Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB, 56607-56613 [2020-20189]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 85, Number 178 (Monday, September 14, 2020)]
[Notices]
[Pages 56607-56613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20189]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

[[Page 56608]]


ACTION: Approval of information collection.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
has adopted a proposal to extend for three years, with revision, the 
Capital Assessments and Stress Testing Reports (FR Y-14A/Q/M; OMB No. 
7100-0341). The revisions are applicable with as of dates ranging from 
September 30, 2020, to June 30, 2021.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, (202) 
452-3829.
    Office of Management and Budget (OMB) Desk Officer--Shagufta 
Ahmed--Office of Information and Regulatory Affairs, Office of 
Management and Budget, New Executive Office Building, Room 10235, 725 
17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
    A copy of the Paperwork Reduction Act (PRA) OMB submission, 
including the reporting form and instructions, supporting statement, 
and other documentation will be placed into OMB's public docket files. 
These documents also are available on the Federal Reserve Board's 
public website at https://www.federalreserve.gov/apps/reportforms/review.aspx or may be requested from the agency clearance officer, 
whose name appears above.

SUPPLEMENTARY INFORMATION: On June 15, 1984, OMB delegated to the Board 
authority under the PRA to approve and assign OMB control numbers to 
collections of information conducted or sponsored by the Board. Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the PRA Submission, supporting statements, and approved collection 
of information instrument(s) are placed into OMB's public docket files.

Final Approval Under OMB Delegated Authority of the Extension for Three 
Years, With Revision, of the Following Information Collection

    Report title: Capital Assessments and Stress Testing Reports.
    Agency form number: FR Y-14A/Q/M.
    OMB control number: 7100-0341.
    Frequency: Annually, quarterly, and monthly.
    Respondents: These collections of information are applicable to 
bank holding companies (BHCs), U.S. intermediate holding companies 
(IHCs), and savings and loan holding companies (SLHCs) \1\ with $100 
billion or more in total consolidated assets, as based on: (i) The 
average of the firm's total consolidated assets in the four most recent 
quarters as reported quarterly on the firm's Consolidated Financial 
Statements for Holding Companies (FR Y-9C); or (ii) if the firm has not 
filed an FR Y-9C for each of the most recent four quarters, then the 
average of the firm's total consolidated assets in the most recent 
consecutive quarters as reported quarterly on the firm's FR Y-9Cs. 
Reporting is required as of the first day of the quarter immediately 
following the quarter in which the respondent meets this asset 
threshold, unless otherwise directed by the Board.
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    \1\ SLHCs with $100 billion or more in total consolidated assets 
become members of the FR Y-14Q and FR Y-14M panels effective June 
30, 2020, and the FR Y-14A panel effective December 31, 2020. See 84 
FR 59032 (November 1, 2019).
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    Estimated number of respondents: FR Y-14A/Q: 36; FR Y-14M: 34.\2\
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    \2\ The estimated number of respondents for the FR Y-14M is 
lower than for the FR Y-14Q and FR Y-14A because, in recent years, 
certain respondents to the FR Y-14A and FR Y-14Q have not met the 
materiality thresholds to report the FR Y-14M due to their lack of 
mortgage and credit activities. The Board expects this situation to 
continue for the foreseeable future.
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    Estimated average hours per response: FR Y-14A: 926 hours; FR Y-
14Q: 2,201 hours; FR Y-14M: 1,072 hours; FR Y-14 On-going Automation 
Revisions: 480 hours; FR Y-14 Attestation On-going Attestation: 2,560 
hours.
    Estimated annual burden hours: FR Y-14A: 33,336 hours; FR Y-14Q: 
316,944 hours; FR Y-14M: 437,376 hours; FR Y-14 On-going Automation 
Revisions: 17,280 hours; FR Y-14 Attestation On-going Attestation: 
33,280 hours.
    General description of report: This family of information 
collections is composed of the following three reports:
     The FR Y-14A collects quantitative projections of balance 
sheet, income, losses, and capital across a range of macroeconomic 
scenarios and qualitative information on methodologies used to develop 
internal projections of capital across scenarios.\3\
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    \3\ On October 10, 2019, the Board issued a final rule that 
eliminated the requirement for firms subject to Category IV 
standards to conduct and publicly disclose the results of a company-
run stress test. See 84 FR 59032 (Nov. 1, 2019). That final rule 
maintained the existing FR Y-14 substantive reporting requirements 
for these firms in order to provide the Board with the data it needs 
to conduct supervisory stress testing and inform the Board's ongoing 
monitoring and supervision of its supervised firms. However, as 
noted in the final rule, the Board intends to provide greater 
flexibility to banking organizations subject to Category IV 
standards in developing their annual capital plans and consider 
further change to the FR Y-14 forms as part of a separate proposal. 
See 84 FR 59032, 59063.
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     The quarterly FR Y-14Q collects granular data on various 
asset classes, including loans, securities, trading assets, and PPNR 
for the reporting period.
     The monthly FR Y-14M is comprised of three retail 
portfolio- and loan-level schedules, and one detailed address-matching 
schedule to supplement two of the portfolio and loan-level schedules.
    The data collected through the FR Y-14A/Q/M reports (FR Y-14 
reports) provide the Board with the information needed to help ensure 
that large firms have strong, firm[hyphen]wide risk measurement and 
management processes supporting their internal assessments of capital 
adequacy and that their capital resources are sufficient given their 
business focus, activities, and resulting risk exposures. The reports 
are used to support the Board's annual Comprehensive Capital Analysis 
and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) exercises, 
which complement other Board supervisory efforts aimed at enhancing the 
continued viability of large firms, including continuous monitoring of 
firms' planning and management of liquidity and funding resources, as 
well as regular assessments of credit, market and operational risks, 
and associated risk management practices. Information gathered in this 
data collection is also used in the supervision and regulation of 
respondent financial institutions. Respondent firms are currently 
required to complete and submit up to 17 filings each year: one annual 
FR Y-14A filing, four quarterly FR Y-14Q filings, and 12 monthly FR Y-
14M filings. Compliance with the information collection is mandatory.
    Current actions: On March 19, 2020, the Board published a notice in 
the Federal Register (85 FR 15776) requesting public comment for 60 
days on the extension, with revision, of the FR Y-14 reports. The 
proposed revisions consisted of changes necessary to better identify 
risk as part of the stress tests, such as revisions related to 
wholesale, trading, and counterparty exposures, as well as capital 
revisions related to capital simplification, total loss-absorbing 
capacity (TLAC), and the standardized approach for counterparty credit 
risk (SA-CCR). The Board also proposed to make several clarifications 
to the instructions that were, in part, prompted by questions the Board 
had received from reporting institutions. The comment period for this 
notice expired on May 18, 2020. The Board

