Amendments to Capital Planning and Stress Testing Requirements for Large Bank Holding Companies, Intermediate Holding Companies and Savings and Loan Holding Companies, 63222-63235 [2020-22166]
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Federal Register / Vol. 85, No. 195 / Wednesday, October 7, 2020 / Proposed Rules
(b) The definitions in this section are
severable. If any definition in this
section is held to be invalid that shall
not affect the operability of the
remaining definitions.
[FR Doc. 2020–20428 Filed 10–6–20; 8:45 am]
BILLING CODE 6325–39–P
FEDERAL RESERVE SYSTEM
12 CFR Parts 225, 238, and 252
[Regulations Y, LL, and YY; Docket No. R–
1724]
RIN 7100–AF95
Amendments to Capital Planning and
Stress Testing Requirements for Large
Bank Holding Companies, Intermediate
Holding Companies and Savings and
Loan Holding Companies
Board of Governors of the
Federal Reserve System (Board).
ACTION: Notice of proposed rulemaking
with request for comment.
AGENCY:
The Board is inviting
comment on a notice of proposed
rulemaking (proposal) to tailor the
requirements in the Board’s capital plan
rule (capital plan rule), which applies to
large bank holding companies and U.S.
intermediate holding companies of
foreign banking organizations.
Specifically, as foreshadowed in the
Board’s October 2019 rulemaking that
updated the prudential framework for
these companies (tailoring framework),
the proposal would make conforming
changes to the capital planning,
regulatory reporting, and stress capital
buffer requirements for firms subject to
Category IV standards to be consistent
with the tailoring framework. To be
consistent with recent changes to the
Board’s stress testing rules, the proposal
would make other changes to the
Board’s stress testing rules, Stress
Testing Policy Statement and regulatory
reporting requirements relating to
business plan change assumptions,
capital action assumptions, and the
publication of company-run stress test
results for savings and loan holding
companies. This proposal also solicits
comment on the Board’s guidance on
capital planning for all firms supervised
by the Board, in light of recent changes
to relevant regulations and as part of the
Board’s ongoing practice of reviewing
its policies to ensure that they are
having their intended effect.
DATES: Comments must be received by
November 20, 2020.
ADDRESSES: You may submit comments,
identified by Docket No.R–1724 and
SUMMARY:
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RIN 7100–AF95 by any of the following
methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.aspx.
• Email: regs.comments@
federalreserve.gov. Include the docket
number and RIN number in the subject
line of the message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Ann E. Misback,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
All public comments are available
from the Board’s website at https://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons or
to remove personally identifiable
information at the commenter’s request.
Accordingly, comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room 146, 1709 New York
Avenue NW, Washington, DC 20006,
between 9:00 a.m. and 5:00 p.m. on
weekdays.
FOR FURTHER INFORMATION CONTACT:
Constance Horsley, Deputy Associate
Director, (202) 452–5239, Elizabeth
MacDonald, Manager (202) 475–6316,
Hillel Kipnis, Senior Financial
Institution Policy Analyst II, (202) 452–
2924, Christopher Appel, Senior
Financial Institution Policy Analyst II,
(202) 973–6862, and Palmer Osteen,
Financial Institution Policy Analyst,
(202) 785–6025, Division of Supervision
and Regulation; Benjamin McDonough,
Assistant General Counsel, (202) 452–
2036, Julie Anthony, Senior Counsel,
(202) 475–6682, Asad Kudiya, Senior
Counsel, (202) 475–6358, Jonah Kind,
Senior Attorney, (202) 452–2045, or
Jasmin Keskinen, Legal Assistant/
Attorney, (202) 475–6650, Legal
Division, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551. Users of Telecommunication
Device for Deaf (TDD) only, call (202)
263–4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning, Stress
Testing and Stress Capital Buffer
Requirements
ii. Background on Tailoring Framework
iii. Summary of Proposal
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B. Changes to Capital Planning
Requirements for Firms Subject to
Category IV Standards
i. Capital Plan Submissions
ii. Changes to Reporting Requirements
Related to Capital Planning
Requirements
C. Calculation and Timing of the Stress
Capital Buffer Requirement for Firms
Subject to Category IV Standards
D. Changes to Stress Test Rules for Firms
Subject to Category I–IV Standards
i. Business Plan Change Assumption
ii. Changes for Savings and Loan Holding
Companies
iii. Changes to Reporting Requirements
Related to Stress Test Rule Changes
E. Definition of Common Stock Dividend
in Capital Plan Rule
F. Impact Analysis
II. Request for Comment on Board Guidance
on Capital Planning
III. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Solicitation of Comments of Use of Plain
Language
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning,
Stress Testing and Stress Capital Buffer
Requirements
Stress testing is a core element of the
Board’s regulatory framework and
supervisory program for large firms.
Stress testing enables the Board to
assess whether large firms have
sufficient capital to absorb potential
losses and continue lending under
severely adverse conditions. The Board
implemented its capital plan rule,
which requires large firms to develop
and maintain capital plans supported by
robust processes for assessing their
capital adequacy, in 2011.1 The Board
made changes to its capital rule—which
establishes minimum regulatory capital
requirements—in 2013. These changes
address weaknesses observed during the
2008—2009 financial crisis, including
the establishment of a minimum
common equity tier 1 (CET1) capital
requirement and a fixed capital
conservation buffer equal to 2.5 percent
1 Capital Plans, 76 FR 74631 (Dec. 1, 2011).
Originally, as a part of the capital plan rule, the
Federal Reserve could object to a firm’s capital plan
based on a qualitative assessment. A subsequent
rulemaking changed this requirement such that
after CCAR 2020 no firm will be subject to a
potential qualitative objection if the firm
successfully passed several qualitative evaluations.
Amendments to the Capital Plan Rule, 84 FR 8953
(March 13, 2019). All firms subject to the capital
plan rule have successfully passed the required
number of qualitative evaluations such that no
firms are subject to the qualitative objection going
forward. As a result, the proposal would revise the
capital plan rule to remove references to the
qualitative objection.
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Federal Register / Vol. 85, No. 195 / Wednesday, October 7, 2020 / Proposed Rules
of risk-weighted assets.2 Rigorous stress
testing—in conjunction with stronger
capital requirements implemented in
the Board’s capital rule—have
significantly improved the resilience of
the U.S. banking system.3
The Board recently adopted a final
rule (stress capital buffer rule) to
integrate its capital plan rule and capital
rule through the establishment of a
stress capital buffer requirement,
creating a single, risk-sensitive
framework for large banking
organizations.4 To achieve individually
tailored and risk-sensitive capital
requirements for banking organizations
subject to the capital plan rule, the
stress capital buffer rule establishes the
size of a firm’s stress capital buffer
requirement based in part on a
supervisory stress test conducted by the
Federal Reserve.
The stress capital buffer rule included
several changes to the assumptions
embedded in the supervisory stress test,
notably removing the assumption that
firms make all planned common
distributions and excluding material
business plan changes from the stress
capital buffer requirement calculation.
Previously, under the Comprehensive
Capital Analysis and Review (CCAR),
the Board required firms to pre-fund
nine quarters of planned dividends and
share repurchases. Under the stress
capital buffer rule, firms are subject to
a pre-funding requirement of four
quarters of planned dividends. This
approach recognizes the capital rule’s
automatic limitations on capital
distributions while continuing to
promote forward-looking capital
planning and mitigate pro-cyclicality.
Prior to the implementation of the
stress capital buffer rule, the impact of
expected material changes to a firm’s
business plan were incorporated into a
firm’s CCAR results. In order to simplify
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the stress test framework and to reduce
burden, material business plan changes
are not included in the stress capital
buffer calculation. Instead, material
changes to a firm’s business plan
resulting from a merger or acquisition
are incorporated into a firm’s capital
and risk-weighted assets upon
consummation of the transaction.
ii. Background on Tailoring Framework
In October 2019, the Board issued a
final rule that established a revised
framework for applying prudential
standards to large firms to align
prudential standards more closely to a
large firm’s risk profile (tailoring rule).5
The tailoring rule established four
categories of prudential standards and
applies them based on indicators
designed to measure the risk profile of
a firm.6 Table I outlines the scoping
criteria for categories of prudential
standards finalized in the tailoring rule.
TABLE I—SCOPING CRITERIA FOR CATEGORIES OF PRUDENTIAL STANDARDS
Category
U.S. banking organizations
I ..........................
U.S. GSIBs and their depository institution subsidiaries .........
II .........................
$700 billion or more in total assets; or $75 billion or more in cross-jurisdictional activity; and do not meet the criteria for Category I.
$250 billion or more in total assets; or $75 billion or more in weighted short-term wholesale funding, nonbank assets, or offbalance sheet exposure; and do not meet the criteria for Category I or II.
$100 billion or more in total assets; and do not meet the criteria for Category I–III.
III ........................
IV ........................
Foreign banking organizations
N/A.
The tailoring rule made two changes
to the stress testing rules for firms
subject to Category IV standards. First,
the tailoring rule removed the
requirement for firms subject to
Category IV standards to conduct and
publicly disclose the results of
company-run stress tests as defined in
the Board’s stress testing rules. Second,
the tailoring rule changed the frequency
of the supervisory stress test for firms
subject to Category IV standards from
annual to biennial.7 In the tailoring rule,
the Board also foreshadowed that it
intended to provide greater flexibility to
firms subject to Category IV standards to
develop their annual capital plans and
consider additional regulatory reporting
burden relief in a separate proposal.8
2 See 12 CFR part 217. Large banking
organizations also became subject to a
countercyclical capital buffer requirement, and the
largest and most systemically important firms—
global systemically important bank holding
companies, or GSIBs—became subject to an
additional capital buffer based on a measure of their
systemic risk, the GSIB surcharge. See Regulatory
Capital Rules: Implementation of Risk-Based
Capital Surcharges for Global Systemically
Important Bank Holding Companies, 80 FR 49082
(Aug. 14, 2015).
3 The common equity capital ratios of firms
subject to CCAR have more than doubled since
2009. Combined, these firms hold more than $1
trillion of common equity tier 1 capital and are
substantially more resilient than they were ten
years ago.
4 See Regulations Q, Y, and YY: Regulatory
Capital, Capital Plan, and Stress Test Rules, 85 FR
15576 (March 18, 2020).
5 See Prudential Standards for Large Bank
Holding Companies, Savings and Loan Holding
Companies, and Foreign Banking Organizations, 84
FR 59032 (Nov. 1, 2019).
6 The final rule increased the threshold for
general application of these standards from $50
billion to $100 billion in total consolidated assets.
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iii. Summary of Proposal
The Board is issuing this proposal to
conform its capital plan rule, stress
capital buffer requirements, and capital
planning requirements by modifying
them to be consistent with its tailoring
framework. Most of the significant
modifications included in the proposal
have been previously described by the
Board, notably in its tailoring rule and
stress capital buffer rule. With respect to
firms subject to Category IV standards,
in order to align the capital plan rule
requirements with the tailoring rule
changes, this proposal would generally
remove the capital plan rule
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requirement to calculate forwardlooking projections of capital under
scenarios provided by the Board. In
addition, for firms subject to Category IV
standards, the proposal would update
the frequency of calculating the portion
of the stress capital buffer that is
calculated as the decline in the CET1
ratio to every other year. These firms
would have the ability to elect to
participate in the supervisory stress
test—and receive an updated stress
capital buffer requirement—in a year in
which they would not generally be
subject to the supervisory stress test.
The proposal would also include
changes to the Board’s supervisory
stress test and the company-run stress
7 Both changes related to stress testing rules for
firms subject to Category IV standards—(1) to
remove the requirement to conduct and to publicly
disclose the results of the company-run stress tests;
and (2) to change the frequency of the supervisory
stress test to biennial—were consistent with
amendments to section 165 of the Dodd-Frank Act
made by the Economic Growth, Regulatory Relief
and Consumer Protection Act (EGRRCPA). See
Public Law 115–174, 132 Stat. 1296 (2018).
8 See 85 FR 15576, 15593, fn 57.
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Federal Register / Vol. 85, No. 195 / Wednesday, October 7, 2020 / Proposed Rules
test rules.9 The proposal would clarify
the assumptions related to business plan
changes, introduce revisions to the
capital action assumptions, and would
require certain savings and loan holding
companies to publicly disclose their
stress tests results in a parallel manner
as bank holding companies.
B. Changes to Capital Planning
Requirements for Firms Subject to
Category IV Standards
Consistent with Section 401(e) of the
EGRRCPA, the tailoring rule adjusted
the frequency of supervisory stress
testing for firms subject to Category IV
standards to every other year and
eliminated the requirement to conduct
the company-run stress tests under the
scenarios provided by the Board. This
adjustment reflected the lower risk
profile of a firm subject to Category IV
standards relative to a firm subject to
Category I–III standards. The proposal
would update the terminology in the
capital plan rule to conform to the
terminology used in the tailoring
framework by removing the term ‘‘large
and noncomplex bank holding
company’’ and replacing it with the
definition of a firm subject to Category
IV standards and tailor the requirements
in the capital plan rule that currently
apply to these firms, as discussed
below.
i. Capital Plan Submissions
Under the proposal, firms subject to
Category IV standards would be
required to submit a capital plan to the
Board annually but would generally no
longer be required to calculate estimates
of projected revenues, losses, reserves,
and pro forma capital levels (effectively
a form of stress testing) using scenarios
provided by the Board. Such firms
would continue to be required to
provide a forward-looking analysis of
income and capital levels under
expected and stressful conditions. The
projections are required to be tailored to
and sufficiently capture the firm’s
exposures, activities, and idiosyncratic
risks in their capital plans.10 This
includes projections under a scenario
designed by the firm that stresses the
specific vulnerabilities of the firm’s risk
profile and operations. This scenario
should incorporate stressful conditions
and events that could adversely affect
the firm’s capital adequacy. Under
certain circumstances, based on the
9 See
12 CFR part 252, subparts E and F.
analysis should cover an appropriate
period (usually a period of at least two years) to
capture the relevant risks to a firm. A firm should
estimate losses, revenues, expenses, and capital
using sound methods that relate macroeconomic
and other risk drivers to its estimates.
10 The
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macroeconomic outlook or based on the
firm’s risk profile, financial condition or
corporate structure, the proposal would
allow the Board to require a firm subject
to Category IV standards to submit a
capital plan under scenarios provided
by the Board. This would ensure that
the Board could evaluate the firm’s
forward-looking capital position using a
scenario designed for the specific
circumstances of the macro-economy or
the firm’s risk profile.
In addition, firms subject to Category
IV standards would no longer be
required to submit to the Federal
Reserve forward-looking projections in
the granular form prescribed by the
regulatory report FR Y–14A, Schedule
A—Summary. This schedule includes
over five hundred capital, revenue,
expense, and balance sheet line items
that a firm must project over a ninequarter planning horizon. In this way,
the firm’s reporting requirements would
be updated to reflect the tailoring rule’s
elimination of the company-run stress
test requirement for a firm subject to
Category IV standards, permitting the
firm to estimate its capital needs using
scenarios reflective of its operations and
to adjust the granularity of its stress
projections to better align with the
materiality of the firm’s business lines.
The proposal would provide firms
flexibility in the granularity of their
forward-looking projections as they
would no longer be required to submit
the specific line items outlined in the
FR Y–14A, Schedule A—Summary. As
the projections would no longer require
the same level of granularity, firms
would also have more flexibility in the
design of their individual stress
scenarios.
While the proposal would no longer
require firms subject to Category IV
standards to include certain elements in
their capital plans, all banking
organizations, regardless of size and
complexity, are expected to have the
capacity to analyze the potential impact
of adverse outcomes on their financial
condition, including on capital. Risk
management practices should be
tailored to the risk and complexity of
the individual institution, and should
include practices to identify and assess
a firm’s sensitivity to unexpected
adverse outcomes before they occur.
The Federal Reserve would continue to
conduct an annual assessment of the
capital plan of a firm subject to Category
IV standards as part of its ongoing
supervisory process, and the results of
this assessment would continue to be an
input into the firm’s capital planning
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and positions component of the Large
Financial Institution Rating System.11
ii. Changes to Reporting Requirements
Related to Capital Planning
Requirements
The proposal includes several
modifications to the FR Y–14 reporting
requirements for firms subject to
Category IV standards to align with the
proposed changes to company-run stress
testing requirements. The Board is
proposing that firms subject to Category
IV standards would no longer be
required to report FR Y–14A Schedule
A—Summary, Schedule B—Scenario,
Schedule F—Business Plan Changes,
and Appendix A—Supporting
Documentation, which are used to
report a firm’s company-run stress test
results. Firms subject to Category IV
standards would be required to
complete all other FR Y–14A schedules,
as they are either necessary for the
Board to run its supervisory stress test
or a required element of the firm’s
capital plan.12 In order to be able to
assess whether a firm’s planned capital
distributions included in its capital plan
would be consistent with any effective
capital distribution limitations that
would apply under the firm’s BHC
baseline projections, as required by the
capital plan rule, the proposal would
add four line items to the FR Y–14A
Schedule C—Regulatory Capital
Instruments, as this schedule is filed by
all firms subject to the capital plan rule.
The line items would be the projections
of Common Equity Tier 1 capital ratio,
Tier 1 capital ratio, Total capital ratio
and net income under the BHC baseline
scenario. These line items would allow
the Federal Reserve to confirm
compliance with the capital plan rule
for firms subject to Category IV
standards.
The detailed balance sheet
information that would continue to be
collected on a monthly and quarterly
basis from firms subject to Category IV
standards on the FR Y–14Q and FR Y–
14M is necessary to maintain the
integrity of the stress tests, monitor
financial stability, and effectively
supervise those firms.
Question 1: What are the advantages
and disadvantages of requiring firms
subject to Category IV standards to
continue to provide the Board with
forward-looking analysis of income and
capital levels under expected and
11 See SR Letter 19–3, Large Financial Institution
(LFI) Rating System (Feb. 26, 2019).
