusions
Upon further consideration, we have
determined that AD 2012–02–18 is no
longer necessary. Accordingly, this
proposed AD would remove AD 2012–
02–18. Removal of AD 2012–02–18
would not preclude the FAA from
issuing another related action or commit
the FAA to any course of action in the
future.
Costs of Compliance
This proposed AD would add no cost.
This proposed AD would remove AD
2012–02–18 from 14 CFR part 39;
therefore, operators would no longer be
required to show compliance with that
AD.
Authority for this Rulemaking
Title 49 of the United States Code
specifies the FAA’s authority to issue
rules on aviation safety. Subtitle I,
Section 106, describes the authority of
the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more
detail the scope of the Agency’s
authority.
We are issuing this rulemaking under
the authority described in Subtitle VII,
Part A, Subpart III, Section 44701,
‘‘General requirements.’’ Under that
section, Congress charges the FAA with
promoting safe flight of civil aircraft in
air commerce by prescribing regulations
for practices, methods, and procedures
the Administrator finds necessary for
safety in air commerce. This regulation
is within the scope of that authority.
This proposed AD is issued in
accordance with authority delegated by
the Executive Director, Aircraft
Certification Service, as authorized by
FAA Order 8000.51C. In accordance
with that order, issuance of ADs is
normally a function of the Compliance
and Airworthiness Division, but during
this transition period, the Executive
Director has delegated the authority to
issue ADs applicable to transport
category airplanes and associated
appliances to the Director of the System
Oversight Division.
Regulatory Findings
We have determined that this
proposed AD would not have federalism
implications under Executive Order
13132. This proposed AD would not
have a substantial direct effect on the
States, on the relationship between the
national Government and the States, or
on the distribution of power and
E:\FR\FM\28DEP1.SGM
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Agencies
[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Proposed Rules]
[Pages 67149-67155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27824]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 /
Proposed Rules
[[Page 67149]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 325
RIN 3064-AE84
Company-Run Stress Testing Requirements for FDIC-Supervised State
Nonmember Banks and State Savings Associations
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking with request for public comment.
-----------------------------------------------------------------------
SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is requesting
comment on a proposed rule (proposed rule or NPR) that would revise the
FDIC's requirements for stress testing by FDIC-supervised institutions,
consistent with changes made by Section 401 of the Economic Growth,
Regulatory Relief, and Consumer Protection Act (EGRRCPA). Specifically,
the proposed rule would amend the FDIC's existing stress testing
regulations to change the minimum threshold for applicability from $10
billion to $250 billion, revise the frequency of required stress tests
by FDIC-supervised institutions, and reduce the number of required
stress testing scenarios from three to two. The NPR also proposes to
make certain conforming and technical changes, including changes that
were previously proposed in an April 2018 notice of proposed rulemaking
that was superseded, in part, by the enactment of EGRRCPA.
DATES: Comments on the notice of proposed rulemaking must be received
by February 19, 2019.
ADDRESSES: Interested parties are encouraged to submit written
comments. Commenters are encouraged to use the title ``Company-Run
Stress Testing Requirements for FDIC-supervised State Nonmember Banks
and State Savings Associations'' to facilitate the organization and
distribution of comments among the Agencies. You may submit comments,
identified by RIN number, by any of the following methods:
Agency website: https://www.FDIC.gov/regulations/laws/federal/. Follow instructions for submitting comments on the Agency
website.
Email: Comments@FDIC.gov. Include RIN 3064-AE84 on the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, 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 business days between 7:00 a.m. and 5:00 p.m.
Public Inspection: All comments received must include the
agency name and RIN 3064-AE84 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 1 (877) 275-3342 or 1 (703) 562-2200.
FOR FURTHER INFORMATION CONTACT: Ryan Sheller, Section Chief, (202)
412-4861, RSheller@FDIC.gov, Large Bank Supervision, Division of Risk
Management Supervision; Annmarie Boyd, Counsel, (202) 898-3714,
aboyd@FDIC.gov; or Benjamin Klein, Counsel, (202) 898-7027,
bklein@FDIC.gov; Legal Division, Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC, 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Prior to the enactment of EGRRCPA, section 165(i)(2) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act \1\ (Dodd-Frank
Act) required a financial company, including an insured depository
institution, with total consolidated assets of more than $10 billion
and regulated by a primary Federal regulatory agency to conduct annual
stress tests and submit a report to the Board of Governors of the
Federal Reserve System (Board) and to its primary federal regulatory
agency. Section 165(i)(2)(C) required each primary Federal regulator to
issue consistent and comparable regulations to: (1) Implement the
stress testing requirements, including establishing methodologies for
conducting stress tests that provided for at least three different sets
of conditions, including baseline, adverse, and severely adverse; (2)
establish the form and content of the required reports, and (3) require
companies to publish a summary of the stress test results.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 5365(i).