[[Page 56609]]

received two comment letters from banking organizations and one comment 
letter from a banking industry group. The Board has adopted the 
proposed revisions, except as discussed below. In addition, although 
the Board did not receive any comment letters regarding the proposed 
revisions related to a proposed rule that would modify the Board's TLAC 
requirements,\4\ the Board has not adopted these revisions as proposed. 
Instead, the Board would address these revisions at such point as the 
Board adopts a final rule.
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    \4\ See 84 FR 13814 (April 8, 2019).
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Detailed Discussion of Public Comments

Capital Simplifications

    The Board proposed to revise the FR Y-14 reports to incorporate the 
changes finalized by the agencies that amended their regulatory capital 
rules (simplifications rule).\5\ \6\ The Board proposed these revisions 
to be effective for the September 30, 2020, FR Y-14Q submission and for 
the December 31, 2020, FR Y-14A submission. In the simplifications 
rule, the agencies adopted a simpler methodology for non-advanced 
approaches banking organizations \7\ to calculate minority interest 
limitations and simplified the regulatory capital treatment of mortgage 
service assets (MSAs), temporary difference deferred tax assets (DTAs), 
and investments in the capital of unconsolidated financial institutions 
for non-advanced approaches banking organizations. The simplifications 
rule became effective April 1, 2020.\8\
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    \5\ See 12 CFR part 3 (OCC); 12 CFR part 217 (Board); 12 CFR 
part 324 (FDIC). While the agencies have codified the capital rule 
in different parts of title 12 of the Code of Federal Regulations, 
the internal structure of the sections within each agency's rule is 
substantially similar. All references to sections in the capital 
rule or the proposal are intended to refer to the corresponding 
sections in the capital rule of each agency.
    \6\ See 84 FR 35234 (July 22, 2019).
    \7\ Non-advanced approaches banking organizations are 
institutions that do not meet the criteria in 12 CFR 3.100(b) (OCC); 
12 CFR 217.100(b) (Board); or 12 CFR 324.100(b) (FDIC).
    \8\ Eligible firms could have chosen to adopt the 
simplifications rule effective January 1, 2020.
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    The Board received two comments on the proposed changes to the FR 
Y-14 reports related to the simplifications rule. First, a banking 
organization asked why the timing of the capital simplifications-
related proposed revisions to the FR Y-14Q report did not align with 
the timing of similar revisions made to the FR Y-9C, which were 
effective for the March 31, 2020, as of date.\9\ The same banking 
organization also asked whether firms could early adopt the capital 
simplifications revisions for FR Y-14Q reporting before the proposed 
effective dates.
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    \9\ See 85 FR 18230 (April 1, 2020).
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    In order to allow firms to incorporate the effects of the capital 
simplifications rule into the FR Y-14Q report, the Board would have 
needed to add items to Schedule D (Regulatory Capital), which it 
proposed to do. It was not possible to allow eligible firms to 
incorporate the effects of the capital simplifications rule before the 
proposed effective date of September 30, 2020, without temporarily 
revising the FR Y-14Q. Firms will have to wait until the September 30, 
2020, FR Y-14Q submission, to be able to incorporate these effects, and 
firms do not have the option to early adopt for FR Y-14Q reporting 
purposes. It is important to note that this does not inhibit eligible 
firms from taking advantage of the capital simplifications rule for 
purposes of capital adequacy compliance through other reports, such as 
the FR Y-9C.