12 In particular, firms subject to Category IV
standards would be required to complete the FR Y–
14A, Schedule C—Regulatory Capital Instruments,
Schedule E—Operational Risk, and the Collection
of Supplemental CECL Information.
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stressful conditions? What, if any,
alternative approaches should the Board
consider and why?
Question 2: Are there potential
alternatives or improvements to other
capital planning requirements for firms
subject to Category IV standards that the
Board should consider in light of the
Board’s elimination of the requirement
for firms subject to Category IV
standards to conduct and publicly
disclose the results of company-run
stress tests? Provide specific suggestions
and rationale.
Question 3: What are the advantages
and disadvantages of requiring firms
subject to Category IV standards to
submit some, but not all, aspects of the
Y–14A Schedule A—Summary to the
Federal Reserve? For example, should
these firms continue to be required to
submit top-line items under their BHC
stress scenario, such as level of capital,
net income or risk-weighted assets, and
if so why?
Question 4: What alternatives could
the Board use to collect information
related to a firm’s capital plan and
forward-looking projections under a
range of conditions?
C. Calculation and Timing of the Stress
Capital Buffer Requirement for Firms
Subject to Category IV Standards
Firms subject to Category IV standards
are currently subject to supervisory
stress testing on a two-year cycle. Under
the proposal, the portion of the stress
capital buffer requirement that is
calculated as the decline in the CET1
ratio for such firms would be calculated
every other year. During a year in which
a firm subject to Category IV standards
does not undergo a supervisory stress
test, the firm would receive an updated
stress capital buffer requirement that
reflects the firm’s updated planned
common stock dividends.
For example, a firm subject to
Category IV standards receives a stress
capital buffer requirement on June 30,
2022, equal to 3.5 percent and the buffer
is composed of a 3.0 percent decline in
CET1 ratio in the stress test and 0.5
percent from four quarters of planned
dividends as a percent of risk-weighted
assets. That requirement would be
effective from October 1, 2022, to
September 30, 2023. The following year,
the firm would provide the Federal
Reserve with an updated capital plan by
April 5, 2023. If, for example, the firm
planned to increase its dividends to
equal 0.6 percent of risk-weighted
assets, then its new stress capital buffer
requirement of 3.6 percent would
become effective on October 1, 2023,
and would remain effective until
September 30, 2024.
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A firm subject to Category IV
standards may prefer to receive an
updated stress capital buffer
requirement in a year in which it would
not generally be subject to the
supervisory stress test. To provide these
firms the flexibility to ensure they
receive stress capital buffer
requirements that are reflective of their
risk profiles, the proposal would allow
a firm subject to Category IV standards
to elect to participate in the supervisory
stress test in a year in which the firm
would not normally be subject to the
supervisory stress test. To ensure the
Board is provided sufficient notice that
the firm is participating in the
supervisory stress test, the firm would
need to make its election by December
31 of the year preceding the year in
which it seeks to opt in to the
supervisory stress test by providing
written notice to the Board and
appropriate Federal Reserve Bank. Such
a firm would be a full participant in that
year’s supervisory stress test, including
disclosure of the firm’s supervisory
stress test results, and would receive an
updated stress capital buffer
requirement like all other firms subject
to the supervisory stress test.
For purposes of calculating the stress
capital buffer requirement in 2021 for a
firm subject to Category IV standards
that elects to participate in the 2021
supervisory stress test, the proposal
includes transitional procedures such
that the firm could notify the Board
until February 15, 2021. These
transitional arrangements would apply
only for purposes of the 2021 stress test
cycle.
In addition, as under the current
capital plan rule, the Board would
continue to have the ability to require a
firm to resubmit its capital plan if,
among other reasons, the Board
determines that there has been or will
likely be a material change in the firm’s
risk profile, financial condition, or
corporate structure, or if changes to
financial market conditions or the
macroeconomic outlook require the use
of updated scenarios. If a firm resubmits
its capital plan, the Board may
recalculate its stress capital buffer
requirement and may use a new
severely adverse scenario. These
requirements help ensure that a firm’s
stress capital buffer requirement
remains commensurate with its risk
profile.
Question 5: What are the advantages
and disadvantages of updating on an
annual basis the dividend add-on
portion of the stress capital buffer
requirements for firms subject to
Category IV standards? Should the
Board consider a shorter or longer time
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period for updating the dividend add-on
portion of the stress capital buffer
requirement, and if so, why?
Question 6: What are the advantages
and disadvantages of allowing a firm
subject to Category IV standards to
receive an updated stress capital buffer
requirement in a year in which the firm
is not subject to the supervisory stress
test if the firm elects to undergo a
supervisory stress test, including the
proposed method and timing of the
election?
Question 7: What are the advantages
and disadvantages of requiring a firm
subject to Category IV standards to be a
full participant (i.e., the Board would
disclose the results of its supervisory
stress test results for the firm), in that
year’s supervisory stress test in order to
receive an updated stress capital buffer
requirement?
Question 8: This proposal includes
February 15, 2021 as the deadline for a
firm subject to Category IV standards to
notify the Board of its intention to
participate in the 2021 supervisory
stress test. What are the advantages and
disadvantages of including February 15,
2021 as the deadline for this notification
to participate in the 2021 supervisory
stress test for such a firm? What other
date(s) or timeline should the Board
consider in order to ensure such a firm
can elect to participate in the 2021
supervisory stress test? For example,
what would be the advantages and
disadvantages of including April 5,
2021, the date on which these firms
must submit their capital plans to the
Federal Reserve, as the deadline for
notification to participate in the 2021
supervisory stress test?
D. Changes to Stress Test Rules for
Firms Subject to Category I–IV
Standards
i. Business Plan Change Assumption
For purposes of the supervisory stress
test, the Board does not incorporate the
impact of expected changes to a firm’s
business plan that are likely to have a
material impact on the firm’s capital
adequacy and funding profile (material
business plan changes) in balance sheet,
risk-weighted asset, and capital
projections. In order to ensure
alignment in the assumptions in the
supervisory and company-run stress
tests, the proposal would clarify that the
Board and firms would exclude impacts
of unconsummated material business
plan changes in the supervisory and
company-run stress tests conducted
pursuant to the Dodd-Frank Act. As this
assumption would be reflected in the
stress test rules, the proposal would
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remove the corresponding section from
the Stress Testing Policy Statement.
A firm would continue to be required
to include in its capital plan a
discussion of any expected changes to
the firm’s business plan that are likely
to have a material impact on the firm’s
capital adequacy or liquidity. A firm
would also continue to be required to
incorporate impacts of material business
plan changes in projections of income
and capital levels under all scenarios
required for purposes of capital
planning. This requirement would help
to ensure that a firm appropriately plans
for changes to its business. If a material
business plan change resulted in or
would result in a material change in a
firm’s risk profile, the firm would still
be required to resubmit its capital plan.
ii. Changes for Savings and Loan
Holding Companies
As a part of the tailoring rule, covered
savings and loan holding companies
were made subject to the Board’s
supervisory stress test and company-run
stress test requirements in the same
manner as comparable bank holding
companies.13 Currently, the capital
action assumptions in the stress test
rules for covered savings and loan
holding companies are different than
those for comparable bank holding
companies because they were not
included in the stress capital buffer rule,
in which the Board updated the
distribution assumptions for bank
holding companies. The proposal would
amend the stress test rules for covered
savings and loan holding companies so
the capital distribution assumptions for
covered savings and loan holding
companies match the assumptions for
comparable bank holding companies.
The proposal would also include a
change to address an omission in the
Board’s company-run stress test
requirements to ensure that all savings
and loan holding companies with more
than $250 billion in assets are required
to publicly disclose the results of their
stress tests, similar to the requirement
for bank holding companies. This would
ensure the requirements are consistent
with the Dodd-Frank Act.
The Board is also considering whether
to apply the capital planning and stress
capital buffer requirements to large
covered savings and loan holding
13 A covered savings and loan holding company
must have less than 25 percent of its total
consolidated assets in insurance underwriting
subsidiaries (other than assets associated with
insurance underwriting for credit), must not have
a top-tier holding company that is an insurance
underwriting company, and must derive a majority
of its assets or revenues from activities that are
financial in nature under section 4(k) of the Bank
Holding Company Act. 12 CFR 217.2.
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companies that currently apply to large
bank holding companies and is posing
the following questions for public
comment.
Question 9: As outlined in the
preamble of the Board’s final tailoring
rule, large covered savings and loan
holding companies engage in many of
the same activities and face similar risks
as large bank holding companies,
including, but not limited to, deposit
taking, lending, broker-dealer activities,
credit card and margin lending, and
certain complex nonbanking activities.
The Board’s tailoring rule applied the
category framework to covered savings
and loan holding companies to help
identify risks that warrant more
sophisticated capital planning, more
frequent company-run stress testing,
and greater supervisory oversight
through supervisory stress testing, to
further the safety and soundness of
these banking organizations. However,
the requirements in the capital plan rule
do not currently apply to large covered
savings and loan holding companies.
What would be the advantages and
disadvantages of applying the
requirements in the capital plan rule,
including the stress capital buffer
requirement, to large covered savings
and loan holding companies in the same
manner as they apply to large bank
holding companies? To what extent
does the public consider covered
savings and loan holding companies to
be close substitutes to similarly situated
bank holding companies?
Question 10: If the Board were to
apply capital planning and stress capital
buffer requirements to large covered
savings and loan holding, what
adjustments, if any, should the Board
make to those requirements as
compared to the requirements that
apply to large bank holding companies
and why? For example, should the
Board consider any adjustments to the
mandatory elements of the capital plan,
the calculation of the stress capital
buffer requirement, regulatory reporting
requirements or any other aspect capital
planning and stress capital buffer
requirements in light of the risk profile
of large covered savings and loan
holding companies relative to large bank
holding companies?
Question 11: What other approaches
to applying capital planning
requirements to large covered savings
and loan holding companies should the
Board consider and why? For example,
what would be the advantages and
disadvantages of allowing large covered
savings and loan holding companies to
opt-in to being required to comply with
the capital planning and stress capital
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buffer requirements that currently apply
to large bank holding companies?
Question 12: Under the Board’s
capital plan rule for large bank holding
companies, a firm that is subject to the
capital plan rule and meets the asset
threshold on or before September 30 of
a calendar year must comply with the
requirements of the rule beginning on
January 1 of the next calendar year.
Similarly, such a firm that meets the
asset threshold after September 30 of a
calendar year must comply with the
requirements of the rule beginning on
January 1 of the second calendar year
after the firm meets the asset threshold.
What elements of this approach to a
transition period are appropriate for
applying capital planning requirements
to large covered savings and loan
holding companies?
iii. Changes to Reporting Requirements
Related to Stress Test Rule Changes
The proposal would update the FR Y–
14 reporting requirements for firms
subject to Category I–IV standards to
conform with changes made to the stress
test rules. In order to reflect the
exclusion of material business plan
changes in company-run stress test
projections, the proposal would create
two sub-schedules for all items on the
FR Y–14A, Schedule A—Summary: (1)
DFAST, where a firm would not
incorporate the effects of business plan
changes and (2) CCAR, where a firm
would incorporate the effects of
business plan changes. Firms would
report projections on the DFAST subschedule under the scenarios provided
by the Federal Reserve, and firms would
report projections on the CCAR subschedule under expected conditions and
under a range of scenarios, including
the supervisory severely adverse
scenario provided by the Federal
Reserve and at least one BHC baseline
and one BHC stress scenario. To more
accurately reflect the types of firms
subject to the stress test reporting
requirements, the proposal would also
rename the BHC baseline scenario and
BHC stress scenario to Firm baseline
scenario and Firm stress scenario,
respectively.
Firms subject to Category I–III
standards would be required to report a
version of FR Y–14A, Schedule A.1.a—
Income Statement, Schedule A.1.b—
Balance Sheet, Schedule A.1.c.1—
Standardized RWA, Schedule A.1.d—
Capital, Schedule A.2.a—Retail Balance
and Loss Projections, Schedule A.3—
AFS/HTM Securities, Schedule A.4—
Trading, Schedule A.5—Counterparty
Credit Risk, Schedule A.6—Operational
Risk, and Schedule A.7—Pre-Provision
Net Revenue, that incorporates the
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effects of business plan changes, as well
as a version of these schedules and
items that does not incorporate these
effects. For Schedule A.1.d, firms
subject to Category I–III standards
would no longer report the supervisory
baseline scenario on the Capital—CCAR
sub-schedule. Firms subject to Category
I–IV standards would be required to
report a version of FR Y–14A Schedule
C that incorporates the effects of
material business plan changes and a
version that does not incorporate these
effects. As described above, firms
subject to Category IV standards would
not be required to submit the FR Y–14A,
Schedule A—Summary. Given the
changes made to the FR Y–14A,
Schedule A—Summary, firms would no
longer be required to submit the
supervisory baseline scenario for FR Y–
14A, Schedule F—Business Plan
Changes.
Question XX: What are the advantages
and disadvantages of the Board
requiring firms subject to Category IV
standards to submit the FR Y–14A,
Schedule A—Summary in response to
changes based on the macroeconomic
outlook or based on the firm’s risk
profile, financial condition or corporate
structure?
E. Definition of Common Stock
Dividend in Capital Plan Rule
A component of a firm’s stress capital
buffer requirement is the dividend addon, which is based on planned
dividends during projected quarters four
through seven of the planning horizon.
As noted above, the dividend add-on
promotes forward-looking dividend
planning and mitigates the
procyclicality of the Board’s stress
testing framework. The capital plan rule
does not define common stock
dividends. However, the FR Y–14A
defines dividends by referencing the
definition of dividend in the Glossary to
the FR Y–9C instructions. That
definition provides, among other things,
that cash dividends are ‘‘payments of
cash to shareholders in proportion to
the number of shares they own.’’ Using
the definition of dividends on the FR Y–
9C, in 2019 dividends as a share of riskweighted assets was around 50 basis
points.
The Board has observed different
practices regarding the classification of
dividends and share repurchases. For
example, certain U.S. intermediate
holding companies of foreign banking
organizations have classified
distributions to their parent companies
as dividends, while other U.S.
intermediate holding companies have
classified similar distributions as nondividend payouts. Decisions by firm
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regarding classifications may depend,
among other things, whether the
distribution is paid out of the firm’s
retained earnings.
The Board is therefore seeking
comment on, but not proposing, a
definition for common stock dividends
in the capital plan rule. The definition
of common stock dividend could be
aligned with the definition on the FR Y–
9C and could include payments of cash
to parent organizations irrespective of
whether the amount paid is debited
from the firm’s retained earnings. For
example, a definition of common stock
dividend could be any payment of cash
to shareholders in proportion to the
number of shares they own.
Question 13: What would be the
advantages and disadvantages of
including a definition of common stock
dividends in the capital plan rule? How
should such a definition interact with
the definition of dividends in the
Board’s rules and regulatory reports,
including the FR Y–9C and the FR Y–
14A/Q/M? What would be the
advantages and disadvantages of
aligning the definition of dividends
across the Board’s rules and regulatory
reports? Please include a discussion of
the materiality of including this
definition.
Question 14: What are the advantages
and disadvantages of the definition
discussed above? What adjustments
should the Board consider to this
definition and why? Are there any
special considerations the Board should
consider with regards to U.S.
intermediate holding companies?
F. Impact Analysis
The changes in the proposal would
not affect the calculation of capital
requirements. The proposal would not
change the calculation of capital
requirements, including the stress
capital buffer requirement, for firms
subject to Category IV standards. The
regulatory reporting aspects of the
proposal would introduce some
additional compliance burden on firms
subject to Category I through III
standards, while significantly reducing
compliance burden on firms subject to
Category IV standards.
II. Request for Comment on Board
Guidance on Capital Planning
Sufficient capital resources are central
to a firm’s ability to absorb unexpected
losses and continue to lend to
creditworthy businesses and consumers.
Therefore, a firm’s processes for
managing and allocating its capital
resources are critical to its financial
strength and resiliency, as well as to the
stability and effective functioning of the
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U.S. financial system. Over the past
decades, the Board has issued guidance
related to its supervisory expectations
for firms’ capital planning. The Board
has tailored expectations for sound
capital planning depending on the size,
scope of operations, activities, and
systemic importance of a firm.
The Board is requesting comment on
all aspects of its guidance on capital
planning for firms of all sizes (as
delineated below), consistent with its
ongoing practice of reviewing its
policies to ensure that they are having
their intended effect. Certain aspects of
the guidance have not been updated
since the 2007–2008 financial crisis.
The revisions made to the Board’s
regulations in the recent tailoring and
stress capital buffer rules and
experiences with capital planning
during the Coronavirus Disease 2019
event (COVID event) also motivate
seeking public input at this time.
The Board’s key capital planning
guidance includes supervision and
regulation (SR) letters, ‘‘Federal Reserve
Supervisory Assessment of Capital
Planning and Positions for LISCC Firms
and Large and Complex Firms,’’ 14
‘‘Federal Reserve Supervisory
Assessment of Capital Planning and
Positions for Large and Noncomplex
Firms,’’ 15 ‘‘Applying Supervisory
Guidance and Regulations on the
Payment of Dividends, Stock
Redemptions, and Stock Repurchases at
Bank Holding Companies,’’ 16 and the
‘‘Policy Statement on the Payment of
Cash Dividends.’’ 17 The Board also
encourages feedback on any other
aspects of its guidance that relate to
capital planning.
Question 15: What if any changes
should the Board consider with respect
to the scope of application of its existing
capital planning guidance and why?
What if any considerations regarding
firms’ risk profiles should be factored
14 SR letter 15–18, ‘‘Federal Reserve Supervisory
Assessment of Capital Planning and Positions for
LISCC Firms and Large and Complex Firms,’’
December 18, 2015, See https://
www.federalreserve.gov/supervisionreg/srletters/
sr1518.htm.
15 SR letter 15–19, ‘‘Federal Reserve Supervisory
Assessment of Capital Planning and Positions for
Large and Noncomplex Firms,’’ December 18, 2015,
See https://www.federalreserve.gov/supervisionreg/
srletters/sr1519.htm.