---------------------------------------------------------------------------
In October 2012, the FDIC published in the Federal Register its
rule implementing the Dodd-Frank Act stress testing requirement.\2\ The
FDIC regulation at 12 CFR part 325 implements the company-run stress
test requirements of section 165(i)(2) of the Dodd-Frank Act with
respect to state nonmember banks and state savings associations with
more than $10 billion in assets (covered banks). Although 12 CFR part
325 applies to all covered banks that exceed $10 billion in assets, the
regulation differentiates between ``$10 billion to $50 billion covered
banks'' and ``over $50 billion covered banks.''
---------------------------------------------------------------------------
\2\ 77 FR 62417 (October 15, 2012). The Board and the Office of
the Comptroller of the Currency contemporaneously issued comparable
regulations. See 77 FR 62380 (October 12, 2012) (Board); 77 FR 61238
(October 9, 2012) (OCC).
---------------------------------------------------------------------------
EGRRCPA, enacted on May 24, 2018,\3\ amended certain aspects of the
company-run stress-testing requirements in section 165(i)(2) of the
Dodd-Frank Act. Specifically, section 401 of EGRRCPA raises the minimum
asset threshold for the company-run stress testing requirement from $10
billion to $250 billion; replaces the requirement for banks to conduct
stress tests ``annually'' with the requirement to conduct stress tests
``periodically;'' and no longer requires the ``adverse'' stress testing
scenario, thus reducing the number of required stress testing scenarios
from three to two. The EGRRCPA amendments to the section 165(i)(2)
stress testing requirements are effective eighteen months after
enactment.
---------------------------------------------------------------------------
\3\ Public Law 115-174, 132 Stat. 1296-1368 (2018).
---------------------------------------------------------------------------
Prior to the enactment of EGRRCPA, on April 2, 2018, the FDIC
issued a notice of proposed rulemaking that also proposed certain
revisions to the FDIC
[[Page 67150]]
stress testing regulations (April NPR).\4\ Certain changes proposed in
the April NPR, particularly those establishing a stress testing
transition process for ``over $50 billion covered banks'' are no longer
relevant as a result of EGRRCPA's increase in the stress testing asset
threshold to $250 billion. However, other revisions originally proposed
in the April NPR remain necessary to ensure the FDIC's stress testing
regulations remain consistent with those of the Board and the Office of
the Comptroller of the Currency (OCC).
---------------------------------------------------------------------------
\4\ 83 FR 13880 (April 2, 2018).
---------------------------------------------------------------------------
II. Description of the Proposed Rule
A. Covered Banks
As described above, section 401 of EGRRCPA amended section 165 of
the Dodd-Frank Act by raising the minimum asset threshold for banks
required to conduct stress tests from $10 billion to $250 billion. The
proposed rule would implement this change by eliminating the two
existing subcategories of ``covered bank''--``$10 to $50 billion
covered bank'' and ``over $50 billion covered bank''--and revising the
term ``covered bank'' to mean a State nonmember bank or State savings
association with average total consolidated assets that are greater
than $250 billion. In addition, the proposal would make certain
technical and conforming changes to 12 CFR part 325 in order to
consolidate requirements, such as those related to reporting and
publication, that are currently referenced separately with respect to
$10 billion to $50 billion covered banks and over $50 billion covered
banks.
B. Frequency of Stress Testing
Section 401 of EGRRCPA also changed the requirement under section
165 of the Dodd-Frank Act to conduct stress tests from ``annual'' to
``periodic.'' Consistent with proposals by the Board and the OCC, the
NPR proposes that, in general, an FDIC-supervised institution that is a
covered bank as of December 31, 2019, would be required to conduct,
report, and publish a stress test once every two years, beginning on
January 1, 2020, and continuing every even-numbered year thereafter
(i.e., 2022, 2024, 2026, etc.). The proposed rule would also add a new
defined term, ``reporting year,'' to the definitions at 12 CFR 325.2. A
covered bank's reporting year would be the year in which a covered bank
must conduct, report, and publish its stress test. As noted above, the
``reporting year'' for most covered banks would generally be every
even-numbered year. However, under the NPR, covered banks that are
subsidiaries of global systemically important bank holding companies or
bank holding companies that have $700 billion or more in total assets
or cross-jurisdictional activity of $75 billion or more would be
required to conduct, report, and publish stress test results on the
same schedule as their bank holding companies, which would be annually
under rules proposed by the Board.