Counterparty

Client-Cleared Derivatives

    The Board proposed to require all client-cleared derivatives 
exposures to be reported on the large counterparty default (LCPD) 
section of FR Y-14Q, Schedule L (Counterparty), effective beginning 
September 30, 2020. One commenter was not supportive of this revision, 
as it commented that firms do not have this information readily 
available. Per the commenter, it would be operationally burdensome for 
firms to gather information related to client-cleared derivatives, 
especially given the volume of reported data that this revision would 
add to Schedule L. The commenter suggested that if the Board were to 
adopt this revision as proposed, then the Board should delay the 
effective until June 30, 2021.
    The Board acknowledges the operational concerns raised by the 
industry, especially given the timing of the coronavirus disease 2019 
(COVID-19) pandemic. The Board has adopted this revision as proposed, 
except that it has delayed the effective date until June 30, 2021. In 
fact, due to the operational concerns raised by the industry and the 
timing of the COVID-19 pandemic, the Board has delayed the effective 
date for all FR Y-14Q, Schedule L revisions until June 30, 2021.
    The same commenter further stated that this revision would require 
firms to report exposures of their clients, and not exposures of the 
banks themselves. Per the comment, this goes against the spirit of the 
data collection, which is to capture reporting firm exposures.
    The Board notes that, per the draft instructions, the requirement 
for a firm to report its exposures to clients (i.e., member to client 
leg) applies only when the firm has credit exposures to a client, 
either directly (i.e., the case in which the firm is acting as a 
financial intermediary on behalf of the client and enters into an 
offsetting transaction with a central counterparty (CCP) or an exchange 
(referred to as a back-to-back derivative)), or indirectly (i.e., the 
case in which the firm guarantees the client's performance to a CCP or 
an exchange (referred to as a guaranteed derivative)). Further, a 
firm's reporting requirement associated with its client-cleared 
exposures to CCPs (i.e., member to CCP leg) applies only when the firm 
has a credit exposure to a CCP, that is, either directly (i.e., the 
case of a back-to-back derivative) or indirectly (i.e., the case in 
which the firm guarantees the performance of the CCP or exchange to the 
client). Therefore, firms are only required to report client-clearing 
derivative exposures in instances where firms are directly or 
indirectly exposed. For these reasons, the Board has adopted this 
revision as proposed, except that has delayed the effective date until 
June 30, 2021.
    The commenter also expressed concern that it is not clear on which 
portions of Schedule L client-cleared derivatives exposures information 
should be reported. Per the comment, the initial notice used the phrase 
``large counterparty default'' section and the draft instructions 
provided with the initial notice did not specify where these exposures 
should be reported.
    Per the proposal, client-cleared derivatives exposures information 
would be reported in Schedule L.5 (Derivatives and Securities Financing 
Transactions (SFT) Profile). The Board has adopted this revision as 
proposed, except that has delayed the effective date until June 30, 
2021.
    The Board specified in the initial notice that it was only going to 
collect information on client-cleared derivative exposures for 
monitoring purposes, and not for use in the stress test at this time. 
Per the commenter, the draft instructions provided with the initial 
notice did not make it clear how client-cleared derivative exposures 
would be delineated from other exposures to ensure they would not be 
included in the stress test at this time.
    The Board will be able to delineate client-cleared derivative 
exposures from other exposures using the ``Agreement Role'' item of 
Schedule L.5.1 (Derivative and SFT information by counterparty legal 
entity and netting set/agreement). The ``Agreement Role'' item provides

[[Page 56610]]

the firm with a means to report its cleared derivative exposures to a 
client in a manner that may be distinguished from the firm's other 
bilateral derivative exposures to the client. The Board has adopted 
this revision as proposed, except that has delayed the effective date 
until June 30, 2021.