16 SR letter 09–4, ‘‘Applying Supervisory
Guidance and Regulations on the Payment of
Dividends, Stock Redemptions, and Stock
Repurchases at Bank Holding Companies’’,
February 24, 2009, See https://
www.federalreserve.gov/boarddocs/srletters/2009/
SR0904.htm.
17 ‘‘UNSOUND BANKING PRACTICES—Cash
Dividends Not Fully Covered by Earnings’’
November 14, 1985. See https://
www.federalreserve.gov/boarddocs/srletters/2009/
sr0904a2.pdf.
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into the applicability of capital planning
guidance and why? Factoring in the
applicability of the Board’s regulations,
what if any aspects of the Board’s
capital planning guidance should be
changed or tailored differently based on
firms’ risk profiles and why?
Question 16: The Board is interested
in comment on whether changes are
appropriate to its supervisory guidance
on capital planning, in light of
experience with the guidance and
factors such as the recent tailoring and
stress capital buffer rules and other
applicable regulatory requirements.
Please describe appropriate changes and
the rationale behind them.
Question 17: How should existing
guidance on capital planning be
adapted, if at all, to reflect times of
heightened and prolonged uncertainty?
For example, how has the COVID event
influenced firms’ capital planning and
loss estimation processes? How should
these types of adjustments be reflected
in the Board’s guidance on capital
planning?
Question 18: How should the Board
weigh the potential benefits of revising
its capital planning guidance against the
potential burdens, given the current
economic environment? How could any
such burdens be mitigated?
Question 19: How well does the
existing guidance on capital planning
reflect sound practices for managing
risks across firms of various risk profiles
and promote safety and soundness?
With a goal of balancing clarity and
flexibility, how could the guidance be
improved in its application to firms
with differing risk profiles? What
aspects of industry practice or other
developments should be considered in
any potential updates to this guidance,
and how?
III. Administrative Law Matters
A. Paperwork Reduction Act
Certain provisions of the proposed
rule contain ‘‘collections of
information’’ within the meaning of the
Paperwork Reduction Act of 1995 (PRA)
(44 U.S.C. 3501–3521). The Board may
not conduct or sponsor, and a
respondent is not required to respond
to, an information collection unless it
displays a currently valid Office of
Management and Budget (OMB) control
number. The Board reviewed the
proposed rule under the authority
delegated to the Board by OMB.
The proposed rule would revise
collection of information requirements
subject to the PRA. The Board proposes
to revise the FR Y–14, FR LL, and the
FR YY to reflect the changes proposed
in the proposed rule. The OMB control
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numbers are 7100–0341, 7100–NEW,
and 7100–0350.
Comments are invited on:
a. Whether the collections of
information are necessary for the proper
performance of the Federal Reserve’s
functions, including whether the
information has practical utility;
b. The accuracy or the estimate of the
burden of the information collections,
including the validity of the
methodology and assumptions used;
c. Ways to enhance the quality,
utility, and clarity of the information to
be collected;
d. Ways to minimize the burden of the
information collections on respondents,
including through the use of automated
collection techniques or other forms of
information technology; and
e. Estimates of capital or startup costs
and costs of operation, maintenance,
and purchase of services to provide
information.
All comment will become a matter of
public record. Comments on aspects of
this proposal that may affect reporting,
recordkeeping, or disclosure
requirements and burden estimates
should be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets NW,
Washington, DC 20551. A copy of the
comments may also be submitted to the
OMB desk officer by mail to U.S. Office
of Management and Budget, 725 17th
Street NW, #10235, Washington, DC
20503 or by facsimile to 202–395–5806,
Attention, Agency Desk Officer.
Proposed Revisions, With Extension for
Three Years, of the Following
Information Collections
(1) 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 covered savings and loan holding
companies (SLHCs) 18 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
18 Covered SLHCs are those which are not
substantially engaged in insurance or commercial
activities. For more information, see the definition
of ‘‘covered savings and loan holding company’’
provided in 12 CFR 217.2 and 12 CFR 238.2(ee).
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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quarterly on the firm’s Consolidated
Financial Statements for Holding
Companies (FR Y–9C; OMB No. 7100–
0128); 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.
Estimated number of respondents: FR
Y–14A/Q: 36; FR Y–14M: 34.19
Estimated average hours per response:
FR Y–14A: 1,250 hours; FR Y–14Q:
2,143 hours; FR Y–14M: 1,072 hours; FR
Y–14 On-going Automation Revisions:
480 hours; FR Y–14 Attestation Ongoing Attestation: 2,560 hours.
Estimated annual burden hours: FR
Y–14A: 45,000 hours; FR Y–14Q:
308,592 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 annual 20 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.21
• The quarterly FR Y–14Q collects
granular data on various asset classes,
including loans, securities, trading
assets, and PPNR for the reporting
period.
19 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.
20 In certain circumstances, a BHC or IHC may be
required to re-submit its capital plan. See 12 CFR
225.8(e)(4). Firms that must re-submit their capital
plan generally also must provide a revised FR Y–
14A in connection with their resubmission.
21 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–14A/Q/M
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. 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–14A/Q/M
forms as part of a separate proposal. See 84 FR
59032, 59063.
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• 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 provide the Board
with the information needed to help
ensure that large firms have strong,
firm-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 DoddFrank 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: As previously
described in this proposal, the Board is
proposing to make several FR Y–14
revisions. Certain revisions would only
be applicable to firms subject to
Category IV or Category I–III standards,
while other revisions would be
applicable to all BHCs and IHCs. All
revisions are proposed to be effective for
data as-of December 31, 2020.
Firms Subject to Category IV Standards
As a result of the proposed changes to
company-run stress testing
requirements, the Board is proposing
that firms subject to Category IV
standards would no longer be required
to report FR Y–14A Schedule A—
Summary, Schedule B—Scenario,
Schedule F—Business Plan Changes,
and Appendix A—Supporting
Documentation, which are used to
report a firm’s company-run stress test
results. However, firms subject to
Category IV standards would be
required to complete all remaining FR
Y–14A schedules, as they are necessary
for the Board to run its supervisory
stress test. The Board believes that the
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detailed balance sheet information that
would continue to be collected on a
monthly and quarterly basis from firms
subject to Category IV standards on the
FR Y–14Q and FR Y–14M is crucial for
maintaining the integrity of the stress
tests, monitoring financial stability, and
supervising those firms.
Firms Subject to Category I–III
Standards
As previously outlined, firms subject
to Category I–III standards would
continue to report the FR Y–14A
Schedule A—Summary. To conform the
FR Y–14 reports with the stress test
assumption changes made per the stress
capital buffer, the Board is proposing to
create two sub-schedules for all items
on the FR Y–14A, Schedule A: (1)
DFAST, where a firm would not
incorporate the effects of business plan
changes and (2) CCAR, where a firm
would incorporate the effects of
business plan changes. Specifically,
firms subject to Category I–III standards
would be required to report a version of
FR Y–14A, Schedule A.1.a—Income
Statement, Schedule A.1.b—Balance
Sheet, Schedule A.1.c.1—Standardized
RWA, Schedule A.1.d—Capital,
Schedule A.2.a—Retail Balance and
Loss, Schedule A.3—AFS/HTM
Securities, Schedule A.4—Trading,
Schedule A.5—Counterparty Credit
Risk, Schedule A.6—Operational Risk,
and Loss Projections, and Schedule
A.7—Pre-Provision Net Revenue, that
incorporates the effects of business plan
changes, as well as a version of these
schedules and items that does not
incorporate these effects. For Schedule
A.1.d, firms would continue to report
two sub-schedules with different capital
actions, along with the income and
balance sheet information reported in
the appropriate sub-schedule. In
addition, firms would only be required
to report FR Y–14A, Schedule F under
the Firm baseline and supervisory
severely adverse scenarios.
All BHCs and IHCs
All BHCs and IHCs would still be
required to report FR Y–14A, Schedule
C—Regulatory Capital Instruments, and
the stress test assumption changes made
per the stress capital buffer rule create
a need for firms to provide certain data
excluding the impact of business plan
changes. As a result, the Board is
proposing to create two sub-schedules
for all items on the FR Y–14A, Schedule
C: (1) SCB, where a firm would not
incorporate the effects of business plan
changes and (2) CCAR, where a firm
would incorporate the effects of
business plan changes. Specifically, all
BHCs and IHCs would be required to
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report a version of FR Y–14A, Schedule
C, that incorporates the effects of
business plan changes, as well as a
version of this schedule and items that
does not incorporate these effects.
In order to be able to assess whether
a firm’s planned capital distributions
included in its capital plan would be
consistent with any effective capital
distribution limitations that would
apply under the firm’s baseline
projections, as required by the capital
plan rule, the Board is also proposing to
add four items to FR Y–14A, Schedule
C. These items would capture baseline
projections of a firm’s common equity
tier 1 capital ratio, tier 1 capital ratio,
total capital ratio, and net income.
Other Revisions
As previously mentioned, the Board is
proposing to replace the current
definition of ‘‘large and noncomplex
bank holding company’’ with the
definition of a firm subject to Category
IV standards. Therefore, the Board is
proposing to make this change across
the FR Y–14A/Q/M reports. In addition,
to more accurately reflect the types of
firms subject to the stress test reporting
requirements, the Board is proposing to
rename the ‘‘BHC baseline scenario’’
and ‘‘BHC stress scenario’’ to ‘‘Firm
baseline scenario’’ and ‘‘Firm stress
scenario,’’ respectively.
(2) Report title: Reporting and
Disclosure Requirements Associated
with Regulation LL.
Agency form number: FR LL.
OMB control number: 7100–NEW.
Frequency: Biennial.
Affected Public: Businesses or other
for-profit.
Respondents: Savings and loan
holding companies.
Estimated number of respondents: 1.
Estimated average hours per response:
Reporting § 238.162(b)(1)(ii)—80;
Disclosure section 238.146 (initial
setup)—150; Disclosure § 238.146—60.
Estimated annual burden hours:
Reporting § 238.162(b)(1)(ii)—40;
Disclosure § 238.146 (initial setup)—75;
Disclosure § 238.146—30.
Legal authorization and
confidentiality: This information
collection is authorized by section 10 of
the Home Owners’ Loan Act (HOLA)
and section 165(i)(2) of the Dodd-Frank
Act. The obligation of covered
institutions to report this information is
mandatory. This information would be
disclosed publicly and, as a result, no
issue of confidentiality is raised.
Current Actions: The proposed rule
includes amendments to § 238.146 of
Regulation LL meant to ensure that
certain savings and loan holding
companies are required to publicly
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disclose their stress tests results. Under
the proposal, a covered savings and loan
holding company that is subject to a
supervisory stress test under § 238.132
of Regulation LL would be required to
publicly disclose a summary of the
results of the stress test required under
§ 238.143 of Regulation LL within the
period that is 15 calendar days after the
Board publicly discloses the results of
its supervisory stress test of the covered
company pursuant to § 238.134 of
Regulation LL, unless that time is
extended by the Board in writing, while
a covered savings and loan holding
company that is not subject to a
supervisory stress test under § 238.132
of Regulation LL would be required to
publicly disclose a summary of the
results of the stress test required under
§ 238.143 of Regulation LL in the period
beginning on June 15 and ending on
June 30 in the year in which the stress
test is conducted, unless that time is
extended by the Board in writing.
(3) Report title: Reporting,
Recordkeeping, and Disclosure
Requirements Associated with
Regulation YY (Enhanced Prudential
Standards).
Agency Form Number: FR YY.
OMB Control Number: 7100–0350.
Frequency: Annual, semiannual,
quarterly.
Affected Public: Businesses or other
for-profit.
Respondents: State member banks,
U.S. bank holding companies, nonbank
financial companies, foreign banking
organizations, U.S. intermediate holding
companies, foreign saving and loan
holding companies, and foreign
nonbank financial companies
supervised by the Board.
Estimated number of respondents: 23
U.S. bank holding companies with total
consolidated assets of $100 billion or
more, 4 U.S. bank holding companies
with total consolidated assets of $50
billion or more but less than $100
billion, 1 state member bank with total
consolidated assets over $250 billion, 11
U.S. intermediate holding companies
with $100 billion or more in total assets,
23 foreign banking organizations with
total consolidated assets of more than
$50 billion but less than $100 billion; 23
foreign banking organizations with total
consolidated assets of $100 billion or
more but combined U.S. operations of at
least $50 billion but less than $100
billion; 17 foreign banking organizations
with total consolidated assets of $100
billion or more and combined U.S.
operations of $100 billion or more.
Current estimated annual burden:
41,619 hours.
Proposed revisions estimated annual
burden: (13,868) hours.
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Total estimated annual burden:
27,751 hours.
General description of report: Section
165 of the Dodd-Frank Act, as amended
by EGRRCPA, requires the Board to
implement enhanced prudential
standards for bank holding companies
and foreign banking organizations with
total consolidated assets of $250 billion
or more, and provides the Board with
discretion to apply enhanced prudential
standards to certain bank holding
companies and foreign banking
organizations with $100 billion or more,
but less than $250 billion, in total
consolidated assets. The enhanced
prudential standards include risk-based
and leverage capital requirements,
liquidity standards, requirements for
overall risk management (including
establishing a risk committee), stress
test requirements, and debt-to-equity
limits for companies that the Financial
Stability Oversight Council has
determined pose a grave threat to
financial stability.
Current Actions: As described above,
the Board proposes to allow a firm
subject to Category IV standards to elect
to participate in the supervisory stress
test in a year in which the firm would
not normally be subject to the
supervisory stress test. To ensure the
Board is provided sufficient notice that
the firm is participating in the
supervisory stress test, the firm would
need to make its election by December
31 of the year preceding the year in
which it seeks to opt in to the
supervisory stress test by providing
written notice to the Board and
appropriate Federal Reserve Bank. For
purposes of calculating the stress capital
buffer requirement in 2021 for a firm
subject to Category IV standards that
elects to participate in the 2021
supervisory stress test, the proposal
includes transitional procedures such
that the firm could notify the Board after
December 31, 2020, but before the Board
publishes the supervisory scenarios.
B. Regulatory Flexibility Act
The Board is providing an initial
regulatory flexibility analysis with
respect to this proposed rule. The
Regulatory Flexibility Act, 5 U.S.C. 601
et seq., (RFA), requires an agency to
consider whether the rules it proposes
will have a significant economic impact
on a substantial number of small
entities.22 In connection with a
proposed rule, the RFA requires an
22 Under regulations issued by the Small Business
Administration, a small entity includes a depository
institution, bank holding company, or savings and
loan holding company with total assets of $600
million or less and trust companies with annual
receipts of $41.5 million or less.
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agency to prepare an Initial Regulatory
Flexibility Analysis describing the
impact of the rule on small entities or
to certify that the proposed rule would
not have a significant economic impact
on a substantial number of small
entities. An initial regulatory flexibility
analysis must contain (1) a description
of the reasons why action by the agency
is being considered; (2) a succinct
statement of the objectives of, and legal
basis for, the proposed rule; (3) a
description of, and, where feasible, an
estimate of the number of small entities
to which the proposed rule will apply;
(4) a description of the projected
reporting, recordkeeping, and other
compliance requirements of the
proposed rule, including an estimate of
the classes of small entities that will be
subject to the requirement and the type
of professional skills necessary for
preparation of the report or record; (5)
an identification, to the extent
practicable, of all relevant Federal rules
which may duplicate, overlap with, or
conflict with the proposed rule; and (6)
a description of any significant
alternatives to the proposed rule which
accomplish its stated objectives.
The Board has considered the
potential impact of the proposed rule on
small entities in accordance with the
RFA. Based on its analysis and for the
reasons stated below, the Board believes
that this proposed rule will not have a
significant economic impact on a
substantial number of small entities.
Nevertheless, the Board is publishing
and inviting comment on this initial
regulatory flexibility analysis. A final
regulatory flexibility analysis will be
conducted after comments received
during the public comment period have
been considered. The proposal would
also make corresponding changes to the
Board’s reporting forms.
As discussed in detail above, the
proposed rule would amend the capital
rule, capital plan rule, stress testing
rules, and the Stress Testing Policy
Statement. Under the proposed rule, the
Board would remove certain capital
plan requirements to remove companyrun stress test requirements. In addition,
in order to align the stress capital buffer
requirements with the tailoring rule
changes, the proposal would update the
portion of the stress capital buffer that
is calculated as the decline in the CET1
ratio every other year for firms subject
to Category IV standards. The proposal
would include changes to Board’s
supervisory stress test and the companyrun stress test rules. The proposal
would clarify the assumptions related to
business plan changes, introduce a
revision to the capital action
assumptions and include a technical
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change to ensure certain savings and
loan holding companies are required to
publicly disclose their stress tests
results.
The Board has broad authority under
the International Lending Supervision
Act (ILSA) 23 and the PCA provisions of
the Federal Deposit Insurance Act 24 to
establish regulatory capital
requirements for the institutions it
regulates. For example, ILSA directs
each Federal banking agency to cause
banking institutions to achieve and
maintain adequate capital by
establishing minimum capital
requirements as well as by other means
that the agency deems appropriate.25
The PCA provisions of the Federal
Deposit Insurance Act direct each
Federal banking agency to specify, for
each relevant capital measure, the level
at which an IDI subsidiary is well
capitalized, adequately capitalized,
undercapitalized, and significantly
undercapitalized.26 In addition, the
Board has broad authority to establish
regulatory capital standards for bank
holding companies under the Bank
Holding Company Act and the DoddFrank Reform and Consumer Protection
Act (Dodd-Frank Act).27
The proposed rule would apply only
to bank holding companies,
intermediate holding companies and
savings and loan holding companies
with total consolidated assets of at least
$100 billion in total consolidated assets.
The proposed rule would not apply to
any small entities. Further, the proposal
would make changes to the projected
reporting, recordkeeping, and other
compliance requirements of the rule by
proposing to collect information from
firms subject to the capital plan rule.