Subsequent to these changes, some covered banks would have a
biennial reporting year (biennial stress testing covered banks) while
others would have an annual reporting year (annual stress testing
covered banks). In either case, under the NPR, the dates and deadlines
in the FDIC's stress testing rule would apply for each reporting year
for a covered bank. For example, a biennial stress testing covered bank
preparing its 2022 stress test would rely on financial data available
as of December 31, 2021; use stress test scenarios that would be
provided by the FDIC no later than February 15, 2022; provide its
report of the stress test to the FDIC by April 5, 2022; and publish a
summary of the results of its stress test in the period starting June
15 and ending July 15 of 2022.
Based on the FDIC's experience overseeing and reviewing the results
of company-run stress testing, the FDIC believes that a biennial stress
testing cycle would be appropriate for most covered banks. For covered
banks that would stress test on a biennial cycle, the FDIC nonetheless
expects this level of frequency to provide the FDIC and the covered
bank with information that is sufficient to satisfy the purposes of
stress testing. In addition, the FDIC would continue to review the
covered bank's stress testing processes and procedures. Under the
proposed rule, all covered banks that would conduct stress tests on a
biennial basis would be required to conduct stress tests in the same
reporting year (i.e., the reporting years for biennial stress testing
covered banks would be synchronized). By requiring these covered banks
to conduct their stress tests in the same reporting year, the proposal
would continue to allow the FDIC to make comparisons across banks for
supervisory purposes and assess macroeconomic trends and risks to the
banking industry.
As discussed above, under the proposed rule, only certain covered
banks would be required to conduct annual stress tests. This subset
would be limited to covered banks that are consolidated under holding
companies that are required to conduct stress tests more frequently
than once every other year. This requirement reflects the FDIC's
expectation that covered banks that would be required to stress test on
an annual basis would be subsidiaries of the largest and most
systemically important banking organizations, (i.e., subsidiaries of
global systemically important bank holding companies or bank holding
companies that have $700 billion or more in total assets or cross-
jurisdictional activity of $75 billion). This treatment aligns with the
agencies' long-standing policy of applying similar standards to holding
companies and their subsidiary banks.
C. Removal of ``Adverse'' Scenario
As enacted by the Dodd-Frank Act, section 165(i)(2)(C) required the
FDIC to establish methodologies for conducting stress tests and further
required the inclusion of at least three different stress-testing
scenarios: ``baseline,'' ``adverse,'' and ``severely adverse.'' EGRRCPA
amended section 165(i) to no longer require the FDIC to include an
``adverse'' stress-testing scenario and to reduce the minimum number of
required stress test scenarios from three to two. Given that the
``adverse'' stress-testing scenario has provided limited incremental
information to the FDIC and market participants beyond what the
``baseline'' and ``severely adverse'' stress testing scenarios provide,
the NPR proposes to remove the ``adverse'' scenario in the FDIC's
stress testing rule and to maintain the requirement to conduct stress
tests under the ``baseline'' and ``severely adverse'' stress testing
scenarios. The NPR would also amend the definition of ``severely
adverse scenario'' so that the term is defined relative to the
``baseline scenario,'' rather than relative to the ``adverse
scenario.''