Netting Agreement Reporting

    The Board proposed to revise the FR Y-14Q, Schedule L instructions 
to provide illustrative examples that clarify netting agreement 
reporting requirements, including describing when firms should report 
mark-to-market (MtM) amounts with a counterparty on a gross or net 
basis. One commenter indicated that under U.S. Generally Accepted 
Accounting Principles (GAAP), firms are not permitted to offset 
negative and positive MtM with the same counterparty in the absence of 
a legally enforceable netting agreement. Per the commenter, the 
proposed reporting of netting requirements would go against U.S. GAAP. 
The commenter recommended that the Board permit firms to report 
positive and negative MtM amounts with a counterparty on a gross basis 
without offsetting in the absence of a legally enforceable netting 
agreement between the firm and the counterparty.
    While the proposed change to the netting agreement reporting 
section in Schedule L.5 reiterated the existing language in other parts 
of the instructions pertaining to Net Current Exposure (CE) and Mark-
to-Market (MtM) items, the Board acknowledges the point raised by the 
commenter concerning the importance of consistency between FR Y-14 
reporting and U.S. GAAP, where possible. To that end, the Board has 
modified the instructions so that firms are required to report MtM 
amounts with a counterparty on a gross basis without offsetting 
positive and negative MtM amounts in cases where there is no legally 
enforceable netting agreement. In essence, the netting rule should 
apply consistently between MtM and Net CE even when there is no netting 
agreement in place, or when a netting agreement exists but that is not 
legally enforceable, so that both data fields are computed after 
aggregating across positions that have positive MtM amounts, without 
allowing any offset against negative MtM amounts.
    The same commenter also asked the Board to provide additional 
examples regarding netting agreement reporting provided in the draft 
instructions to better illustrate how firms should report when both 
positive and non-positive legal opinions exist for a given netting 
agreement. Specifically, the commenter recommended that the Board 
clarify how values should be reported if there are both positive and 
negative legal opinions on collateral enforceability for a netting 
agreement.
    The Board strives to clarify the instructions to ensure accurate 
reporting where possible, and has revised the instructions to state 
that in cases where mixed legal opinions exist for either a netting 
agreement or a collateral enforceability, firms should apply the 
methodologies that are consistent with the treatment for the regulatory 
capital rules, and report applicable data fields accordingly.
    A commenter recommended that the Board include instructions on what 
agreement type value should be reported in cases where there is both 
SFT and derivatives exposure but not cross product netting. 
Additionally, the commenter recommended that the Board clarify what 
value of agreement type should be included if there is no netting 
agreement for SFT and derivatives between CCP and non-CCP.
    In order to remove ambiguity, the Board has revised the 
instructions so that firms may report ``Other'' under ``Agreement 
Type'' in cases where the allowable entries currently listed in the 
instructions do not represent the characteristics of the exposure being 
reported.
    A commenter asked the Board to clarify how to aggregate contractual 
terms from credit support annexes (CSAs). Per the commenter, firms 
currently report at the margin level, while the proposed instructions 
would require firms to report at netting agreement level.
    For clarity, the Board has revised the instructions so that firms 
may report certain margin agreement details (such as agreement type, 
CSA contractual features, non-cash collateral type, threshold, minimum 
transfer amount CP, margin frequency, etc.) at a margin agreement level 
in cases where multiple CSAs with different contractual features per 
netting agreement exist. When doing so, firms are required to use the 
``Netting Set ID'' naming convention in a manner that is a 
concatenation of a unique identifier assigned to a netting agreement 
and that to a margin agreement.
    A commenter further requested that the Board provide clarification 
regarding reporting granularity of counterparty and netting, as these 
concepts differ between Schedules L.1 and L.5.
    The Board notes that the level of granularity of counterparty and 
netting intentionally differs between Schedules L.1 and L.5. Consistent 
with the proposed instructions, firms should report Schedules L.1-L.3 
at the counterparty legal entity level and Schedule L.5 at the netting 
set level. The Board has adopted the revision as proposed, except that 
has delayed the effective date until June 30, 2021.

CDS Hedge Notional

    The Board proposed several revisions to the instructions 
surrounding the ``CDS Hedge Notional'' item on FR Y-14Q, Schedule 
L.5.1, such as clarifying that when firms are calculating the net 
notional amount, purchased CDS hedge notional amounts must be reflected 
as negative amounts and sold amounts must be reflected as positive 
amounts. A commenter stated that the concept of CDS hedges appears also 
appears on Schedule L.1, and the definitions are not consistent between 
Schedule L.1 and Schedule L.5.1.
    The Board notes that the scope of CDS hedge positions in Schedule 
L.1 intentionally differs from that of Schedule L.5.1. Consistent with 
the instructions, the ``Single Name Credit Hedges'' item in Schedule 
L.1 is limited to single name CDS only, whereas the ``CDS Hedge 
Notional'' item in Schedule L.5.1 covers a range of positions that are 
eligible credit derivatives as defined in 12 CFR 252.71. The Board has 
adopted the revisions as proposed, except that has delayed the 
effective date until June 30, 2021.