These changes would not impact small
entities. In addition, the Board is aware
of no other Federal rules that duplicate,
overlap, or conflict with the proposed
changes to the capital rule, capital plan
rule, and stress testing rules. Therefore,
the Board believes that the proposed
rule will not have a significant
economic impact on small banking
organizations supervised by the Board
and therefore believes that there are no
significant alternatives to the proposed
rule that would reduce the economic
impact on small banking organizations
supervised by the Board.
The Board welcomes comment on all
aspects of its analysis. In particular, the
Board requests that commenters
23 12
U.S.C. 3901–3911.
U.S.C. 1831o.
25 12 U.S.C. 3907(a)(1).
26 12 U.S.C. 1831o(c)(2).
27 See, e.g., sections 165 and 171 of the DoddFrank Act (12 U.S.C. 5365 and 12 U.S.C. 5371).
Public Law 111–203, 124 Stat. 1376 (2010).
24 12
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describe the nature of any impact on
small entities and provide empirical
data to illustrate and support the extent
of the impact.
C. Solicitation of Comments of Use of
Plain Language
Section 722 of the Gramm-LeachBliley Act (Pub. L. 106–102, 113 Stat.
1338, 1471, 12 U.S.C. 4809) requires the
federal banking agencies to use plain
language in all proposed and final rules
published after January 1, 2000. The
Board has sought to present the
proposed rule in a simple and
straightforward manner, and invites
comment on the use of plain language.
For example:
• Have we organized the material to
suit your needs? If not, how could the
rule be more clearly stated?
• Are the requirements in the rule
clearly stated? If not, how could the rule
be more clearly stated?
• Do the regulations contain technical
language or jargon that is not clear? If
so, which language requires
clarification?
• Will a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
easier to understand? If so, what
changes will make the regulation easier
to understand?
• Will more, but shorter, sections be
better? If so, which sections should be
changed?
• What else could we do to make the
regulation easier to understand?
List of Subjects
12 CFR Part 225
Administrative practice and
procedure, Banks, Banking, Capital
planning, Holding companies, Reporting
and recordkeeping requirements,
Securities, Stress testing.
12 CFR Part 238
Administrative practice and
procedure, Banks, Banking, Federal
Reserve System, Reporting and
recordkeeping requirements, Securities.
12 CFR Part 252
Administrative practice and
procedure, Banks, Banking, Capital
planning, Federal Reserve System,
Holding companies, Reporting and
recordkeeping requirements, Securities,
Stress testing.
Authority and Issuance
For the reasons stated in the
the Board
proposes to amend chapter II of title 12
of the Code of Federal Regulations as
follows:
SUPPLEMENTARY INFORMATION,
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63231
PART 225—BANK HOLDING
COMPANIES AND CHANGE IN BANK
CONTROL (REGULATION Y)
1. The authority citation for part 225
continues to read as follows:
■
Authority: 12 U.S.C. 1817(j)(13), 1818,
1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),
1972(1), 3106, 3108, 3310, 3331–3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w,
6801 and 6805.
Subpart A—General Provisions
2. Amend § 225.8 by:
a. Removing all references to ‘‘BHC
stress scenario’’ and ‘‘BHS stress
scenario(s)’’ and add in their place
‘‘Firm stress scenario’’ and ‘‘Firm stress
scenario(s),’’ respectively;
■ b. Removing all references to ‘‘BHC
baseline scenario’’ and add in their
place ‘‘Firm baseline scenario’’;
■ c. Revising paragraphs (d)(10) through
(15), (e)(2)(i)(A), and (e)(4)(ii) and (iii);
■ d. Removing paragraphs (e)(4)(iv);
■ e. Revising paragraph (f)(1);
■ f. Adding paragraph (f)(4);
■ g. Revising paragraphs (h)(2) through
(5), (i), (j), and (k); and
■ h. Removing paragraph (l).
The revisions and addition read as
follows:
■
■
§ 225.8 Capital planning and stress capital
buffer requirement.
*
*
*
*
*
(d) * * *
(10) Category IV bank holding
company means any bank holding
company or U.S. intermediate holding
company subject to this section that, as
of December 31 of the prior capital plan
cycle, is a Category IV banking
organization pursuant to 12 CFR 252.5.
(11) Common equity tier 1 capital has
the same meaning as under 12 CFR part
217.
(12) Effective capital distribution
limitations means any limitations on
capital distributions established by the
Board by order or regulation, including
pursuant to 12 CFR 217.11, 225.4,
252.63, 252.165, and 263.202, provided
that, for any limitations based on riskweighted assets, such limitations must
be calculated using the standardized
approach, as set forth in 12 CFR part
217, subpart D.
(13) Final planned capital
distributions means the planned capital
distributions included in a capital plan
that include the adjustments made
pursuant to paragraph (h) of this
section, if any.
(14) Global systemically important
BHC means a bank holding company
identified as a global systemically
important BHC under 12 CFR 217.402.
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(15) GSIB surcharge has the same
meaning as under 12 CFR 217.403.
*
*
*
*
*
(e) * * *
(2) * * *
(i) * * *
(A) Estimates of projected revenues,
losses, reserves, and pro forma capital
levels, including regulatory capital
ratios, and any additional capital
measures deemed relevant by the bank
holding company, over the planning
horizon under a range of scenarios,
including:
(1) If the bank holding company is a
Category IV bank holding company, the
Firm baseline scenario and at least one
Firm stress scenario, as well as any
additional scenarios, based on financial
conditions or the macroeconomic
outlook, or based on the bank holding
company’s financial condition, size,
complexity, risk profile, or activities, or
risks to the U.S. economy, that the
Federal Reserve may provide the bank
holding company after giving notice to
the bank holding company; or
(2) If the bank holding company is not
a Category IV bank holding company,
any scenarios provided by the Federal
Reserve, the Firm baseline scenario, and
at least one Firm stress scenario;
*
*
*
*
*
(4) * * *
(ii) The Board, or the appropriate
Reserve Bank with concurrence of the
Board, may extend the 30-day period in
paragraph (e)(4)(i) of this section for up
to an additional 60 calendar days, or
such longer period as the Board or the
appropriate Reserve Bank, with
concurrence of the Board, determines
appropriate.
(iii) Any updated capital plan must
satisfy all the requirements of this
section; however, a bank holding
company may continue to rely on
information submitted as part of a
previously submitted capital plan to the
extent that the information remains
accurate and appropriate.
*
*
*
*
*
(f) Calculation of the stress capital
buffer requirement—(1) General. The
Board will determine the stress capital
buffer requirement that applies under 12
CFR 217.11 pursuant to paragraph (f) of
this section. For each bank holding
company that is not a Category IV bank
holding company, the Board will
calculate the bank holding company’s
stress capital buffer requirement
annually. For each Category IV bank
holding company, the Board will
calculate the bank holding company’s
stress capital buffer requirement
biennially, occurring in each calendar
year ending in an even number, and will
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adjust the bank holding company’s
stress capital buffer requirement
biennially, occurring in each calendar
year ending in an odd number.
Notwithstanding the previous sentence,
the Board will calculate the stress
capital buffer requirement of a Category
IV bank holding company in a year
ending in an odd number with respect
to which that company makes an
election pursuant to 12 CFR
252.44(d)(2)(ii).
*
*
*
*
*
(4) Adjustment of stress capital buffer
requirement. In each calendar year in
which the Board does not calculate a
Category IV bank holding company’s
stress capital buffer requirement
pursuant to paragraph (f)(1) of this
section, the Board will adjust the
Category IV bank holding company’s
stress capital buffer requirement to be
equal to the result of the calculation set
forth in paragraph (f)(2) of this section,
using the same values that were used to
calculate the stress capital buffer
requirement most recently provided to
the bank holding company, except that
the value used in paragraph
(f)(2)(i)(C)(1) of this section will be
equal to the bank holding company’s
planned common stock dividends
(expressed as a dollar amount) for each
of the fourth through seventh quarters of
the planning horizon as set forth in the
capital plan submitted by the bank
holding company in the calendar year in
which the Board adjusts the bank
holding company’s stress capital buffer
requirement.
*
*
*
*
*
(h) * * *
(2) Response to notice—(i) Request for
reconsideration of stress capital buffer
requirement. A bank holding company
may request reconsideration of a stress
capital buffer requirement provided
under paragraph (h)(1) of this section.
To request reconsideration of a stress
capital buffer requirement, a bank
holding company must submit to the
Board a request pursuant to paragraph
(i) of this section.
(ii) Adjustments to planned capital
distributions. Within two business days
of receipt of notice of a stress capital
buffer requirement under paragraph
(h)(1) or (i)(5) of this section, as
applicable, a bank holding company
must:
(A) Determine whether the planned
capital distributions for the fourth
through seventh quarters of the
planning horizon under the Firm
baseline scenario would be consistent
with effective capital distribution
limitations assuming the stress capital
buffer requirement provided by the
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Board under paragraph (h)(1) or (i)(5) of
this section, as applicable, in place of
any stress capital buffer requirement in
effect; and
(1) If the planned capital distributions
for the fourth through seventh quarters
of the planning horizon under the Firm
baseline scenario would not be
consistent with effective capital
distribution limitations assuming the
stress capital buffer requirement
provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital
buffer requirement in effect, the bank
holding company must adjust its
planned capital distributions such that
its planned capital distributions would
be consistent with effective capital
distribution limitations assuming the
stress capital buffer requirement
provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital
buffer requirement in effect; or
(2) If the planned capital distributions
for the fourth through seventh quarters
of the planning horizon under the Firm
baseline scenario would be consistent
with effective capital distribution
limitations assuming the stress capital
buffer requirement provided by the
Board under paragraph (h)(1) or (i)(5) of
this section, as applicable, in place of
any stress capital buffer requirement in
effect, the bank holding company may
adjust its planned capital distributions.
A bank holding company may not adjust
its planned capital distributions to be
inconsistent with the effective capital
distribution limitations assuming the
stress capital buffer requirement
provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as
applicable; and
(B) Notify the Board of any
adjustments made to planned capital
distributions for the fourth through
seventh quarters of the planning horizon
under the Firm baseline scenario.
(3) Final planned capital
distributions. The Board will consider
the planned capital distributions,
including any adjustments made
pursuant to paragraph (h)(2)(ii) of this
section, to be the bank holding
company’s final planned capital
distributions on the later of:
(i) The expiration of the time for
requesting reconsideration under
paragraph (i) of this section; and
(ii) The expiration of the time for
adjusting planned capital distributions
pursuant to paragraph (h)(2)(ii) of this
section.
(4) Effective date of final stress capital
buffer requirement. (i) The Board will
provide a bank holding company with
its final stress capital buffer requirement
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and confirmation of the bank holding
company’s final planned capital
distributions by August 31 of the
calendar year that a capital plan was
submitted pursuant to paragraph
(e)(1)(ii) of this section, unless
otherwise determined by the Board. A
stress capital buffer requirement will
not be considered final so as to be
agency action subject to judicial review
under 5 U.S.C. 704 during the pendency
of a request for reconsideration made
pursuant to paragraph (i) of this section
or before the time for requesting
reconsideration has expired.
(ii) Unless otherwise determined by
the Board, a bank holding company’s
final planned capital distributions and
final stress capital buffer requirement
shall:
(A) Be effective on October 1 of the
calendar year in which a capital plan
was submitted pursuant to paragraph
(e)(1)(ii) of this section; and
(B) Remain in effect until superseded.
(5) Publication. With respect to any
bank holding company subject to this
section, the Board may disclose publicly
any or all of the following:
(i) The stress capital buffer
requirement provided to a bank holding
company under paragraph (h)(1) or (i)(5)
of this section;
(ii) Adjustments made pursuant to
paragraph (h)(2)(ii);
(iii) A summary of the results of the
supervisory stress test; and
(iv) Other information.
(i) Administrative remedies; request
for reconsideration. The following
requirements and procedures apply to
any request under this paragraph (i):
(1) General. To request
reconsideration of a stress capital buffer
requirement, provided under paragraph
(h) of this section, a bank holding
company must submit a written request
for reconsideration.
(2) Timing of request. A request for
reconsideration of a stress capital buffer
requirement, provided under paragraph
(h) of this section, must be received
within 15 calendar days of receipt of a
notice of a bank holding company’s
stress capital buffer requirement.
(3) Contents of request. (i) A request
for reconsideration must include a
detailed explanation of why
reconsideration should be granted (that
is, why a stress capital buffer
requirement should be reconsidered).
With respect to any information that
was not previously provided to the
Federal Reserve in the bank holding
company’s capital plan, the request
should include an explanation of why
the information should be considered.
(ii) A request for reconsideration may
include a request for an informal
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hearing on the bank holding company’s
request for reconsideration.
(4) Hearing. (i) The Board may, in its
sole discretion, order an informal
hearing if the Board finds that a hearing
is appropriate or necessary to resolve
disputes regarding material issues of
fact.
(ii) An informal hearing shall be held
within 30 calendar days of a request, if
granted, provided that the Board may
extend this period upon notice to the
requesting party.
(5) Response to request. Within 30
calendar days of receipt of the bank
holding company’s request for
reconsideration of its stress capital
buffer requirement submitted under
paragraph (i)(2) of this section or within
30 days of the conclusion of an informal
hearing conducted under paragraph
(i)(4) of this section, the Board will
notify the company of its decision to
affirm or modify the bank holding
company’s stress capital buffer
requirement, provided that the Board
may extend this period upon notice to
the bank holding company.
(6) Distributions during the pendency
of a request for reconsideration. During
the pendency of the Board’s decision
under paragraph (i)(5) of this section,
the bank holding company may make
capital distributions that are consistent
with effective distribution limitations,
unless prior approval is required under
paragraph (j)(1) of this section.
(j) Approval requirements for certain
capital actions—(1) Circumstances
requiring approval—resubmission of a
capital plan. Unless it receives prior
approval pursuant to paragraph (j)(3) of
this section, a bank holding company
may not make a capital distribution
(excluding any capital distribution
arising from the issuance of a capital
instrument eligible for inclusion in the
numerator of a regulatory capital ratio)
if the capital distribution would occur
after the occurrence of an event
requiring resubmission under paragraph
(e)(4)(i)(A) or (B) of this section.
(2) Contents of request. A request for
a capital distribution under this section
must contain the following information:
(i) The bank holding company’s
capital plan or a discussion of changes
to the bank holding company’s capital
plan since it was last submitted to the
Federal Reserve;
(ii) The purpose of the transaction;
(iii) A description of the capital
distribution, including for redemptions
or repurchases of securities, the gross
consideration to be paid and the terms
and sources of funding for the
transaction, and for dividends, the
amount of the dividend(s); and
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63233
(iv) Any additional information
requested by the Board or the
appropriate Reserve Bank (which may
include, among other things, an
assessment of the bank holding
company’s capital adequacy under a
severely adverse scenario, a revised
capital plan, and supporting data).
(3) Approval of certain capital
distributions. (i) The Board, or the
appropriate Reserve Bank with
concurrence of the Board, will act on a
request for prior approval of a capital
distribution within 30 calendar days
after the receipt of all the information
required under paragraph (j)(2) of this
section.
(ii) In acting on a request for prior
approval of a capital distribution, the
Board, or appropriate Reserve Bank with
concurrence of the Board, will apply the
considerations and principles in
paragraph (g) of this section, as
appropriate. In addition, the Board, or
the appropriate Reserve Bank with
concurrence of the Board, may
disapprove the transaction if the bank
holding company does not provide all of
the information required to be
submitted under paragraph (j)(2) of this
section.
(4) Disapproval and hearing. (i) The
Board, or the appropriate Reserve Bank
with concurrence of the Board, will
notify the bank holding company in
writing of the reasons for a decision to
disapprove any proposed capital
distribution. Within 15 calendar days
after receipt of a disapproval by the
Board, the bank holding company may
submit a written request for a hearing.
(ii) The Board may, in its sole
discretion, order an informal hearing if
the Board finds that a hearing is
appropriate or necessary to resolve
disputes regarding material issues of
fact. An informal hearing shall be held
within 30 calendar days of a request, if
granted, provided that the Board may
extend this period upon notice to the
requesting party.
(iii) Written notice of the final
decision of the Board shall be given to
the bank holding company within 60
calendar days of the conclusion of any
informal hearing ordered by the Board,
provided that the Board may extend this
period upon notice to the requesting
party.
(iv) While the Board’s decision is
pending and until such time as the
Board, or the appropriate Reserve Bank
with concurrence of the Board, approves
the capital distribution at issue, the
bank holding company may not make
such capital distribution.
(k) Post notice requirement. A bank
holding company must notify the Board
and the appropriate Reserve Bank
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within 15 days of making a capital
distribution if:
(1) The capital distribution was
approved pursuant to paragraph (j)(3) of
this section; or
(2) The dollar amount of the capital
distribution will exceed the dollar
amount of the bank holding company’s
final planned capital distributions, as
measured on an aggregate basis
beginning in the fourth quarter of the
planning horizon through the quarter at
issue.
PART 238—SAVINGS AND LOAN
HOLDING COMPANIES (REGULATION
LL)
3. The authority citation for part 238
continues to read as follows:
■
Authority: 5 U.S.C. 552, 559; 12 U.S.C.
1462, 1462a, 1463, 1464, 1467, 1467a, 1468,
5365; 1813, 1817, 1829e, 1831i, 1972, 15
U.S.C. 78 l.
Subpart O—Supervisory Stress Test
Requirements for Covered Savings
and Loan Holding Companies
4. In § 238.132, add paragraphs (a)(4)
and (d) to read as follows:
■
§ 238.132
Board.
Analysis conducted by the
(a) * * *
(4) In conducting the analysis, the
Board will not incorporate changes to a
firm’s business plan that are likely to
have a material impact on the covered
company’s capital adequacy and
funding profile in its projections of
losses, net income, pro forma capital
levels, and capital ratios.