D. Transition Process for Covered Banks
Currently, 12 CFR 325.3 provides for a transition period between
when a bank becomes a covered bank and when the bank must report its
first stress test. The NPR proposes to revise the transition period in
12 CFR 325.3 to conform to the other changes in this proposal.
Accordingly, proposed paragraph (a)(2) would generally require a state
nonmember bank or state savings association that becomes a covered bank
after December 31, 2019, to conduct its first stress test under this
part in the first reporting year that begins more than three calendar
quarters after the date the state nonmember bank or state savings
association becomes a covered bank. For example, if a covered bank that
conducts stress tests on a biennial basis becomes a covered bank on
March 31 of a non-reporting year (e.g., 2023), the
[[Page 67151]]
bank would report its first stress test in the subsequent calendar year
(i.e., 2024), which is its first reporting year. If the same bank
becomes a covered bank on April 1 of a non-reporting year (e.g., 2023),
it would skip the subsequent reporting calendar year and the following,
non-reporting calendar year, and would report its first stress test in
the next reporting year (i.e., 2026). As with other aspects of the
stress test rule, the rule reserves to the FDIC the authority to change
the transition period for a particular covered bank, as appropriate in
light of the nature and level of the activities, complexity, risks,
operations, and regulatory capital of the covered bank, in addition to
any other relevant factors.\5\
---------------------------------------------------------------------------
\5\ 12 CFR 325.1(c).
---------------------------------------------------------------------------
The NPR would not establish a transition period for covered banks
that move from a biennial stress testing requirement to an annual
stress testing requirement. Accordingly, a covered bank that becomes
subject to annual stress testing would be required to begin stress
testing annually as of the next reporting year. The FDIC expects that
covered banks would anticipate and make arrangements for this
development. To the extent that particular circumstances warrant the
extension of a transition period, the FDIC would do so based on its
reservation of authority and supervisory discretion.
E. Review by Board of Directors
Currently, 12 CFR 325.5(a)(2) requires a covered bank's board of
directors, or a committee thereof, to approve and review the policies
and procedures of the stress testing processes as frequently as
economic conditions or the bank's condition may warrant, but no less
than annually. The NPR would revise the frequency of this requirement
from ``annual'' to ``once every reporting year'' in order to make
review by the board of directors consistent with the covered bank's
stress testing cycle.
F. Reservation of Authority
12 CFR 325.1(c) currently includes a reservation of authority,
pursuant to which the FDIC may revise the frequency and methodology of
the stress testing requirement as appropriate for a particular covered
bank. The NPR proposes to amend the reservation of authority by
clarifying the FDIC's authority to exempt a covered bank from the
requirement to conduct a stress test in a particular reporting year.
G. New Range of As-of Dates for Trading Scenario Component
Under 12 CFR 325.4(c), the FDIC may require a covered bank with
significant trading activities to include trading and counterparty
components in its adverse and severely adverse scenarios. The trading
data to be used in this component is as of a date between January 1 and
March 1 of a calendar year.\6\ On February 3, 2017 the Board published
a final rule that extended this range to run from October 1 of the
calendar year preceding the year of the stress test to March 1 of the
calendar year of the stress test.\7\ On February 23, 2018, the OCC
published a final rule making the same change to its stress testing
regulation.\8\ The proposed rule would make the same change to the
FDIC's stress testing regulation (as was originally proposed in the
April NPR). Extending the as-of date range would ensure consistency
with the Board and OCC rules and increase the FDIC's flexibility to
choose an appropriate as-of date.
---------------------------------------------------------------------------
\6\ 12 CFR 325.4(c).
\7\ 82 FR 9308 (Feb 3, 2017).
\8\ 83 FR 7951 (Feb. 23, 2018).
---------------------------------------------------------------------------
H. Other Changes
As originally proposed in the April NPR, the proposed rule would
also remove certain obsolete transitional language in 12 CFR 325.3 that
was included to facilitate a 2014 shift in the dates of the annual
stress testing cycle.\9\ That transition is now complete and the
regulatory transition language is no longer necessary.
---------------------------------------------------------------------------
\9\ 79 FR 69365 (Nov. 21, 2014).
---------------------------------------------------------------------------
Additionally, in order to update and standardize the language used
in part 325, references to ``this subpart'' would be changed to ``this
part'' following the redesignation of the FDIC's stress test rule from
subpart C of 12 CFR part 325 to occupy all of part 325.\10\ Finally,
the proposed rule would eliminate the reference to supervisory guidance
in 12 CFR 325.5(b)(1).\11\
---------------------------------------------------------------------------
\10\ 83 FR 17737 (Apr. 24, 2018). Additional technical
amendments to part 325 were recently proposed in a notice of
proposed rulemaking to implement the current expected credit losses
methodology for allowances. 83 FR 22312 (May 14, 2018).
\11\ See Interagency Statement Clarifying the Role of
Supervisory Guidance, Financial Institution Letter 49-2018 (Sep. 11,
2018).