Variation Margins

    The Board proposed to align the FR Y-14Q, Schedule L instructions 
regarding how variation margins can be treated with the guidance 
provided in SR Letter 17-7 (Regulatory Capital Treatment of Certain 
Centrally-cleared Derivative Contracts under the Board's Capital 
Rule).\10\ The commenter asked to confirm whether this guidance could 
be interpreted as requiring firms to report zero in the variation 
margin column for exposures to CCPs, whose rulebook considers variation 
margin as a settlement payment. In addition, the commenter asked the 
Board to confirm whether variation margin should be included in the 
Gross CE column of Schedule L and whether firms should continue to 
report all exposures to the CCP, such as default fund contributions and 
initial margin and any other collateral provided to the CCP that 
exceeds contract MtM amounts in their specific columns.
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    \10\ https://www.federalreserve.gov/supervisionreg/srletters/sr1707a1.pdf.
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    The Board confirms that the commenter's interpretation of SR 17-7

[[Page 56611]]

is appropriate for the Schedule L reporting purposes, and has adopted 
the revision as proposed, except that has delayed the effective date 
until June 30, 2021.

Trading

Formalizing Supplemental Collections

    The Board proposed to formalize two supplemental collections by 
incorporating them into FR Y-14Q, Schedule F (Trading). One of these 
supplemental collections would require firms to report corporate single 
name exposures at the obligor level in Schedule F.22 ([Incremental 
Default Risk] IDR--Corporate Credit) along with corporate index 
exposures at the series level.
    A commenter stated that requiring firms to report corporate single 
name exposures at the obligor level, as well as corporate index 
exposures at the series level, would result in significant operational 
challenges, as this level of data is not readily available in firms' 
internal systems. Per the commenter, the supplemental collection on 
which this proposal was based was only collected annually, and so the 
data was aggregated manually by firms. Since the proposal would have 
required that this information be provided on a quarterly basis, firms 
would have needed to develop a systemic solution, which would take time 
to implement. Therefore, the commenter recommended that this revision 
be delayed until June 30, 2021. The commenter also recommended that the 
Board clarify the definition of ``average credit spread'' in the 
instructions for Schedule F.22.
    The Board acknowledges the operational concerns raised by the 
industry, especially given the timing of the COVID-19 pandemic. In 
light of these concerns, the Board has adopted the requirements to 
report corporate single name exposures at the obligor level and to 
report corporate index exposures at the series level as proposed, 
except that the Board has delayed the effective date of this revision 
until June 30, 2021. In addition, Board has revised the instructions 
for Schedule F.22 to specify that the ``average credit spread'' should 
be calculated using a standardized 5-year tenor.

Hedge Reporting

    The Board proposed to require firms to report a version of FR Y-
14Q, Schedule F that captures the impact of accrual loan hedges. A 
commenter indicated that it would be operationally burdensome to submit 
data on accrual loan hedges on a quarterly basis, as controls and 
verification for this data need to be set up. The commenter further 
stated that for some firms, hedges are generally utilized to cover 
credit risk without regard for how the underlying loan is accounted. 
Therefore, in order to comply with the proposed revisions related to 
accrual loan hedges, such firms would need to isolate hedges based on 
accounting treatment of their underlying loan risk. Per the commenter, 
separating this data would pose a significant burden for such firms, 
and would require them to invest additional time and resources in FR Y-
14 reporting. Given this, the commenter recommended that this revision 
be postponed until June 30, 2021.
    The Board acknowledges the operational concerns raised by the 
industry, especially given the timing of the COVID-19 pandemic. In 
light of these concerns, the Board has adopted the requirement to 
separately report accrual loan hedges as proposed, except that the 
Board has delayed the effective date of this revision until June 30, 
2021.
    The Board proposed to add the following language to the Schedule F 
instructions: ``Positions that are held outside of the trading book 
that are hedges of accrual loans or hedges of loans held under fair 
value accounting (FVO hedges) should not be included in this schedule. 
Instead, they should each be reported separately in their own FR Y-14Q 
Trading schedules.'' A commenter asked the Board to specify to which 
``positions'' these instructions refer, and to clarify the reporting 
requirements for such positions.
    To minimize ambiguity, the Board has clarified that the phrase 
``outside the trading book'' refers to positions reported outside of FR 
Y-9C, Schedule HC-D (Trading Assets and Liabilities). Reporting 
locations for such positions include, for example, FR Y-9C, Schedules 
HC-F (Other Assets) and HC-G (Other Liabilities).
    Further, the Board has revised the instructions to make it clear 
that positions hedging FVO loans should be reported with submission 
type ``FVO Hedges'' and positions hedging accrual loans should be 
reported with submission type ``Accrual Loan Hedges.''
    The Board proposed revisions related to hedge reporting on FR Y-
14Q, Schedule F in order to isolate the impact of specific hedges 
(e.g., X-valuation adjustment or XVA hedges). Specifically, the Board 
proposed to revise the instructions to clarify that XVA hedges should 
not be reported on Schedule F. A commenter stated that not requiring 
XVA hedges to be reported on Schedule F would be challenging for firms, 
as these hedges are built into pricing models when re-valuing positions 
under the global market shock. Further, per the commenter, these hedges 
are critical for reporting the impact for private equity exposures. The 
commenter stated that adopting these revisions as proposed would 
require significant modeling changes, which would create operational 
burden in terms of testing and validating results. Therefore, the 
commenter recommended that this revision be delayed until June 30, 
2021.
    The Board acknowledges the changes required for firms to comply 
with this proposed revision. Given these challenges and the timing of 
the COVID-19 pandemic, the Board has adopted the revision as proposed, 
except that it has delayed the effective date until June 30, 2021.