*
*
*
*
*
(d) Capital action assumptions. In
conducting a stress test under this
section, the Board will make the
following assumptions regarding a
covered company’s capital actions over
the planning horizon:
(1) The covered company will not pay
any dividends on any instruments that
qualify as common equity tier 1 capital;
(2) The covered company will make
payments on instruments that qualify as
additional tier 1 capital or tier 2 capital
equal to the stated dividend, interest, or
principal due on such instrument;
(3) The covered company will not
make a redemption or repurchase of any
capital instrument that is eligible for
inclusion in the numerator of a
regulatory capital ratio; and
(4) The covered company will not
make any issuances of common stock or
preferred stock.
Subpart P—Company-Run Stress Test
Requirements for Savings and Loan
Holding Companies
5. Amend § 238.144 by revising
paragraphs (a)(2) and (b)(1) and (2) and
adding paragraphs (b)(3) and (4) to read
as follows:
■
§ 238.144
Methodologies and practices.
(a) * * *
(2) The potential impact on pro forma
regulatory capital levels and pro forma
capital ratios (including regulatory
capital ratios and any other capital
ratios specified by the Board), and in so
doing must:
(i) Incorporate the effects of any
capital actions over the planning
horizon and maintenance of an
allowance for credit losses appropriate
for credit exposures throughout the
planning horizon; and
(ii) Exclude the impacts of changes to
a firm’s business plan that are likely to
have a material impact on the covered
company’s capital adequacy and
funding profile.
(b) * * *
(1) The covered company will not pay
any dividends on any instruments that
qualify as common equity tier 1 capital;
(2) The covered company will make
payments on instruments that qualify as
additional tier 1 capital or tier 2 capital
equal to the stated dividend, interest, or
principal due on such instrument;
(3) The covered company will not
make a redemption or repurchase of any
capital instrument that is eligible for
inclusion in the numerator of a
regulatory capital ratio; and
(4) The covered company will not
make any issuances of common stock or
preferred stock.
*
*
*
*
*
■ 6. In § 238.146, revise paragraph (a)(1)
to read as follows:
§ 238.146
Disclosure of stress test results.
(a) * * *
(1) In general. (i) A covered company
that is subject to a supervisory stress test
under § 238.132 must publicly disclose
a summary of the results of the stress
test required under § 238.143 within the
period that is 15 calendar days after the
Board publicly discloses the results of
its supervisory stress test of the covered
company pursuant to § 238.134, unless
that time is extended by the Board in
writing; and
(ii) A covered company that is not
subject to a supervisory stress test under
§ 238.132 must publicly disclose a
summary of the results of the stress test
required under § 238.143 in the period
beginning on June 15 and ending on
June 30 in the year in which the stress
test is conducted, unless that time is
extended by the Board in writing.
*
*
*
*
*
PART 252—ENHANCED PRUDENTIAL
STANDARDS (REGULATION YY)
7. The authority citation for part 252
continues to read as follows:
■
Authority: 12 U.S.C. 321–338a, 481–486,
1467a, 1818, 1828, 1831n, 1831o, 1831p–1,
1831w, 1835, 1844(b), 1844(c), 3101 et seq.,
3101 note, 3904, 3906–3909, 4808, 5361,
5362, 5365, 5366, 5367, 5368, 5371.
Subpart E—Supervisory Stress Test
Requirements for Certain U.S. Banking
Organizations With $100 Billion or
More in Total Consolidated Assets and
Nonbank Financial Companies
Supervised by the Board
8. In § 252.44, revise paragraphs (a)(3)
and (d) to read as follows:
■
§ 252.44
Analysis conducted by the Board.
(a) * * *
(3) In conducting the analysis, the
Board will not incorporate changes to a
firm’s business plan that are likely to
have a material impact on the covered
company’s capital adequacy and
funding profile in its projections of
losses, net income, pro forma capital
levels, and capital ratios.
*
*
*
*
*
(d) Frequency of analysis conducted
by the Board—(1) General. Except as
provided in paragraph (d)(2) of this
section, the Board will conduct its
analysis of a covered company
according to the frequency in Table 1 to
this paragraph (d)(1).
TABLE 1 TO PARAGRAPH (g)(1)
If the covered company is a
Then the Board will conduct its analysis
Global systemically important BHC ..........................................................
Category II bank holding company ...........................................................
Category II U.S. intermediate holding company .......................................
Category III bank holding company ..........................................................
Category III U.S. intermediate holding company ......................................
Category IV bank holding company .........................................................
VerDate Sep<11>2014
16:45 Oct 06, 2020
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Fmt 4702
Annually.
Annually.
Annually.
Annually.
Annually.
Biennially, occurring in each year ending in an even number.
Sfmt 4702
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Federal Register / Vol. 85, No. 195 / Wednesday, October 7, 2020 / Proposed Rules
63235
TABLE 1 TO PARAGRAPH (g)(1)—Continued
If the covered company is a
Then the Board will conduct its analysis
Category IV U.S. intermediate holding company .....................................
Nonbank financial company supervised by the Board .............................
Biennially, occurring in each year ending in an even number.
Annually.
(2) Change in frequency. (i) The Board
may conduct a stress test of a covered
company on a more or less frequent
basis than would be required under
paragraph (d)(1) of this section based on
the company’s financial condition, size,
complexity, risk profile, scope of
operations, or activities, or risks to the
U.S. economy.
(ii) A Category IV bank holding
company or Category IV U.S.
intermediate holding company may
elect to have the Board conduct a stress
test with respect to the company in a
year ending in an odd number by
providing notice to the Board by
December 31 of the preceding year
(ending in an even number).
Notwithstanding the previous sentence,
such a company may elect to have the
Board conduct a stress test with respect
to the company in the year 2021 by
providing notice to the Board by
February 15, 2021.
(3) Notice and response—(i)
Notification of change in frequency. If
the Board determines to change the
frequency of the stress test under
paragraph (d)(2)(i) of this section, the
Board will notify the company in
writing and provide a discussion of the
basis for its determination.
(ii) Request for reconsideration and
Board response. Within 14 calendar
days of receipt of a notification under
paragraph (d)(3)(i) of this section, a
covered company may request in
writing that the Board reconsider the
requirement to conduct a stress test on
a more or less frequent basis than would
be required under paragraph (d)(1) of
this section. A covered company’s
request for reconsideration must include
an explanation as to why the request for
reconsideration should be granted. The
Board will respond in writing within 14
calendar days of receipt of the
company’s request.
(i) * * *
(B) Is not a Category IV bank holding
company as the term is used in 12 CFR
225.8.
*
*
*
*
*
■ 10. In § 252.56, revise paragraph (a)(2)
to read as follows:
Subpart F—Company-Run Stress Test
Requirements for Certain U.S. Bank
Holding Companies and Nonbank
Financial Companies Supervised by
the Board
Appendix B to Part 252—[Amended]
9. In § 252.54, revise paragraph
(b)(2)(i)(B) to read as follows:
■
§ 252.54
*
Stress test.
*
*
(b) * * *
(2) * * *
VerDate Sep<11>2014
*
*
16:45 Oct 06, 2020
Jkt 253001
§ 252.56
Methodologies and practices.
(a) * * *
(2) The potential impact on the
regulatory capital levels and ratios
applicable to the covered bank, and any
other capital ratios specified by the
Board, and in doing so must:
(i) Incorporate the effects of any
capital action over the planning horizon
and maintenance of an allowance for
loan losses or adjusted allowance for
credit losses, as appropriate, for credit
exposures throughout the planning
horizon; and
(ii) Exclude the impacts of changes to
a firm’s business plan that are likely to
have a material impact on the covered
company’s capital adequacy and
funding profile.
*
*
*
*
*
■ 11. In § 252.58, revise paragraph (a)(1)
to read as follows:
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2020–0904; Product
Identifier 2019–SW–041–AD]
RIN 2120–AA64
Airworthiness Directives; Airbus
Helicopters
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
By order of the Board of Governors of the
Federal Reserve System.
Ann E. Misback,
Secretary of the Board.
The FAA proposes to adopt a
new airworthiness directive (AD) for
Airbus Helicopters Model EC225LP
helicopters. This proposed AD would
require various inspections of the lefthand side (LH) engine fuel supply (fuel
supply) hose and depending on the
inspection results, removing from
service or reinstalling the hose. This
proposed AD would also prohibit
installing any LH fuel supply hose
unless it is installed by following the
service information. This proposed AD
was prompted by a report of an
incorrect installation of the LH fuel
supply hose causing restricted fuel flow
to the LH engine. The actions of this
proposed AD are intended to address an
unsafe condition on these products.
DATES: The FAA must receive comments
on this proposed AD by November 23,
2020.
ADDRESSES: You may send comments by
any of the following methods:
• Federal eRulemaking Docket: Go to
https://www.regulations.gov. Follow the
online instructions for sending your
comments electronically.
• Fax: 202–493–2251.
• Mail: Send comments to the U.S.
Department of Transportation, Docket
Operations, M–30, West Building
Ground Floor, Room W12–140, 1200
New Jersey Avenue SE, Washington, DC
20590–0001.
• Hand Delivery: Deliver to the
‘‘Mail’’ address between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
[FR Doc. 2020–22166 Filed 10–6–20; 8:45 am]
Examining the AD Docket
BILLING CODE 6210–01–P
You may examine the AD docket on
the internet at https://
§ 252.58
Disclosure of stress test results.
(a) * * *
(1) In general. A covered company
must publicly disclose a summary of the
results of the stress test required under
§ 252.54 within the period that is 15
calendar days after the Board publicly
discloses the results of its supervisory
stress test of the covered company
pursuant to § 252.46(b), unless that time
is extended by the Board in writing.
*
*
*
*
*
12. Amend appendix B to part 252 by
removing and reserving section 2.6.
■
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Fmt 4702
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SUMMARY:
E:\FR\FM\07OCP1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 195 (Wednesday, October 7, 2020)]
[Proposed Rules]
[Pages 63222-63235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22166]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Parts 225, 238, and 252
[Regulations Y, LL, and YY; Docket No. R-1724]
RIN 7100-AF95
Amendments to Capital Planning and Stress Testing Requirements
for Large Bank Holding Companies, Intermediate Holding Companies and
Savings and Loan Holding Companies
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Notice of proposed rulemaking with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board is inviting comment on a notice of proposed
rulemaking (proposal) to tailor the requirements in the Board's capital
plan rule (capital plan rule), which applies to large bank holding
companies and U.S. intermediate holding companies of foreign banking
organizations. Specifically, as foreshadowed in the Board's October
2019 rulemaking that updated the prudential framework for these
companies (tailoring framework), the proposal would make conforming
changes to the capital planning, regulatory reporting, and stress
capital buffer requirements for firms subject to Category IV standards
to be consistent with the tailoring framework. To be consistent with
recent changes to the Board's stress testing rules, the proposal would
make other changes to the Board's stress testing rules, Stress Testing
Policy Statement and regulatory reporting requirements relating to
business plan change assumptions, capital action assumptions, and the
publication of company-run stress test results for savings and loan
holding companies. This proposal also solicits comment on the Board's
guidance on capital planning for all firms supervised by the Board, in
light of recent changes to relevant regulations and as part of the
Board's ongoing practice of reviewing its policies to ensure that they
are having their intended effect.
DATES: Comments must be received by November 20, 2020.
ADDRESSES: You may submit comments, identified by Docket No.R-1724 and
RIN 7100-AF95 by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.aspx.
Email: [email protected]. Include the
docket number and RIN number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Address to Ann E. Misback, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
All public comments are available from the Board's website at
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove
personally identifiable information at the commenter's request.
Accordingly, comments will not be edited to remove any identifying or
contact information. Public comments may also be viewed electronically
or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006,
between 9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Constance Horsley, Deputy Associate
Director, (202) 452-5239, Elizabeth MacDonald, Manager (202) 475-6316,
Hillel Kipnis, Senior Financial Institution Policy Analyst II, (202)
452-2924, Christopher Appel, Senior Financial Institution Policy
Analyst II, (202) 973-6862, and Palmer Osteen, Financial Institution
Policy Analyst, (202) 785-6025, Division of Supervision and Regulation;
Benjamin McDonough, Assistant General Counsel, (202) 452-2036, Julie
Anthony, Senior Counsel, (202) 475-6682, Asad Kudiya, Senior Counsel,
(202) 475-6358, Jonah Kind, Senior Attorney, (202) 452-2045, or Jasmin
Keskinen, Legal Assistant/Attorney, (202) 475-6650, Legal Division,
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington, DC 20551. Users of
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning, Stress Testing and Stress
Capital Buffer Requirements
ii. Background on Tailoring Framework
iii. Summary of Proposal
B. Changes to Capital Planning Requirements for Firms Subject to
Category IV Standards
i. Capital Plan Submissions
ii. Changes to Reporting Requirements Related to Capital
Planning Requirements
C. Calculation and Timing of the Stress Capital Buffer
Requirement for Firms Subject to Category IV Standards
D. Changes to Stress Test Rules for Firms Subject to Category I-
IV Standards
i. Business Plan Change Assumption
ii. Changes for Savings and Loan Holding Companies
iii. Changes to Reporting Requirements Related to Stress Test
Rule Changes
E. Definition of Common Stock Dividend in Capital Plan Rule
F. Impact Analysis
II. Request for Comment on Board Guidance on Capital Planning
III. Administrative Law Matters
A. Paperwork Reduction Act
B. Regulatory Flexibility Act
C. Solicitation of Comments of Use of Plain Language
I. Changes to the Capital Plan Rule
A. Introduction
i. Background on Capital Planning, Stress Testing and Stress Capital
Buffer Requirements
Stress testing is a core element of the Board's regulatory
framework and supervisory program for large firms. Stress testing
enables the Board to assess whether large firms have sufficient capital
to absorb potential losses and continue lending under severely adverse
conditions. The Board implemented its capital plan rule, which requires
large firms to develop and maintain capital plans supported by robust
processes for assessing their capital adequacy, in 2011.\1\ The Board
made changes to its capital rule--which establishes minimum regulatory
capital requirements--in 2013. These changes address weaknesses
observed during the 2008--2009 financial crisis, including the
establishment of a minimum common equity tier 1 (CET1) capital
requirement and a fixed capital conservation buffer equal to 2.5
percent
[[Page 63223]]
of risk-weighted assets.\2\ Rigorous stress testing--in conjunction
with stronger capital requirements implemented in the Board's capital
rule--have significantly improved the resilience of the U.S. banking
system.\3\
---------------------------------------------------------------------------
\1\ Capital Plans, 76 FR 74631 (Dec. 1, 2011). Originally, as a
part of the capital plan rule, the Federal Reserve could object to a
firm's capital plan based on a qualitative assessment. A subsequent
rulemaking changed this requirement such that after CCAR 2020 no
firm will be subject to a potential qualitative objection if the
firm successfully passed several qualitative evaluations. Amendments
to the Capital Plan Rule, 84 FR 8953 (March 13, 2019). All firms
subject to the capital plan rule have successfully passed the
required number of qualitative evaluations such that no firms are
subject to the qualitative objection going forward. As a result, the
proposal would revise the capital plan rule to remove references to
the qualitative objection.
\2\ See 12 CFR part 217. Large banking organizations also became
subject to a countercyclical capital buffer requirement, and the
largest and most systemically important firms--global systemically
important bank holding companies, or GSIBs--became subject to an
additional capital buffer based on a measure of their systemic risk,
the GSIB surcharge. See Regulatory Capital Rules: Implementation of
Risk-Based Capital Surcharges for Global Systemically Important Bank
Holding Companies, 80 FR 49082 (Aug. 14, 2015).
\3\ The common equity capital ratios of firms subject to CCAR
have more than doubled since 2009. Combined, these firms hold more
than $1 trillion of common equity tier 1 capital and are
substantially more resilient than they were ten years ago.
---------------------------------------------------------------------------
The Board recently adopted a final rule (stress capital buffer
rule) to integrate its capital plan rule and capital rule through the
establishment of a stress capital buffer requirement, creating a
single, risk-sensitive framework for large banking organizations.\4\ To
achieve individually tailored and risk-sensitive capital requirements
for banking organizations subject to the capital plan rule, the stress
capital buffer rule establishes the size of a firm's stress capital
buffer requirement based in part on a supervisory stress test conducted
by the Federal Reserve.
---------------------------------------------------------------------------
\4\ See Regulations Q, Y, and YY: Regulatory Capital, Capital
Plan, and Stress Test Rules, 85 FR 15576 (March 18, 2020).
---------------------------------------------------------------------------
The stress capital buffer rule included several changes to the
assumptions embedded in the supervisory stress test, notably removing
the assumption that firms make all planned common distributions and
excluding material business plan changes from the stress capital buffer
requirement calculation. Previously, under the Comprehensive Capital
Analysis and Review (CCAR), the Board required firms to pre-fund nine
quarters of planned dividends and share repurchases. Under the stress
capital buffer rule, firms are subject to a pre-funding requirement of
four quarters of planned dividends. This approach recognizes the
capital rule's automatic limitations on capital distributions while
continuing to promote forward-looking capital planning and mitigate
pro-cyclicality.
Prior to the implementation of the stress capital buffer rule, the
impact of expected material changes to a firm's business plan were
incorporated into a firm's CCAR results. In order to simplify the
stress test framework and to reduce burden, material business plan
changes are not included in the stress capital buffer calculation.
Instead, material changes to a firm's business plan resulting from a
merger or acquisition are incorporated into a firm's capital and risk-
weighted assets upon consummation of the transaction.
ii. Background on Tailoring Framework
In October 2019, the Board issued a final rule that established a
revised framework for applying prudential standards to large firms to
align prudential standards more closely to a large firm's risk profile
(tailoring rule).\5\ The tailoring rule established four categories of
prudential standards and applies them based on indicators designed to
measure the risk profile of a firm.\6\ Table I outlines the scoping
criteria for categories of prudential standards finalized in the
tailoring rule.