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III. Request for Comment
The FDIC invites comment on all aspects of this proposed rule,
including the following questions:
1. The proposal would require a covered bank that is consolidated
under a holding company that is required to conduct a stress test at
least once every calendar year to treat every calendar year as a
reporting year, unless otherwise determined by the FDIC. Is this the
appropriate frequency for this group of banks? What are the advantages
and disadvantages of requiring a covered bank to conduct a stress test
at the same frequency as, or at a different frequency than, its holding
company?
2. As an alternative to the requirement that a covered bank be
required to stress test annually based on the stress testing
requirements of its holding company, should the FDIC establish separate
criteria to capture certain large banks (e.g., banks above a specified
asset threshold), regardless of whether they are consolidated under a
holding company?
3. All other covered banks that are not required to stress test
annually would be required to stress test biennially. Is this the
appropriate frequency for this category of banks? Should the FDIC
further subdivide covered banks into additional categories that would
be subject to different frequency requirements?
4. Is the length of the transition period for new covered banks
appropriate? Should the proposal establish a transition period for
covered banks that are already required to stress test and that move
from a biennial stress testing requirement to an annual stress testing
requirement?
IV. Regulatory Analysis
A. Riegle Community Development and Regulatory Improvement Act of 1994
The RCDRIA requires that the FDIC, in determining the effective
date and administrative compliance requirements of new regulations that
impose additional reporting, disclosure, or other requirements on
insured depository institutions (IDIs), 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 benefits of such
regulations.\12\ In addition, in order to provide an adequate
transition period, new regulations that impose additional reporting,
disclosures, or other new requirements on IDIs generally must 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.
---------------------------------------------------------------------------
\12\ 12 U.S.C. 4802.
---------------------------------------------------------------------------
[[Page 67152]]
The proposed rule imposes no additional reporting, disclosure, or
other requirements on IDIs, including small depository institutions,
nor on the customers of depository institutions. The proposed rule
would reduce the frequency of company-run stress tests for a subset of
banks, raise the threshold for covered banks from $10 billion to $250
billion, and reduce the number of required stress test scenarios from
three to two for all covered banks. The requirement to conduct, report,
and publish a company-run stress testing is a previously existing
requirement imposed by section 165(i) of the Dodd-Frank Act.
Nonetheless, in connection with determining an effective date for the
proposed rule, the FDIC invites comment on any administrative burdens
that the proposed rule would place on depository institutions,
including small depository institutions, and customers of depository
institutions.
B. The Regulatory Flexibility Act
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.\13\ However, a regulatory flexibility analysis is not
required if the agency certifies that the rule would 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 that are independently owned and operated or
owned by a holding company with less than $550 million in total
assets.\14\ For the reasons described below and under section 605(b) of
the RFA, the FDIC certifies that this proposed rule would not have a
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\13\ 5 U.S.C. 601 et seq.
\14\ 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 has considered the potential impact of the proposed rule
on small entities in accordance with the RFA. The FDIC supervises 3,533
depository institutions,\15\ of which, 2,726 are defined as small
banking entities by the terms of the RFA.\16\ As discussed in the
Background Section, 12 CFR part 325 implements company-run stress test
requirements for all state nonmember banks and state savings
associations with more than $10 billion in assets (covered banks). The
proposed rule would raise the threshold for covered banks required to
conduct company-run stress testing from $10 billion to $250 billion. No
FDIC-supervised institutions with total consolidated assets of $550
million or less are or would, as a result of the proposed rule, be
subject to 12 CFR part 325. Therefore, the proposed rule would not
affect any small, FDIC-supervised institutions.
---------------------------------------------------------------------------
\15\ FDIC-supervised institutions are set forth in 12 U.S.C.
1813(q)(2).
\16\ FDIC Call Report, September 30, 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. The Paperwork Reduction Act
The FDIC has determined that this proposed rule involves a
collection of information pursuant to the provisions of the Paperwork
Reduction Act of 1995 (the PRA) (44 U.S.C. 3501 et seq.).
A Federal agency may not conduct or sponsor, and an organization is
not required to respond to, this information collection unless the
information collection displays a currently valid Office of Management
and Budget (OMB) control number. The FDIC has obtained an OMB control
number for this information collection (3064-0189) and will make a
submission to OMB in connection with the proposed rule.
Revised Information Collection Title: Stress Test Reporting
Templates and Documentation for Covered Banks with Total Consolidated
Assets of $250 Billion or More.