Wholesale

Undrawn Commitments

    The Board proposed to revise the FR Y-14Q, Schedule H (Wholesale) 
to require firms to report interest rate data for undrawn commitments 
as if they were fully drawn on the reporting date. A commenter stated 
that the Board should not adopt this revision, as most firms do not 
have systems in place to capture interest rate information on undrawn 
commitments. Per the commenter, gathering and vetting this information 
would require significant manual review of physical documents.
    The Board needs interest rate information for undrawn exposures to 
more accurately estimate wholesale risk and potential credit 
availability in a stressed environment, as interest rate information 
provides a measure of risk that is quantitative and uniformly defined 
across reporting entities. However, due to the challenges associated 
with adopting this revision, as well as the timing of the COVID-19 
pandemic, the Board has delayed the effective date for this revision 
until December 31, 2020.
    Two commenters stated that in many cases, there are multiple 
interest rate options available for an undrawn commitment and the 
borrower is not required to choose an interest rate until a draw has 
been made. The commenters also requested that the Board clarify how the 
interest rate should be reported for variable rate loans, credit 
facilities with loans with varying interest rates, loans with multiple 
rate reset scenarios, and interest rates based on performance metrics. 
The Board proposed instructions that would have required firms to 
report the most conservative

[[Page 56612]]

interest rate allowed per the terms of the credit agreement if a credit 
facility allows for multiple interest rates. Per one of the commenters, 
requiring the most conservative rate would need to be recalculated for 
each report date, which would require significant resources.
    To reduce the unintended burden of recalculating the most 
conservative interest rate each quarter, the Board has revised the 
language regarding which interest rate to report for facilities with 
multiple interest rate options to specify that firms should report the 
most conservative (highest) rate as of the most recent of origination 
or renewal date. The Board has revised the instructions to further 
clarify that in cases when the facility is an acquired facility and 
acquired more recently than origination or renewal, the reported rate 
should be the most conservative at time of acquisition. This revised 
language allows for consistent reporting over time of the combination 
of options that comprise an interest rate for an undrawn facility. For 
example, assuming at origination, a London Inter-Bank Offered Rate 
(LIBOR) index plus spread amounts to a 4.25% interest rate, and a Base 
index plus spread amounts to a 4.50% interest rate, the interest rate 
reported would be the Base index plus spread for each subsequent 
reporting period that the origination or renewal date does not change 
and the facility remains fully undrawn. The same logic should be 
applied to other scenarios that allow for multiple interest rates.
    A commenter stated that there was the need for further 
clarification in order to properly calculate interest rates for undrawn 
commitments, such as in situations where the date used to calculate the 
interest rate is a different date than the draw date.
    To remove ambiguity, the Board has clarified the instructions to 
state that the funding date should be considered the reporting date.

Legal Entity Identifiers

    The Board proposed to require firms to report Legal Entity 
Identifiers (LEIs) assigned to obligors and if applicable, entities 
that are identified as the primary source or repayment when the primary 
source of repayment differs from the reported obligor, for credit 
facilities reported on Schedule H. A commenter indicated that many 
firms do not collect LEI information from their clients and there is no 
automated way to gather or validate LEI data. Per the commenter, firms 
do not currently have systems in place to maintain LEI information and 
small naming differences or misspellings can lead to LEI mismatches. 
Therefore, requiring LEIs would require costly system updates and 
significant resources to accurately report.
    The commenter further added that requiring LEIs at any time would 
be challenging, but given the outbreak of the COVID-19 pandemic, firms 
do not have ample resources to dedicate to system changes associated 
with LEIs. The commenter recommended that if the Board adopts this 
proposal, then it should delay this requirement until after the COVID-
19 pandemic has subsided.
    The Board believes there is a significant benefit to using LEI data 
to identify obligors, as it is globally available and contains 
information about entity structure. This makes it a beneficial addition 
to the other identifiers collected in the Schedule H, and the trend is 
toward using LEI data. However, the Board acknowledges that firms will 
need time to capture the LEI data for their obligors, especially given 
the timing of the COVID-19 pandemic. Accordingly, the Board has adopted 
this revision as proposed, except that it has delayed the effective 
date of this revision until June 30, 2021.