---------------------------------------------------------------------------
\5\ See Prudential Standards for Large Bank Holding Companies,
Savings and Loan Holding Companies, and Foreign Banking
Organizations, 84 FR 59032 (Nov. 1, 2019).
\6\ The final rule increased the threshold for general
application of these standards from $50 billion to $100 billion in
total consolidated assets.
Table I--Scoping Criteria for Categories of Prudential Standards
------------------------------------------------------------------------
U.S. banking Foreign banking
Category organizations organizations
------------------------------------------------------------------------
I...................... U.S. GSIBs and their N/A.
depository institution
subsidiaries.
------------------------------------------------
II..................... $700 billion or more in total assets; or $75
billion or more in cross-jurisdictional
activity; and do not meet the criteria for
Category I.
III.................... $250 billion or more in total assets; or $75
billion or more in weighted short-term
wholesale funding, nonbank assets, or off-
balance sheet exposure; and do not meet the
criteria for Category I or II.
IV..................... $100 billion or more in total assets; and do
not meet the criteria for Category I-III.
------------------------------------------------------------------------
The tailoring rule made two changes to the stress testing rules for
firms subject to Category IV standards. First, the tailoring rule
removed the requirement for firms subject to Category IV standards to
conduct and publicly disclose the results of company-run stress tests
as defined in the Board's stress testing rules. Second, the tailoring
rule changed the frequency of the supervisory stress test for firms
subject to Category IV standards from annual to biennial.\7\ In the
tailoring rule, the Board also foreshadowed that it intended to provide
greater flexibility to firms subject to Category IV standards to
develop their annual capital plans and consider additional regulatory
reporting burden relief in a separate proposal.\8\
---------------------------------------------------------------------------
\7\ Both changes related to stress testing rules for firms
subject to Category IV standards--(1) to remove the requirement to
conduct and to publicly disclose the results of the company-run
stress tests; and (2) to change the frequency of the supervisory
stress test to biennial--were consistent with amendments to section
165 of the Dodd-Frank Act made by the Economic Growth, Regulatory
Relief and Consumer Protection Act (EGRRCPA). See Public Law 115-
174, 132 Stat. 1296 (2018).
\8\ See 85 FR 15576, 15593, fn 57.
---------------------------------------------------------------------------
iii. Summary of Proposal
The Board is issuing this proposal to conform its capital plan
rule, stress capital buffer requirements, and capital planning
requirements by modifying them to be consistent with its tailoring
framework. Most of the significant modifications included in the
proposal have been previously described by the Board, notably in its
tailoring rule and stress capital buffer rule. With respect to firms
subject to Category IV standards, in order to align the capital plan
rule requirements with the tailoring rule changes, this proposal would
generally remove the capital plan rule requirement to calculate
forward-looking projections of capital under scenarios provided by the
Board. In addition, for firms subject to Category IV standards, the
proposal would update the frequency of calculating the portion of the
stress capital buffer that is calculated as the decline in the CET1
ratio to every other year. These firms would have the ability to elect
to participate in the supervisory stress test--and receive an updated
stress capital buffer requirement--in a year in which they would not
generally be subject to the supervisory stress test.
The proposal would also include changes to the Board's supervisory
stress test and the company-run stress
[[Page 63224]]
test rules.\9\ The proposal would clarify the assumptions related to
business plan changes, introduce revisions to the capital action
assumptions, and would require certain savings and loan holding
companies to publicly disclose their stress tests results in a parallel
manner as bank holding companies.
---------------------------------------------------------------------------
\9\ See 12 CFR part 252, subparts E and F.
---------------------------------------------------------------------------
B. Changes to Capital Planning Requirements for Firms Subject to
Category IV Standards
Consistent with Section 401(e) of the EGRRCPA, the tailoring rule
adjusted the frequency of supervisory stress testing for firms subject
to Category IV standards to every other year and eliminated the
requirement to conduct the company-run stress tests under the scenarios
provided by the Board. This adjustment reflected the lower risk profile
of a firm subject to Category IV standards relative to a firm subject
to Category I-III standards. The proposal would update the terminology
in the capital plan rule to conform to the terminology used in the
tailoring framework by removing the term ``large and noncomplex bank
holding company'' and replacing it with the definition of a firm
subject to Category IV standards and tailor the requirements in the
capital plan rule that currently apply to these firms, as discussed
below.
i. Capital Plan Submissions
Under the proposal, firms subject to Category IV standards would be
required to submit a capital plan to the Board annually but would
generally no longer be required to calculate estimates of projected
revenues, losses, reserves, and pro forma capital levels (effectively a
form of stress testing) using scenarios provided by the Board. Such
firms would continue to be required to provide a forward-looking
analysis of income and capital levels under expected and stressful
conditions. The projections are required to be tailored to and
sufficiently capture the firm's exposures, activities, and
idiosyncratic risks in their capital plans.\10\ This includes
projections under a scenario designed by the firm that stresses the
specific vulnerabilities of the firm's risk profile and operations.
This scenario should incorporate stressful conditions and events that
could adversely affect the firm's capital adequacy. Under certain
circumstances, based on the macroeconomic outlook or based on the
firm's risk profile, financial condition or corporate structure, the
proposal would allow the Board to require a firm subject to Category IV
standards to submit a capital plan under scenarios provided by the
Board. This would ensure that the Board could evaluate the firm's
forward-looking capital position using a scenario designed for the
specific circumstances of the macro-economy or the firm's risk profile.
---------------------------------------------------------------------------
\10\ The analysis should cover an appropriate period (usually a
period of at least two years) to capture the relevant risks to a
firm. A firm should estimate losses, revenues, expenses, and capital
using sound methods that relate macroeconomic and other risk drivers
to its estimates.
---------------------------------------------------------------------------
In addition, firms subject to Category IV standards would no longer
be required to submit to the Federal Reserve forward-looking
projections in the granular form prescribed by the regulatory report FR
Y-14A, Schedule A--Summary. This schedule includes over five hundred
capital, revenue, expense, and balance sheet line items that a firm
must project over a nine-quarter planning horizon. In this way, the
firm's reporting requirements would be updated to reflect the tailoring
rule's elimination of the company-run stress test requirement for a
firm subject to Category IV standards, permitting the firm to estimate
its capital needs using scenarios reflective of its operations and to
adjust the granularity of its stress projections to better align with
the materiality of the firm's business lines. The proposal would
provide firms flexibility in the granularity of their forward-looking
projections as they would no longer be required to submit the specific
line items outlined in the FR Y-14A, Schedule A--Summary. As the
projections would no longer require the same level of granularity,
firms would also have more flexibility in the design of their
individual stress scenarios.
While the proposal would no longer require firms subject to
Category IV standards to include certain elements in their capital
plans, all banking organizations, regardless of size and complexity,
are expected to have the capacity to analyze the potential impact of
adverse outcomes on their financial condition, including on capital.
Risk management practices should be tailored to the risk and complexity
of the individual institution, and should include practices to identify
and assess a firm's sensitivity to unexpected adverse outcomes before
they occur. The Federal Reserve would continue to conduct an annual
assessment of the capital plan of a firm subject to Category IV
standards as part of its ongoing supervisory process, and the results
of this assessment would continue to be an input into the firm's
capital planning and positions component of the Large Financial
Institution Rating System.\11\
---------------------------------------------------------------------------
\11\ See SR Letter 19-3, Large Financial Institution (LFI)
Rating System (Feb. 26, 2019).
---------------------------------------------------------------------------
ii. Changes to Reporting Requirements Related to Capital Planning
Requirements
The proposal includes several modifications to the FR Y-14
reporting requirements for firms subject to Category IV standards to
align with the proposed changes to company-run stress testing
requirements. The Board is proposing that firms subject to Category IV
standards would no longer be required to report FR Y-14A Schedule A--
Summary, Schedule B--Scenario, Schedule F--Business Plan Changes, and
Appendix A--Supporting Documentation, which are used to report a firm's
company-run stress test results. Firms subject to Category IV standards
would be required to complete all other FR Y-14A schedules, as they are
either necessary for the Board to run its supervisory stress test or a
required element of the firm's capital plan.\12\ In order to be able to
assess whether a firm's planned capital distributions included in its
capital plan would be consistent with any effective capital
distribution limitations that would apply under the firm's BHC baseline
projections, as required by the capital plan rule, the proposal would
add four line items to the FR Y-14A Schedule C--Regulatory Capital
Instruments, as this schedule is filed by all firms subject to the
capital plan rule. The line items would be the projections of Common
Equity Tier 1 capital ratio, Tier 1 capital ratio, Total capital ratio
and net income under the BHC baseline scenario. These line items would
allow the Federal Reserve to confirm compliance with the capital plan
rule for firms subject to Category IV standards.
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\12\ In particular, firms subject to Category IV standards would
be required to complete the FR Y-14A, Schedule C--Regulatory Capital
Instruments, Schedule E--Operational Risk, and the Collection of
Supplemental CECL Information.
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The detailed balance sheet information that would continue to be
collected on a monthly and quarterly basis from firms subject to
Category IV standards on the FR Y-14Q and FR Y-14M is necessary to
maintain the integrity of the stress tests, monitor financial
stability, and effectively supervise those firms.
Question 1: What are the advantages and disadvantages of requiring
firms subject to Category IV standards to continue to provide the Board
with forward-looking analysis of income and capital levels under
expected and
[[Page 63225]]
stressful conditions? What, if any, alternative approaches should the
Board consider and why?
Question 2: Are there potential alternatives or improvements to
other capital planning requirements for firms subject to Category IV
standards that the Board should consider in light of the Board's
elimination of the requirement for firms subject to Category IV
standards to conduct and publicly disclose the results of company-run
stress tests? Provide specific suggestions and rationale.
Question 3: What are the advantages and disadvantages of requiring
firms subject to Category IV standards to submit some, but not all,
aspects of the Y-14A Schedule A--Summary to the Federal Reserve? For
example, should these firms continue to be required to submit top-line
items under their BHC stress scenario, such as level of capital, net
income or risk-weighted assets, and if so why?
Question 4: What alternatives could the Board use to collect
information related to a firm's capital plan and forward-looking
projections under a range of conditions?
C. Calculation and Timing of the Stress Capital Buffer Requirement for
Firms Subject to Category IV Standards
Firms subject to Category IV standards are currently subject to
supervisory stress testing on a two-year cycle. Under the proposal, the
portion of the stress capital buffer requirement that is calculated as
the decline in the CET1 ratio for such firms would be calculated every
other year. During a year in which a firm subject to Category IV
standards does not undergo a supervisory stress test, the firm would
receive an updated stress capital buffer requirement that reflects the
firm's updated planned common stock dividends.
For example, a firm subject to Category IV standards receives a
stress capital buffer requirement on June 30, 2022, equal to 3.5
percent and the buffer is composed of a 3.0 percent decline in CET1
ratio in the stress test and 0.5 percent from four quarters of planned
dividends as a percent of risk-weighted assets. That requirement would
be effective from October 1, 2022, to September 30, 2023. The following
year, the firm would provide the Federal Reserve with an updated
capital plan by April 5, 2023. If, for example, the firm planned to
increase its dividends to equal 0.6 percent of risk-weighted assets,
then its new stress capital buffer requirement of 3.6 percent would
become effective on October 1, 2023, and would remain effective until
September 30, 2024.
A firm subject to Category IV standards may prefer to receive an
updated stress capital buffer requirement in a year in which it would
not generally be subject to the supervisory stress test. To provide
these firms the flexibility to ensure they receive stress capital
buffer requirements that are reflective of their risk profiles, the
proposal would allow a firm subject to Category IV standards to elect
to participate in the supervisory stress test in a year in which the
firm would not normally be subject to the supervisory stress test. To
ensure the Board is provided sufficient notice that the firm is
participating in the supervisory stress test, the firm would need to
make its election by December 31 of the year preceding the year in
which it seeks to opt in to the supervisory stress test by providing
written notice to the Board and appropriate Federal Reserve Bank. Such
a firm would be a full participant in that year's supervisory stress
test, including disclosure of the firm's supervisory stress test
results, and would receive an updated stress capital buffer requirement
like all other firms subject to the supervisory stress test.
For purposes of calculating the stress capital buffer requirement
in 2021 for a firm subject to Category IV standards that elects to
participate in the 2021 supervisory stress test, the proposal includes
transitional procedures such that the firm could notify the Board until
February 15, 2021. These transitional arrangements would apply only for
purposes of the 2021 stress test cycle.
In addition, as under the current capital plan rule, the Board
would continue to have the ability to require a firm to resubmit its
capital plan if, among other reasons, the Board determines that there
has been or will likely be a material change in the firm's risk
profile, financial condition, or corporate structure, or if changes to
financial market conditions or the macroeconomic outlook require the
use of updated scenarios. If a firm resubmits its capital plan, the
Board may recalculate its stress capital buffer requirement and may use
a new severely adverse scenario. These requirements help ensure that a
firm's stress capital buffer requirement remains commensurate with its
risk profile.
Question 5: What are the advantages and disadvantages of updating
on an annual basis the dividend add-on portion of the stress capital
buffer requirements for firms subject to Category IV standards? Should
the Board consider a shorter or longer time period for updating the
dividend add-on portion of the stress capital buffer requirement, and
if so, why?
Question 6: What are the advantages and disadvantages of allowing a
firm subject to Category IV standards to receive an updated stress
capital buffer requirement in a year in which the firm is not subject
to the supervisory stress test if the firm elects to undergo a
supervisory stress test, including the proposed method and timing of
the election?
Question 7: What are the advantages and disadvantages of requiring
a firm subject to Category IV standards to be a full participant (i.e.,
the Board would disclose the results of its supervisory stress test
results for the firm), in that year's supervisory stress test in order
to receive an updated stress capital buffer requirement?
Question 8: This proposal includes February 15, 2021 as the
deadline for a firm subject to Category IV standards to notify the
Board of its intention to participate in the 2021 supervisory stress
test. What are the advantages and disadvantages of including February
15, 2021 as the deadline for this notification to participate in the
2021 supervisory stress test for such a firm? What other date(s) or
timeline should the Board consider in order to ensure such a firm can
elect to participate in the 2021 supervisory stress test? For example,
what would be the advantages and disadvantages of including April 5,
2021, the date on which these firms must submit their capital plans to
the Federal Reserve, as the deadline for notification to participate in
the 2021 supervisory stress test?
D. Changes to Stress Test Rules for Firms Subject to Category I-IV
Standards
i. Business Plan Change Assumption
For purposes of the supervisory stress test, the Board does not
incorporate the impact of expected changes to a firm's business plan
that are likely to have a material impact on the firm's capital
adequacy and funding profile (material business plan changes) in
balance sheet, risk-weighted asset, and capital projections. In order
to ensure alignment in the assumptions in the supervisory and company-
run stress tests, the proposal would clarify that the Board and firms
would exclude impacts of unconsummated material business plan changes
in the supervisory and company-run stress tests conducted pursuant to
the Dodd-Frank Act. As this assumption would be reflected in the stress
test rules, the proposal would
[[Page 63226]]
remove the corresponding section from the Stress Testing Policy
Statement.
A firm would continue to be required to include in its capital plan
a discussion of any expected changes to the firm's business plan that
are likely to have a material impact on the firm's capital adequacy or
liquidity. A firm would also continue to be required to incorporate
impacts of material business plan changes in projections of income and
capital levels under all scenarios required for purposes of capital
planning. This requirement would help to ensure that a firm
appropriately plans for changes to its business. If a material business
plan change resulted in or would result in a material change in a
firm's risk profile, the firm would still be required to resubmit its
capital plan.
ii. Changes for Savings and Loan Holding Companies
As a part of the tailoring rule, covered savings and loan holding
companies were made subject to the Board's supervisory stress test and
company-run stress test requirements in the same manner as comparable
bank holding companies.\13\ Currently, the capital action assumptions
in the stress test rules for covered savings and loan holding companies
are different than those for comparable bank holding companies because
they were not included in the stress capital buffer rule, in which the
Board updated the distribution assumptions for bank holding companies.
The proposal would amend the stress test rules for covered savings and
loan holding companies so the capital distribution assumptions for
covered savings and loan holding companies match the assumptions for
comparable bank holding companies.
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\13\ A covered savings and loan holding company must have less
than 25 percent of its total consolidated assets in insurance
underwriting subsidiaries (other than assets associated with
insurance underwriting for credit), must not have a top-tier holding
company that is an insurance underwriting company, and must derive a
majority of its assets or revenues from activities that are
financial in nature under section 4(k) of the Bank Holding Company
Act. 12 CFR 217.2.
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The proposal would also include a change to address an omission in
the Board's company-run stress test requirements to ensure that all
savings and loan holding companies with more than $250 billion in
assets are required to publicly disclose the results of their stress
tests, similar to the requirement for bank holding companies. This
would ensure the requirements are consistent with the Dodd-Frank Act.
The Board is also considering whether to apply the capital planning
and stress capital buffer requirements to large covered savings and
loan holding companies that currently apply to large bank holding
companies and is posing the following questions for public comment.
Question 9: As outlined in the preamble of the Board's final
tailoring rule, large covered savings and loan holding companies engage
in many of the same activities and face similar risks as large bank
holding companies, including, but not limited to, deposit taking,
lending, broker-dealer activities, credit card and margin lending, and
certain complex nonbanking activities. The Board's tailoring rule
applied the category framework to covered savings and loan holding
companies to help identify risks that warrant more sophisticated
capital planning, more frequent company-run stress testing, and greater
supervisory oversight through supervisory stress testing, to further
the safety and soundness of these banking organizations. However, the
requirements in the capital plan rule do not currently apply to large
covered savings and loan holding companies. What would be the
advantages and disadvantages of applying the requirements in the
capital plan rule, including the stress capital buffer requirement, to
large covered savings and loan holding companies in the same manner as
they apply to large bank holding companies? To what extent does the
public consider covered savings and loan holding companies to be close
substitutes to similarly situated bank holding companies?