OMB Number: 3064-0189.
Form Number: FDIC DFAST 14A Summary; FDIC DFAST 14A Scenario.
Affected Public: Insured state nonmember banks.
Burden Estimate:
Summary of Annual Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Estimated Estimated time Estimated
Information collection description Type of burden Obligation to respond number of frequency of per response annual burden
respondents responses (hours) (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Methodologies and Practices.......... Recordkeeping.......... Mandatory.............. 1* Annually 640 640
Stress Test Reporting................ Reporting.............. Mandatory.............. 1* Annually 240 240
Publications......................... Disclosure............. Mandatory.............. 1* Annually 160 160
------------------------------------------------------------------------------------------------------------------
Estimated Total Annual Burden.... ....................... ....................... .............. .............. .............. 1,040
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: FDIC estimates that none of the existing FDIC-supervised institutions are currently subject to the recordkeeping, reporting or disclosure
requirements in the proposed rule. However, FDIC is reporting one respondent as a placeholder to preserve the burden estimate in case an institution
becomes subject to these requirements in the future.
Comments are invited on:
1. Whether the information collections are necessary for the proper
performance of the Agencies' functions, including whether the
information has practical utility;
2. The accuracy of the Agencies' estimates of the burden of the
information collections, including the validity of the methodology and
assumptions used;
3. Ways to enhance the quality, utility, and clarity of the
information to be collected;
4. Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
5. Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
[[Page 67153]]
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the FDIC to use
plain language in all proposed and final rules published after January
1, 2000. The FDIC invites comment on how to make this proposed rule
easier to understand.
For example:
Has the FDIC organized the material to inform your needs?
If not, how could it present the proposed rule more clearly?
Are the requirements in the proposed rule clearly stated?
If not, how could the proposal be more clearly stated?
Does the proposed regulation 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 proposed regulation easier to
understand? If so, what changes would achieve that?
Is this section format adequate? If not, which of the
sections should be changed and how?
What other changes can the FDIC incorporate to make the
proposed regulation easier to understand?
List of Subjects in 12 CFR Part 325
Administrative practice and procedure, Banks, banking, Reporting
and recordkeeping requirements, State savings associations, Stress
tests.
Authority and Issuance
For the reasons stated in the preamble, the FDIC proposes to amend
12 CFR part 325 as follows:
PART 325--STRESS TESTING
0
1. The authority citation for part 325 continues to read as follows:
Authority: 12 U.S.C. 5365(i)(2), 12 U.S.C. 5412(b)(2)(C), 12
U.S.C. 1818, 12 U.S.C. 1819(a)(Tenth), 12 U.S.C. 1831o, and 12
U.S.C. 1831p-1.
0
2. The heading for part 325 is revised to read as set forth above.
0
3. In part 325, revise all references to ``subpart'' to read ``part''.
0
4. Amend Sec. 325.1 by:
0
a. Revising paragraph (b); and
0
b. Redesignating current paragraphs (c)(4), (5), and (6) as (c)(5),
(6), and (7), and adding new paragraph (c)(4).
The revisions read as follows:
Sec. 325.1 Authority, purpose, and reservation of authority.
* * * * *
(b) Purpose. This part implements 12 U.S.C. 5365(i)(2), which
requires the Corporation (in coordination with the Board of Governors
of the Federal Reserve System (Board) and the Federal Insurance Office)
to issue regulations that require each covered bank to conduct periodic
stress tests, and establishes a definition of stress test,
methodologies for conducting stress tests, and reporting and disclosure
requirements.
(c) * * *
* * * * *
(4) The Corporation may also exempt a covered bank from the
requirement to conduct a stress test in a particular reporting year.
* * * * *
0
4. Amend Sec. 325.2 by:
0
a. Removing paragraph (a) and redesignating current paragraphs (b)
through (h) as paragraphs (a) through (g);
0
b. Revising the definitions of ``covered bank'' in paragraph (c),
0
c. Adding the definition of ``reporting year'' as paragraph (h);
0
d. Revising the definitions of ``scenarios'' in paragraph (i),
0
e. Revising the definitions of ``severely adverse scenario'' in
paragraph (j), and
0
f. Revising the definitions of ``stress testing cycle'' in paragraph
(m).
The revisions and additions read as follows:
Sec. 325.2 Definitions.