Property Size

    The Board proposed to revise FR Y-14Q, Schedule H.2 (Commercial 
Real Estate), item 39 (``Property Size'') to clarify that predominance 
can be used to determine the units even if the loan consists of mixed 
property types. A commenter stated that this revision inadvertently 
creates ambiguity as it would no longer be clear when the ``Other'' 
option for item 39 would be used. The commenter further stated that the 
proposed revision would not clearly address the reporting of mixed 
property types, as it would still be unclear if firms are to only 
report the size of the single predominate property type and exclude the 
size of the other property types that secure the facility. For these 
reasons, the commenter suggested not adopting the proposed revisions.
    The Board believes the proposed clarifications remain necessary as 
they address an ambiguity in the instructions concerning how to report 
property size when there is a single property with multiple property 
types where one property type predominates. To provide greater clarity, 
the Board has revised the instructions for item 39 to indicate the 
reporting of property size when the option reported in Schedule H.2, 
item 9 (``Property Type'') is ``Other''. The Board has also revised the 
instructions to state that the reported property size should be based 
on the size of the entire property.

Capital Call Subscriptions

    The Board proposed to add options of ``Revolving Credit (of any 
type)--Capital Call Subscription'' and ``Term loan (of any type)--
Capital Call Subscription'' to FR Y-14Q, Schedule H.1, item 20 
(``Credit Facility Type''). The Board also proposed to add the option 
of ``Capital Call Subscription'' to item 22 (``Credit Facility 
Purpose''). A commenter indicated that the Board should not adopt the 
revisions to item 20, as the Board could combine the values reported in 
items 20 and 22 to identify revolving credit and term loans that are 
capital call subscriptions.
    The Board agrees with the commenter that the revisions as proposed 
are duplicative. As a result, the Board has not adopted the proposed 
revisions to the instructions for Schedule H.1, item 20 (``Credit 
Facility Type''). However, the Board has adopted the revisions as 
proposed to Schedule H.1 (Corporate Loan), item 22 (``Credit Facility 
Purpose''), so that the Board can still identify capital call 
subscriptions.

Retail

Credit Cards

    The Board proposed to revise items 11 (``Projected Managed 
Losses'') and 12 (``Projected Booked Losses'') of FR Y-14M, Schedule 
D.2 (Portfolio Level Credit Card Information) to require firms to 
project lifetime losses under current expected credit losses (CECL) 
projections on a rolling basis each month, as opposed to only losses 
over the next twelve months on a rolling basis each month. A commenter 
stated that these proposed revisions do not allow firms to report 
losses quarterly, which would align with current CECL practices of 
calculating losses at most firms. A commenter suggested that the Board 
revise the instructions to provide firms more flexibility for reporting 
items 11 and 12.
    The Board notes that firms should use an appropriate model for 
calculating projected managed and booked losses that is consistent with 
current accounting guidelines and firms' own modeling frameworks. 
Therefore, to allow flexibility in reporting, the Board has removed the 
language ``rolling basis each reporting month'' from items 11 and 12. 
Additionally, the Board has not adopted the proposed revisions to the 
instructions to project through the expected lifetime of the loans for 
line items 11 and 12. Rather, the Board will continue to require firms 
to report projected managed and booked losses over the next twelve 
months for each respective portfolio.

[[Page 56613]]