Question 10: If the Board were to apply capital planning and stress
capital buffer requirements to large covered savings and loan holding,
what adjustments, if any, should the Board make to those requirements
as compared to the requirements that apply to large bank holding
companies and why? For example, should the Board consider any
adjustments to the mandatory elements of the capital plan, the
calculation of the stress capital buffer requirement, regulatory
reporting requirements or any other aspect capital planning and stress
capital buffer requirements in light of the risk profile of large
covered savings and loan holding companies relative to large bank
holding companies?
Question 11: What other approaches to applying capital planning
requirements to large covered savings and loan holding companies should
the Board consider and why? For example, what would be the advantages
and disadvantages of allowing large covered savings and loan holding
companies to opt-in to being required to comply with the capital
planning and stress capital buffer requirements that currently apply to
large bank holding companies?
Question 12: Under the Board's capital plan rule for large bank
holding companies, a firm that is subject to the capital plan rule and
meets the asset threshold on or before September 30 of a calendar year
must comply with the requirements of the rule beginning on January 1 of
the next calendar year. Similarly, such a firm that meets the asset
threshold after September 30 of a calendar year must comply with the
requirements of the rule beginning on January 1 of the second calendar
year after the firm meets the asset threshold. What elements of this
approach to a transition period are appropriate for applying capital
planning requirements to large covered savings and loan holding
companies?
iii. Changes to Reporting Requirements Related to Stress Test Rule
Changes
The proposal would update the FR Y-14 reporting requirements for
firms subject to Category I-IV standards to conform with changes made
to the stress test rules. In order to reflect the exclusion of material
business plan changes in company-run stress test projections, the
proposal would create two sub-schedules for all items on the FR Y-14A,
Schedule A--Summary: (1) DFAST, where a firm would not incorporate the
effects of business plan changes and (2) CCAR, where a firm would
incorporate the effects of business plan changes. Firms would report
projections on the DFAST sub-schedule under the scenarios provided by
the Federal Reserve, and firms would report projections on the CCAR
sub-schedule under expected conditions and under a range of scenarios,
including the supervisory severely adverse scenario provided by the
Federal Reserve and at least one BHC baseline and one BHC stress
scenario. To more accurately reflect the types of firms subject to the
stress test reporting requirements, the proposal would also rename the
BHC baseline scenario and BHC stress scenario to Firm baseline scenario
and Firm stress scenario, respectively.
Firms subject to Category I-III standards would be required to
report a version of FR Y-14A, Schedule A.1.a--Income Statement,
Schedule A.1.b--Balance Sheet, Schedule A.1.c.1--Standardized RWA,
Schedule A.1.d--Capital, Schedule A.2.a--Retail Balance and Loss
Projections, Schedule A.3--AFS/HTM Securities, Schedule A.4--Trading,
Schedule A.5--Counterparty Credit Risk, Schedule A.6--Operational Risk,
and Schedule A.7--Pre-Provision Net Revenue, that incorporates the
[[Page 63227]]
effects of business plan changes, as well as a version of these
schedules and items that does not incorporate these effects. For
Schedule A.1.d, firms subject to Category I-III standards would no
longer report the supervisory baseline scenario on the Capital--CCAR
sub-schedule. Firms subject to Category I-IV standards would be
required to report a version of FR Y-14A Schedule C that incorporates
the effects of material business plan changes and a version that does
not incorporate these effects. As described above, firms subject to
Category IV standards would not be required to submit the FR Y-14A,
Schedule A--Summary. Given the changes made to the FR Y-14A, Schedule
A--Summary, firms would no longer be required to submit the supervisory
baseline scenario for FR Y-14A, Schedule F--Business Plan Changes.
Question XX: What are the advantages and disadvantages of the Board
requiring firms subject to Category IV standards to submit the FR Y-
14A, Schedule A--Summary in response to changes based on the
macroeconomic outlook or based on the firm's risk profile, financial
condition or corporate structure?
E. Definition of Common Stock Dividend in Capital Plan Rule
A component of a firm's stress capital buffer requirement is the
dividend add-on, which is based on planned dividends during projected
quarters four through seven of the planning horizon. As noted above,
the dividend add-on promotes forward-looking dividend planning and
mitigates the procyclicality of the Board's stress testing framework.
The capital plan rule does not define common stock dividends. However,
the FR Y-14A defines dividends by referencing the definition of
dividend in the Glossary to the FR Y-9C instructions. That definition
provides, among other things, that cash dividends are ``payments of
cash to shareholders in proportion to the number of shares they own.''
Using the definition of dividends on the FR Y-9C, in 2019 dividends as
a share of risk-weighted assets was around 50 basis points.
The Board has observed different practices regarding the
classification of dividends and share repurchases. For example, certain
U.S. intermediate holding companies of foreign banking organizations
have classified distributions to their parent companies as dividends,
while other U.S. intermediate holding companies have classified similar
distributions as non-dividend payouts. Decisions by firm regarding
classifications may depend, among other things, whether the
distribution is paid out of the firm's retained earnings.
The Board is therefore seeking comment on, but not proposing, a
definition for common stock dividends in the capital plan rule. The
definition of common stock dividend could be aligned with the
definition on the FR Y-9C and could include payments of cash to parent
organizations irrespective of whether the amount paid is debited from
the firm's retained earnings. For example, a definition of common stock
dividend could be any payment of cash to shareholders in proportion to
the number of shares they own.
Question 13: What would be the advantages and disadvantages of
including a definition of common stock dividends in the capital plan
rule? How should such a definition interact with the definition of
dividends in the Board's rules and regulatory reports, including the FR
Y-9C and the FR Y-14A/Q/M? What would be the advantages and
disadvantages of aligning the definition of dividends across the
Board's rules and regulatory reports? Please include a discussion of
the materiality of including this definition.
Question 14: What are the advantages and disadvantages of the
definition discussed above? What adjustments should the Board consider
to this definition and why? Are there any special considerations the
Board should consider with regards to U.S. intermediate holding
companies?
F. Impact Analysis
The changes in the proposal would not affect the calculation of
capital requirements. The proposal would not change the calculation of
capital requirements, including the stress capital buffer requirement,
for firms subject to Category IV standards. The regulatory reporting
aspects of the proposal would introduce some additional compliance
burden on firms subject to Category I through III standards, while
significantly reducing compliance burden on firms subject to Category
IV standards.
II. Request for Comment on Board Guidance on Capital Planning
Sufficient capital resources are central to a firm's ability to
absorb unexpected losses and continue to lend to creditworthy
businesses and consumers. Therefore, a firm's processes for managing
and allocating its capital resources are critical to its financial
strength and resiliency, as well as to the stability and effective
functioning of the U.S. financial system. Over the past decades, the
Board has issued guidance related to its supervisory expectations for
firms' capital planning. The Board has tailored expectations for sound
capital planning depending on the size, scope of operations,
activities, and systemic importance of a firm.
The Board is requesting comment on all aspects of its guidance on
capital planning for firms of all sizes (as delineated below),
consistent with its ongoing practice of reviewing its policies to
ensure that they are having their intended effect. Certain aspects of
the guidance have not been updated since the 2007-2008 financial
crisis. The revisions made to the Board's regulations in the recent
tailoring and stress capital buffer rules and experiences with capital
planning during the Coronavirus Disease 2019 event (COVID event) also
motivate seeking public input at this time.
The Board's key capital planning guidance includes supervision and
regulation (SR) letters, ``Federal Reserve Supervisory Assessment of
Capital Planning and Positions for LISCC Firms and Large and Complex
Firms,'' \14\ ``Federal Reserve Supervisory Assessment of Capital
Planning and Positions for Large and Noncomplex Firms,'' \15\
``Applying Supervisory Guidance and Regulations on the Payment of
Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding
Companies,'' \16\ and the ``Policy Statement on the Payment of Cash
Dividends.'' \17\ The Board also encourages feedback on any other
aspects of its guidance that relate to capital planning.
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\14\ SR letter 15-18, ``Federal Reserve Supervisory Assessment
of Capital Planning and Positions for LISCC Firms and Large and
Complex Firms,'' December 18, 2015, See https://www.federalreserve.gov/supervisionreg/srletters/sr1518.htm.
\15\ SR letter 15-19, ``Federal Reserve Supervisory Assessment
of Capital Planning and Positions for Large and Noncomplex Firms,''
December 18, 2015, See https://www.federalreserve.gov/supervisionreg/srletters/sr1519.htm.
\16\ SR letter 09-4, ``Applying Supervisory Guidance and
Regulations on the Payment of Dividends, Stock Redemptions, and
Stock Repurchases at Bank Holding Companies'', February 24, 2009,
See https://www.federalreserve.gov/boarddocs/srletters/2009/SR0904.htm.
\17\ ``UNSOUND BANKING PRACTICES--Cash Dividends Not Fully
Covered by Earnings'' November 14, 1985. See https://www.federalreserve.gov/boarddocs/srletters/2009/sr0904a2.pdf.
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Question 15: What if any changes should the Board consider with
respect to the scope of application of its existing capital planning
guidance and why? What if any considerations regarding firms' risk
profiles should be factored
[[Page 63228]]
into the applicability of capital planning guidance and why? Factoring
in the applicability of the Board's regulations, what if any aspects of
the Board's capital planning guidance should be changed or tailored
differently based on firms' risk profiles and why?
Question 16: The Board is interested in comment on whether changes
are appropriate to its supervisory guidance on capital planning, in
light of experience with the guidance and factors such as the recent
tailoring and stress capital buffer rules and other applicable
regulatory requirements. Please describe appropriate changes and the
rationale behind them.
Question 17: How should existing guidance on capital planning be
adapted, if at all, to reflect times of heightened and prolonged
uncertainty? For example, how has the COVID event influenced firms'
capital planning and loss estimation processes? How should these types
of adjustments be reflected in the Board's guidance on capital
planning?
Question 18: How should the Board weigh the potential benefits of
revising its capital planning guidance against the potential burdens,
given the current economic environment? How could any such burdens be
mitigated?
Question 19: How well does the existing guidance on capital
planning reflect sound practices for managing risks across firms of
various risk profiles and promote safety and soundness? With a goal of
balancing clarity and flexibility, how could the guidance be improved
in its application to firms with differing risk profiles? What aspects
of industry practice or other developments should be considered in any
potential updates to this guidance, and how?
III. Administrative Law Matters
A. Paperwork Reduction Act
Certain provisions of the proposed rule contain ``collections of
information'' within the meaning of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501-3521). The Board may not conduct or sponsor, and
a respondent is not required to respond to, an information collection
unless it displays a currently valid Office of Management and Budget
(OMB) control number. The Board reviewed the proposed rule under the
authority delegated to the Board by OMB.
The proposed rule would revise collection of information
requirements subject to the PRA. The Board proposes to revise the FR Y-
14, FR LL, and the FR YY to reflect the changes proposed in the
proposed rule. The OMB control numbers are 7100-0341, 7100-NEW, and
7100-0350.
Comments are invited on:
a. Whether the collections of information are necessary for the
proper performance of the Federal Reserve's functions, including
whether the information has practical utility;
b. The accuracy or the estimate of the burden of the information
collections, including the validity of the methodology and assumptions
used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation,
maintenance, and purchase of services to provide information.
All comment will become a matter of public record. Comments on
aspects of this proposal that may affect reporting, recordkeeping, or
disclosure requirements and burden estimates should be sent to:
Secretary, Board of Governors of the Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. A copy of the comments may also be
submitted to the OMB desk officer by mail to U.S. Office of Management
and Budget, 725 17th Street NW, #10235, Washington, DC 20503 or by
facsimile to 202-395-5806, Attention, Agency Desk Officer.
Proposed Revisions, With Extension for Three Years, of the Following
Information Collections
(1) 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 covered savings and loan holding companies (SLHCs) \18\
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; OMB No. 7100-
0128); 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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\18\ Covered SLHCs are those which are not substantially engaged
in insurance or commercial activities. For more information, see the
definition of ``covered savings and loan holding company'' provided
in 12 CFR 217.2 and 12 CFR 238.2(ee). 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.\19\
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\19\ 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: 1,250 hours; FR Y-
14Q: 2,143 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: 45,000 hours; FR Y-14Q:
308,592 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 annual \20\ 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.\21\
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\20\ In certain circumstances, a BHC or IHC may be required to
re-submit its capital plan. See 12 CFR 225.8(e)(4). Firms that must
re-submit their capital plan generally also must provide a revised
FR Y-14A in connection with their resubmission.
\21\ 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-14A/Q/M 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.
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-14A/Q/M 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.
[[Page 63229]]
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 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: As previously described in this proposal, the
Board is proposing to make several FR Y-14 revisions. Certain revisions
would only be applicable to firms subject to Category IV or Category I-
III standards, while other revisions would be applicable to all BHCs
and IHCs. All revisions are proposed to be effective for data as-of
December 31, 2020.
Firms Subject to Category IV Standards
As a result of the proposed changes to company-run stress testing
requirements, the Board is proposing that firms subject to Category IV
standards would no longer be required to report FR Y-14A Schedule A--
Summary, Schedule B--Scenario, Schedule F--Business Plan Changes, and
Appendix A--Supporting Documentation, which are used to report a firm's
company-run stress test results. However, firms subject to Category IV
standards would be required to complete all remaining FR Y-14A
schedules, as they are necessary for the Board to run its supervisory
stress test. The Board believes that the detailed balance sheet
information that would continue to be collected on a monthly and
quarterly basis from firms subject to Category IV standards on the FR
Y-14Q and FR Y-14M is crucial for maintaining the integrity of the
stress tests, monitoring financial stability, and supervising those
firms.
Firms Subject to Category I-III Standards
As previously outlined, firms subject to Category I-III standards
would continue to report the FR Y-14A Schedule A--Summary. To conform
the FR Y-14 reports with the stress test assumption changes made per
the stress capital buffer, the Board is proposing to create two sub-
schedules for all items on the FR Y-14A, Schedule A: (1) DFAST, where a
firm would not incorporate the effects of business plan changes and (2)
CCAR, where a firm would incorporate the effects of business plan
changes. Specifically, firms subject to Category I-III standards would
be required to report a version of FR Y-14A, Schedule A.1.a--Income
Statement, Schedule A.1.b--Balance Sheet, Schedule A.1.c.1--
Standardized RWA, Schedule A.1.d--Capital, Schedule A.2.a--Retail
Balance and Loss, Schedule A.3--AFS/HTM Securities, Schedule A.4--
Trading, Schedule A.5--Counterparty Credit Risk, Schedule A.6--
Operational Risk, and Loss Projections, and Schedule A.7--Pre-Provision
Net Revenue, that incorporates the effects of business plan changes, as
well as a version of these schedules and items that does not
incorporate these effects. For Schedule A.1.d, firms would continue to
report two sub-schedules with different capital actions, along with the
income and balance sheet information reported in the appropriate sub-
schedule. In addition, firms would only be required to report FR Y-14A,
Schedule F under the Firm baseline and supervisory severely adverse
scenarios.
All BHCs and IHCs
All BHCs and IHCs would still be required to report FR Y-14A,
Schedule C--Regulatory Capital Instruments, and the stress test
assumption changes made per the stress capital buffer rule create a
need for firms to provide certain data excluding the impact of business
plan changes. As a result, the Board is proposing to create two sub-
schedules for all items on the FR Y-14A, Schedule C: (1) SCB, where a
firm would not incorporate the effects of business plan changes and (2)
CCAR, where a firm would incorporate the effects of business plan
changes. Specifically, all BHCs and IHCs would be required to report a
version of FR Y-14A, Schedule C, that incorporates the effects of
business plan changes, as well as a version of this schedule and items
that does not incorporate these effects.
In order to be able to assess whether a firm's planned capital
distributions included in its capital plan would be consistent with any
effective capital distribution limitations that would apply under the
firm's baseline projections, as required by the capital plan rule, the
Board is also proposing to add four items to FR Y-14A, Schedule C.
These items would capture baseline projections of a firm's common
equity tier 1 capital ratio, tier 1 capital ratio, total capital ratio,
and net income.
Other Revisions
As previously mentioned, the Board is proposing to replace the
current definition of ``large and noncomplex bank holding company''
with the definition of a firm subject to Category IV standards.
Therefore, the Board is proposing to make this change across the FR Y-
14A/Q/M reports. In addition, to more accurately reflect the types of
firms subject to the stress test reporting requirements, the Board is
proposing to rename the ``BHC baseline scenario'' and ``BHC stress
scenario'' to ``Firm baseline scenario'' and ``Firm stress scenario,''
respectively.
(2) Report title: Reporting and Disclosure Requirements Associated
with Regulation LL.
Agency form number: FR LL.
OMB control number: 7100-NEW.
Frequency: Biennial.
Affected Public: Businesses or other for-profit.
Respondents: Savings and loan holding companies.
Estimated number of respondents: 1.
Estimated average hours per response: Reporting Sec.
238.162(b)(1)(ii)--80; Disclosure section 238.146 (initial setup)--150;
Disclosure Sec. 238.146--60.
Estimated annual burden hours: Reporting Sec. 238.162(b)(1)(ii)--
40; Disclosure Sec. 238.146 (initial setup)--75; Disclosure Sec.
238.146--30.
Legal authorization and confidentiality: This information
collection is authorized by section 10 of the Home Owners' Loan Act
(HOLA) and section 165(i)(2) of the Dodd-Frank Act. The obligation of
covered institutions to report this information is mandatory. This
information would be disclosed publicly and, as a result, no issue of
confidentiality is raised.
Current Actions: The proposed rule includes amendments to Sec.
238.146 of Regulation LL meant to ensure that certain savings and loan
holding companies are required to publicly
[[Page 63230]]
disclose their stress tests results. Under the proposal, a covered
savings and loan holding company that is subject to a supervisory
stress test under Sec. 238.132 of Regulation LL would be required to
publicly disclose a summary of the results of the stress test required
under Sec. 238.143 of Regulation LL within the period that is 15
calendar days after the Board publicly discloses the results of its
supervisory stress test of the covered company pursuant to Sec.