For purposes of this part--
* * * * *
(c) Covered bank means any state nonmember bank or state savings
association with average total consolidated assets calculated as
required under this part that are greater than $250 billion.
* * * * *
(h) Reporting year means the calendar year in which a covered
institution must conduct, report, and publish its stress test, as
required under 12 CFR 325.4(d).
(i) Scenarios are those sets of conditions that affect the U.S.
economy or the financial condition of a covered bank that the
Corporation determines are appropriate for use in the company-run
stress tests, including, but not limited to, baseline and severely
adverse scenarios.
(j) Severely adverse scenario means a set of conditions that affect
the U.S. economy or the financial condition of a covered bank and that
overall are significantly more severe than those associated with the
baseline scenario and may include trading or other additional
components.
* * * * *
(m) Stress test cycle means the period beginning January 1 of a
reporting year and ending on December 31 of that reporting year.
0
5. Revise Sec. 325.3 to read as follows:
Sec. 325.3 Applicability.
(a) Covered banks subject to stress testing. (1) A state nonmember
bank or state savings association that is a covered bank as of December
31, 2019, is subject to the requirements of this subpart for the 2020
reporting year.
(2) A state nonmember bank or state savings association that
becomes a covered bank after December 31, 2019, shall conduct its first
stress test under this part in the first reporting year that begins
more than three calendar quarters after the date the state nonmember
bank or state savings association becomes a covered bank, unless
otherwise determined by the Corporation in writing.
(b) Ceasing to be a covered bank. A covered bank shall remain
subject to the stress test requirements of this part unless and until
total consolidated assets of the covered bank falls to $250 billion or
less for each of four consecutive quarters as reported on the covered
bank's most recent Call Reports. The calculation will be effective on
the as-of date of the fourth consecutive Call Report.
(c) Covered bank subsidiaries of a bank holding company or savings
and loan holding company subject to periodic stress test requirements.
(1) Notwithstanding the requirements applicable to covered banks under
this section, a covered bank that is a consolidated subsidiary of a
bank holding company or savings and loan holding company that is
required to conduct a periodic company-run stress test under applicable
regulations of the Board of Governors of the Federal Reserve System may
elect to conduct its stress test and report to the FDIC on the same
timeline as its parent bank holding company or savings and loan holding
company.
(2) A covered bank that elects to conduct its stress test under
paragraph (c)(1) of this section will remain subject to the same
timeline requirements of its parent company until otherwise approved by
the FDIC.
0
6. Revise Sec. 325.4 to read as follows:
Sec. 325.4 Periodic stress tests required.
Each covered bank must conduct the periodic stress test under this
part subject to the following requirements:
(a) Financial data--A covered bank must use financial data as of
December 31 of the calendar year prior to the reporting year.
(b) Scenarios provided by the Corporation. In conducting the stress
test under this part, each covered bank must use the scenarios provided
by the
[[Page 67154]]
Corporation. The scenarios provided by the Corporation will reflect a
minimum of two sets of economic and financial conditions, including
baseline and severely adverse scenarios. The Corporation will provide a
description of the scenarios required to be used by each covered bank
no later than February 15 of the reporting year.
(c) Significant trading activities. The Corporation may require a
covered bank with significant trading activities, as determined by the
Corporation, to include trading and counterparty components in its
severely adverse scenarios. The trading and counterparty position data
used in this component will be as of a date between October 1 of the
year preceding the reporting year and March 1 of the reporting year,
and the Corporation will communicate a description of the component to
the covered bank no later than March 1 of the reporting year.
(d) Frequency. A covered bank that is consolidated under a holding
company that is required, pursuant to applicable regulations of the
Board of Governors of the Federal Reserve System, to conduct a stress
test at least once every calendar year must treat every calendar year
as a reporting year, unless otherwise determined by the Corporation.
All other covered banks must treat every even-numbered calendar year
beginning January 1, 2020 (i.e., 2022, 2024, 2026, etc.), as a
reporting year, unless otherwise determined by the Corporation.
0
7. Amend Sec. 325.5 by revising paragraph (b) to read as follows:
Sec. 325.5 Methodologies and practices.
* * * * *
(b) Controls and oversight of stress testing processes. (1) The
senior management of a covered bank must establish and maintain a
system of controls, oversight, and documentation, including policies
and procedures, that are designed to ensure that its stress test
processes satisfy the requirements in this part. These policies and
procedures must, at a minimum, describe the covered bank's stress test
practices and methodologies, and processes for validating and updating
the covered bank's stress test practices and methodologies consistent
with applicable laws and regulations.