    A commenter indicated that the proposed revisions to items 11 and 
12 would require firms that have adopted CECL to report duplicative 
data in these items as they are required to report in Schedule D.2, 
items 9 (``ALL Managed Balance'') and 10 (``ALL Booked Balance''), 
respectively. Additionally, the commenter asked the Board to clarify 
whether the values reported in items 11 and 12 should include projected 
interest and fees.
    Given that the Board has not adopted the revision as proposed to 
items 11 and 12, the instructions for items 11 and 12 will to continue 
to differ from those of items 9 and 10. The instructions for items 9 
and 10 reflect the lifetime expected credit losses for firms that have 
adopted CECL, whereas the instructions for items 11 and 12 require 
institutions that have adopted CECL to report the allowance for credit 
losses managed or booked balance over the next 12 months, respectively. 
Also, given the intention to capture total projected losses within 
items 11 and 12, the Board has clarified the instructions for these 
items to require firms to include projected losses recognized to on-
balance sheet interest and fees.
    Legal authorization and confidentiality: The Board has the 
authority to require BHCs to file the FR Y-14 reports pursuant to 
section 5(c) of the Bank Holding Company Act (``BHC Act''), 12 U.S.C. 
1844(c), and pursuant to section 165(i) of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act), 12 U.S.C. 5365(i), 
as amended by section 401(a) and (e) of the Economic Growth, Regulatory 
Relief, and Consumer Protection Act (EGRRCPA).\11\ The Board has 
authority to require SLHCs to file the FR Y-14 reports pursuant to 
section 10(b) of the Home Owners' Loan Act (12 U.S.C. 1467a(b)), as 
amended by section 369(8) and 604(h)(2) of the Dodd-Frank Act. Lastly, 
the Board has authority to require U.S. IHCs of FBOs to file the FR Y-
14 reports pursuant to section 5 of the BHC Act, as well as pursuant to 
sections 102(a)(1) and 165 of the Dodd-Frank Act, 12 U.S.C. 5311(a)(1) 
and 5365.\12\ In addition, section 401(g) of EGRRCPA, 12 U.S.C. 5365 
note, provides that the Board has the authority to establish enhanced 
prudential standards for foreign banking organizations with total 
consolidated assets of $100 billion or more, and clarifies that nothing 
in section 401 ``shall be construed to affect the legal effect of the 
final rule of the Board . . . entitled `Enhanced Prudential Standard 
for [BHCs] and Foreign Banking Organizations' (79 FR 17240 (March 27, 
2014)), as applied to foreign banking organizations with total 
consolidated assets equal to or greater than $100 million.'' \13\ The 
FR Y-14 reports are mandatory. The information collected in the FR Y-14 
reports is collected as part of the Board's supervisory process, and 
therefore, such information is afforded confidential treatment pursuant 
to exemption 8 of the Freedom of Information Act (FOIA), 5 U.S.C. 
552(b)(8). In addition, confidential commercial or financial 
information, which a submitter actually and customarily treats as 
private, and which has been provided pursuant to an express assurance 
of confidentiality by the Board, is considered exempt from disclosure 
under exemption 4 of the FOIA, 5 U.S.C. 552(b)(4).\14\
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    \11\ Public Law 115-174, Title IV Sec.  401(a) and (e), 132 
Stat. 1296, 1356-59 (2018).
    \12\ Section 165(b)(2) of the Dodd-Frank Act, 12 U.S.C. 
5365(b)(2), refers to ``foreign-based bank holding company.'' 
Section 102(a)(1) of the Dodd-Frank Act, 12 U.S.C. 5311(a)(1), 
defines ``bank holding company'' for purposes of Title I of the 
Dodd-Frank Act to include foreign banking organizations that are 
treated as bank holding companies under section 8(a) of the 
International Banking Act of 1978, 12 U.S.C. 3106(a). The Board has 
required, pursuant to section 165(b)(1)(B)(iv) of the Dodd-Frank 
Act, 12 U.S.C. 5365(b)(1)(B)(iv), certain foreign banking 
organizations subject to section 165 of the Dodd-Frank Act to form 
U.S. intermediate holding companies. Accordingly, the parent 
foreign-based organization of a U.S. IHC is treated as a BHC for 
purposes of the BHC Act and section 165 of the Dodd-Frank Act. 
Because Section 5(c) of the BHC Act authorizes the Board to require 
reports from subsidiaries of BHCs, section 5(c) provides additional 
authority to require U.S. IHCs to report the information contained 
in the FR Y-14 reports.
    \13\ The Board's Final Rule referenced in section 401(g) of 
EGRRCPA specifically stated that the Board would require IHCs to 
file the FR Y-14 reports. See 79 FR 17240, 17304 (March 27, 2014).
    \14\ Please note that the Board publishes a summary of the 
results of the Board's CCAR testing pursuant to 12 CFR 
225.8(f)(2)(v), and publishes a summary of the results of the 
Board's DFAST stress testing pursuant to 12 CFR 252.46(b) and 12 CFR 
238.134, which includes aggregate data. In addition, under the 
Board's regulations, covered companies must also publicly disclose a 
summary of the results of the Board's DFAST stress testing. See 12 
CFR 252.58; 12 CFR 238.146. The public disclosure requirement 
contained in 12 CFR 252.58 for covered BHCs and covered IHCs is 
separately accounted for by the Board in the Paperwork Reduction Act 
clearance for FR YY (OMB No. 7100-0350) and the public disclosure 
requirement for covered SLHCs is separately accounted for in by the 
Board in the Paperwork Reduction Act clearance for FR LL (OMB No. 
7100-0380).

    Board of Governors of the Federal Reserve System, September 9, 
2020.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2020-20189 Filed 9-11-20; 8:45 am]
BILLING CODE 6210-01-P