(2) The board of directors, or a committee thereof, of a covered
bank must approve and review the policies and procedures of the stress
testing processes as frequently as economic conditions or the condition
of the covered bank may warrant, but no less than once every reporting
year. The board of directors and senior management of the covered bank
must receive a summary of the results of the stress test.
(3) The board of directors and senior management of each covered
bank must consider the results of the stress tests in the normal course
of business, including but not limited to, the covered bank's capital
planning, assessment of capital adequacy, and risk management
practices.
0
8. Revise Sec. 325.6 to read as follows:
Sec. 325.6 Required reports of stress test results to the FDIC and
the Board of Governors of the Federal Reserve System.
(a) Report required for periodic stress test results. A covered
bank must report to the FDIC and to the Board of Governors of the
Federal Reserve System, on or before April 5 of the reporting year, the
results of the stress test in the manner and form specified by the
FDIC.
(b) Content of reports. (1) The reports required under paragraph
(a) of this section must include under the baseline scenario, severely
adverse scenario, and any other scenario required by the Corporation
under this part, a description of the types of risks being included in
the stress test, a summary description of the methodologies used in the
stress test, and, for each quarter of the planning horizon, estimates
of aggregate losses, pre-provision net revenue, provision for loan and
lease losses, net income, and pro forma capital ratios (including
regulatory and any other capital ratios specified by the FDIC). In
addition, the report must include an explanation of the most
significant causes for the changes in regulatory capital ratios and any
other information required by the Corporation.
(2) The description of aggregate losses and net income must include
the cumulative losses and cumulative net income over the planning
horizon, and the description of each regulatory capital ratio must
include the beginning value, ending value, and minimum value of each
ratio over the planning horizon.
(c) Confidential treatment of information submitted. The
confidentiality of information submitted to the Corporation under this
part and related materials will be determined in accordance with
applicable law including any available exemptions under the Freedom of
Information Act (5 U.S.C. 552(b)) and the FDIC's Rules and Regulations
regarding the Disclosure of Information (12 CFR part 309).
0
9. Revise Sec. 325.7 to read as follows:
Sec. 325.7 Publication of stress test results.
(a) Publication date--(1) A covered bank must publish a summary of
the results of its stress tests in the period starting June 15 and
ending July 15 of the reporting year, provided:
(A) Unless the Corporation determines otherwise, if the covered
bank is a consolidated subsidiary of a bank holding company or savings
and loan holding company subject to supervisory stress tests conducted
by the Board of Governors of the Federal Reserve System under 12 CFR
part 252, then, within the June 15 to July 15 period, such covered bank
may not publish the required summary of its periodic stress test
earlier than the date that the Board of Governors of the Federal
Reserve System publishes the supervisory stress test results of the
covered bank's parent holding company.
(B) If the Board of Governors of the Federal Reserve System
publishes the supervisory stress test results of the covered bank's
parent holding company prior to June 15, then such covered bank may
publish its stress test results prior to June 15, but no later than
July 15, through actual publication by the covered bank or through
publication by the parent holding company under paragraph (b) of this
section.
(b) Publication method. The summary required under this section may
be published on the covered bank's website or in any other forum that
is reasonably accessible to the public. A covered bank that is a
consolidated subsidiary of a bank holding company or savings and loan
holding company that is required to conduct a company-run stress test
under applicable regulations of the Board of Governors of the Federal
Reserve System will be deemed to have satisfied the public disclosure
requirements under this subpart if it publishes a summary of its stress
test results with its parent bank holding company's or savings and loan
holding company's summary of stress test results. Subsidiary covered
banks electing to satisfy their public disclosure requirement in this
manner must include a summary of changes in regulatory capital ratios
of such covered bank over the planning horizon, and an explanation of
the most significant causes for the changes in regulatory capital
ratios.
(c) Information to be disclosed in the summary. A covered bank must
disclose the following information regarding the severely adverse
scenario if it is not a consolidated subsidiary of a parent bank
holding company or savings and loan holding company that has elected to
[[Page 67155]]
make its disclosure under 12 CFR 325.3(d):
* * * * *
Dated at Washington, DC, on December 18, 2018.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018-27824 Filed 12-27-18; 8:45 am]
BILLING CODE 6714-01-P