238.134 of Regulation LL, unless that time is extended by the Board in
writing, while a covered savings and loan holding company that is not
subject to a supervisory stress test under Sec. 238.132 of Regulation
LL would be required to publicly disclose a summary of the results of
the stress test required under Sec. 238.143 of Regulation LL in the
period beginning on June 15 and ending on June 30 in the year in which
the stress test is conducted, unless that time is extended by the Board
in writing.
(3) Report title: Reporting, Recordkeeping, and Disclosure
Requirements Associated with Regulation YY (Enhanced Prudential
Standards).
Agency Form Number: FR YY.
OMB Control Number: 7100-0350.
Frequency: Annual, semiannual, quarterly.
Affected Public: Businesses or other for-profit.
Respondents: State member banks, U.S. bank holding companies,
nonbank financial companies, foreign banking organizations, U.S.
intermediate holding companies, foreign saving and loan holding
companies, and foreign nonbank financial companies supervised by the
Board.
Estimated number of respondents: 23 U.S. bank holding companies
with total consolidated assets of $100 billion or more, 4 U.S. bank
holding companies with total consolidated assets of $50 billion or more
but less than $100 billion, 1 state member bank with total consolidated
assets over $250 billion, 11 U.S. intermediate holding companies with
$100 billion or more in total assets, 23 foreign banking organizations
with total consolidated assets of more than $50 billion but less than
$100 billion; 23 foreign banking organizations with total consolidated
assets of $100 billion or more but combined U.S. operations of at least
$50 billion but less than $100 billion; 17 foreign banking
organizations with total consolidated assets of $100 billion or more
and combined U.S. operations of $100 billion or more.
Current estimated annual burden: 41,619 hours.
Proposed revisions estimated annual burden: (13,868) hours.
Total estimated annual burden: 27,751 hours.
General description of report: Section 165 of the Dodd-Frank Act,
as amended by EGRRCPA, requires the Board to implement enhanced
prudential standards for bank holding companies and foreign banking
organizations with total consolidated assets of $250 billion or more,
and provides the Board with discretion to apply enhanced prudential
standards to certain bank holding companies and foreign banking
organizations with $100 billion or more, but less than $250 billion, in
total consolidated assets. The enhanced prudential standards include
risk-based and leverage capital requirements, liquidity standards,
requirements for overall risk management (including establishing a risk
committee), stress test requirements, and debt-to-equity limits for
companies that the Financial Stability Oversight Council has determined
pose a grave threat to financial stability.
Current Actions: As described above, the Board proposes to allow a
firm subject to Category IV standards to elect to participate in the
supervisory stress test in a year in which the firm would not normally
be subject to the supervisory stress test. To ensure the Board is
provided sufficient notice that the firm is participating in the
supervisory stress test, the firm would need to make its election by
December 31 of the year preceding the year in which it seeks to opt in
to the supervisory stress test by providing written notice to the Board
and appropriate Federal Reserve Bank. For purposes of calculating the
stress capital buffer requirement in 2021 for a firm subject to
Category IV standards that elects to participate in the 2021
supervisory stress test, the proposal includes transitional procedures
such that the firm could notify the Board after December 31, 2020, but
before the Board publishes the supervisory scenarios.
B. Regulatory Flexibility Act
The Board is providing an initial regulatory flexibility analysis
with respect to this proposed rule. The Regulatory Flexibility Act, 5
U.S.C. 601 et seq., (RFA), requires an agency to consider whether the
rules it proposes will have a significant economic impact on a
substantial number of small entities.\22\ In connection with a proposed
rule, the RFA requires an agency to prepare an Initial Regulatory
Flexibility Analysis describing the impact of the rule on small
entities or to certify that the proposed rule would not have a
significant economic impact on a substantial number of small entities.
An initial regulatory flexibility analysis must contain (1) a
description of the reasons why action by the agency is being
considered; (2) a succinct statement of the objectives of, and legal
basis for, the proposed rule; (3) a description of, and, where
feasible, an estimate of the number of small entities to which the
proposed rule will apply; (4) a description of the projected reporting,
recordkeeping, and other compliance requirements of the proposed rule,
including an estimate of the classes of small entities that will be
subject to the requirement and the type of professional skills
necessary for preparation of the report or record; (5) an
identification, to the extent practicable, of all relevant Federal
rules which may duplicate, overlap with, or conflict with the proposed
rule; and (6) a description of any significant alternatives to the
proposed rule which accomplish its stated objectives.
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\22\ Under regulations issued by the Small Business
Administration, a small entity includes a depository institution,
bank holding company, or savings and loan holding company with total
assets of $600 million or less and trust companies with annual
receipts of $41.5 million or less.
---------------------------------------------------------------------------
The Board has considered the potential impact of the proposed rule
on small entities in accordance with the RFA. Based on its analysis and
for the reasons stated below, the Board believes that this proposed
rule will not have a significant economic impact on a substantial
number of small entities. Nevertheless, the Board is publishing and
inviting comment on this initial regulatory flexibility analysis. A
final regulatory flexibility analysis will be conducted after comments
received during the public comment period have been considered. The
proposal would also make corresponding changes to the Board's reporting
forms.
As discussed in detail above, the proposed rule would amend the
capital rule, capital plan rule, stress testing rules, and the Stress
Testing Policy Statement. Under the proposed rule, the Board would
remove certain capital plan requirements to remove company-run stress
test requirements. In addition, in order to align the stress capital
buffer requirements with the tailoring rule changes, the proposal would
update the portion of the stress capital buffer that is calculated as
the decline in the CET1 ratio every other year for firms subject to
Category IV standards. The proposal would include changes to Board's
supervisory stress test and the company-run stress test rules. The
proposal would clarify the assumptions related to business plan
changes, introduce a revision to the capital action assumptions and
include a technical
[[Page 63231]]
change to ensure certain savings and loan holding companies are
required to publicly disclose their stress tests results.
The Board has broad authority under the International Lending
Supervision Act (ILSA) \23\ and the PCA provisions of the Federal
Deposit Insurance Act \24\ to establish regulatory capital requirements
for the institutions it regulates. For example, ILSA directs each
Federal banking agency to cause banking institutions to achieve and
maintain adequate capital by establishing minimum capital requirements
as well as by other means that the agency deems appropriate.\25\ The
PCA provisions of the Federal Deposit Insurance Act direct each Federal
banking agency to specify, for each relevant capital measure, the level
at which an IDI subsidiary is well capitalized, adequately capitalized,
undercapitalized, and significantly undercapitalized.\26\ In addition,
the Board has broad authority to establish regulatory capital standards
for bank holding companies under the Bank Holding Company Act and the
Dodd-Frank Reform and Consumer Protection Act (Dodd-Frank Act).\27\
---------------------------------------------------------------------------
\23\ 12 U.S.C. 3901-3911.
\24\ 12 U.S.C. 1831o.
\25\ 12 U.S.C. 3907(a)(1).
\26\ 12 U.S.C. 1831o(c)(2).
\27\ See, e.g., sections 165 and 171 of the Dodd-Frank Act (12
U.S.C. 5365 and 12 U.S.C. 5371). Public Law 111-203, 124 Stat. 1376
(2010).
---------------------------------------------------------------------------
The proposed rule would apply only to bank holding companies,
intermediate holding companies and savings and loan holding companies
with total consolidated assets of at least $100 billion in total
consolidated assets. The proposed rule would not apply to any small
entities. Further, the proposal would make changes to the projected
reporting, recordkeeping, and other compliance requirements of the rule
by proposing to collect information from firms subject to the capital
plan rule. These changes would not impact small entities. In addition,
the Board is aware of no other Federal rules that duplicate, overlap,
or conflict with the proposed changes to the capital rule, capital plan
rule, and stress testing rules. Therefore, the Board believes that the
proposed rule will not have a significant economic impact on small
banking organizations supervised by the Board and therefore believes
that there are no significant alternatives to the proposed rule that
would reduce the economic impact on small banking organizations
supervised by the Board.
The Board welcomes comment on all aspects of its analysis. In
particular, the Board requests that commenters describe the nature of
any impact on small entities and provide empirical data to illustrate
and support the extent of the impact.
C. Solicitation of Comments of Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The Board has sought to present the proposed rule in a
simple and straightforward manner, and invites comment on the use of
plain language.
For example:
Have we organized the material to suit your needs? If not,
how could the rule be more clearly stated?
Are the requirements in the rule clearly stated? If not,
how could the rule be more clearly stated?
Do the regulations contain technical language or jargon
that is not clear? If so, which language requires clarification?
Will a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes will make the regulation easier to
understand?
Will more, but shorter, sections be better? If so, which
sections should be changed?
What else could we do to make the regulation easier to
understand?
List of Subjects
12 CFR Part 225
Administrative practice and procedure, Banks, Banking, Capital
planning, Holding companies, Reporting and recordkeeping requirements,
Securities, Stress testing.
12 CFR Part 238
Administrative practice and procedure, Banks, Banking, Federal
Reserve System, Reporting and recordkeeping requirements, Securities.
12 CFR Part 252
Administrative practice and procedure, Banks, Banking, Capital
planning, Federal Reserve System, Holding companies, Reporting and
recordkeeping requirements, Securities, Stress testing.
Authority and Issuance
For the reasons stated in the SUPPLEMENTARY INFORMATION, the Board
proposes to amend chapter II of title 12 of the Code of Federal
Regulations as follows:
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
0
1. The authority citation for part 225 continues to read as follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906,
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
Subpart A--General Provisions
0
2. Amend Sec. 225.8 by:
0
a. Removing all references to ``BHC stress scenario'' and ``BHS stress
scenario(s)'' and add in their place ``Firm stress scenario'' and
``Firm stress scenario(s),'' respectively;
0
b. Removing all references to ``BHC baseline scenario'' and add in
their place ``Firm baseline scenario'';
0
c. Revising paragraphs (d)(10) through (15), (e)(2)(i)(A), and
(e)(4)(ii) and (iii);
0
d. Removing paragraphs (e)(4)(iv);
0
e. Revising paragraph (f)(1);
0
f. Adding paragraph (f)(4);
0
g. Revising paragraphs (h)(2) through (5), (i), (j), and (k); and
0
h. Removing paragraph (l).
The revisions and addition read as follows:
Sec. 225.8 Capital planning and stress capital buffer requirement.
* * * * *
(d) * * *
(10) Category IV bank holding company means any bank holding
company or U.S. intermediate holding company subject to this section
that, as of December 31 of the prior capital plan cycle, is a Category
IV banking organization pursuant to 12 CFR 252.5.
(11) Common equity tier 1 capital has the same meaning as under 12
CFR part 217.
(12) Effective capital distribution limitations means any
limitations on capital distributions established by the Board by order
or regulation, including pursuant to 12 CFR 217.11, 225.4, 252.63,
252.165, and 263.202, provided that, for any limitations based on risk-
weighted assets, such limitations must be calculated using the
standardized approach, as set forth in 12 CFR part 217, subpart D.
(13) Final planned capital distributions means the planned capital
distributions included in a capital plan that include the adjustments
made pursuant to paragraph (h) of this section, if any.
(14) Global systemically important BHC means a bank holding company
identified as a global systemically important BHC under 12 CFR 217.402.
[[Page 63232]]
(15) GSIB surcharge has the same meaning as under 12 CFR 217.403.
* * * * *
(e) * * *
(2) * * *
(i) * * *
(A) Estimates of projected revenues, losses, reserves, and pro
forma capital levels, including regulatory capital ratios, and any
additional capital measures deemed relevant by the bank holding
company, over the planning horizon under a range of scenarios,
including:
(1) If the bank holding company is a Category IV bank holding
company, the Firm baseline scenario and at least one Firm stress
scenario, as well as any additional scenarios, based on financial
conditions or the macroeconomic outlook, or based on the bank holding
company's financial condition, size, complexity, risk profile, or
activities, or risks to the U.S. economy, that the Federal Reserve may
provide the bank holding company after giving notice to the bank
holding company; or
(2) If the bank holding company is not a Category IV bank holding
company, any scenarios provided by the Federal Reserve, the Firm
baseline scenario, and at least one Firm stress scenario;
* * * * *
(4) * * *
(ii) The Board, or the appropriate Reserve Bank with concurrence of
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this
section for up to an additional 60 calendar days, or such longer period
as the Board or the appropriate Reserve Bank, with concurrence of the
Board, determines appropriate.
(iii) Any updated capital plan must satisfy all the requirements of
this section; however, a bank holding company may continue to rely on
information submitted as part of a previously submitted capital plan to
the extent that the information remains accurate and appropriate.
* * * * *
(f) Calculation of the stress capital buffer requirement--(1)
General. The Board will determine the stress capital buffer requirement
that applies under 12 CFR 217.11 pursuant to paragraph (f) of this
section. For each bank holding company that is not a Category IV bank
holding company, the Board will calculate the bank holding company's
stress capital buffer requirement annually. For each Category IV bank
holding company, the Board will calculate the bank holding company's
stress capital buffer requirement biennially, occurring in each
calendar year ending in an even number, and will adjust the bank
holding company's stress capital buffer requirement biennially,
occurring in each calendar year ending in an odd number.
Notwithstanding the previous sentence, the Board will calculate the
stress capital buffer requirement of a Category IV bank holding company
in a year ending in an odd number with respect to which that company
makes an election pursuant to 12 CFR 252.44(d)(2)(ii).
* * * * *
(4) Adjustment of stress capital buffer requirement. In each
calendar year in which the Board does not calculate a Category IV bank
holding company's stress capital buffer requirement pursuant to
paragraph (f)(1) of this section, the Board will adjust the Category IV
bank holding company's stress capital buffer requirement to be equal to
the result of the calculation set forth in paragraph (f)(2) of this
section, using the same values that were used to calculate the stress
capital buffer requirement most recently provided to the bank holding
company, except that the value used in paragraph (f)(2)(i)(C)(1) of
this section will be equal to the bank holding company's planned common
stock dividends (expressed as a dollar amount) for each of the fourth
through seventh quarters of the planning horizon as set forth in the
capital plan submitted by the bank holding company in the calendar year
in which the Board adjusts the bank holding company's stress capital
buffer requirement.
* * * * *
(h) * * *
(2) Response to notice--(i) Request for reconsideration of stress
capital buffer requirement. A bank holding company may request
reconsideration of a stress capital buffer requirement provided under
paragraph (h)(1) of this section. To request reconsideration of a
stress capital buffer requirement, a bank holding company must submit
to the Board a request pursuant to paragraph (i) of this section.
(ii) Adjustments to planned capital distributions. Within two
business days of receipt of notice of a stress capital buffer
requirement under paragraph (h)(1) or (i)(5) of this section, as
applicable, a bank holding company must:
(A) Determine whether the planned capital distributions for the
fourth through seventh quarters of the planning horizon under the Firm
baseline scenario would be consistent with effective capital
distribution limitations assuming the stress capital buffer requirement
provided by the Board under paragraph (h)(1) or (i)(5) of this section,
as applicable, in place of any stress capital buffer requirement in
effect; and
(1) If the planned capital distributions for the fourth through
seventh quarters of the planning horizon under the Firm baseline
scenario would not be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect, the bank holding company must adjust its planned capital
distributions such that its planned capital distributions would be
consistent with effective capital distribution limitations assuming the
stress capital buffer requirement provided by the Board under paragraph
(h)(1) or (i)(5) of this section, as applicable, in place of any stress
capital buffer requirement in effect; or
(2) If the planned capital distributions for the fourth through
seventh quarters of the planning horizon under the Firm baseline
scenario would be consistent with effective capital distribution
limitations assuming the stress capital buffer requirement provided by
the Board under paragraph (h)(1) or (i)(5) of this section, as
applicable, in place of any stress capital buffer requirement in
effect, the bank holding company may adjust its planned capital
distributions. A bank holding company may not adjust its planned
capital distributions to be inconsistent with the effective capital
distribution limitations assuming the stress capital buffer requirement
provided by the Board under paragraph (h)(1) or (i)(5) of this section,
as applicable; and
(B) Notify the Board of any adjustments made to planned capital
distributions for the fourth through seventh quarters of the planning
horizon under the Firm baseline scenario.
(3) Final planned capital distributions. The Board will consider
the planned capital distributions, including any adjustments made
pursuant to paragraph (h)(2)(ii) of this section, to be the bank
holding company's final planned capital distributions on the later of:
(i) The expiration of the time for requesting reconsideration under
paragraph (i) of this section; and
(ii) The expiration of the time for adjusting planned capital
distributions pursuant to paragraph (h)(2)(ii) of this section.
(4) Effective date of final stress capital buffer requirement. (i)
The Board will provide a bank holding company with its final stress
capital buffer requirement
[[Page 63233]]
and confirmation of the bank holding company's final planned capital
distributions by August 31 of the calendar year that a capital plan was
submitted pursuant to paragraph (e)(1)(ii) of this section, unless
otherwise determined by the Board. A stress capital buffer requirement
will not be considered final so as to be agency action subject to
judicial review under 5 U.S.C. 704 during the pendency of a request for
reconsideration made pursuant to paragraph (i) of this section or
before the time for requesting reconsideration has expired.
(ii) Unless otherwise determined by the Board, a bank holding
company's final planned capital distributions and final stress capital
buffer requirement shall:
(A) Be effective on October 1 of the calendar year in which a
capital plan was submitted pursuant to paragraph (e)(1)(ii) of this
section; and
(B) Remain in effect until superseded.
(5) Publication. With respect to any bank holding company subject
to this section, the Board may disclose publicly any or all of the
following:
(i) The stress capital buffer requirement provided to a bank
holding company under paragraph (h)(1) or (i)(5) of this section;
(ii) Adjustments made pursuant to paragraph (h)(2)(ii);
(iii) A summary of the results of the supervisory stress test; and
(iv) Other information.
(i) Administrative remedies; request for reconsideration. The
following requirements and procedures apply to any request under this
paragraph (i):
(1) General. To request reconsideration of a stress capital buffer
requirement, provided under paragraph (h) of this section, a bank
holding company must submit a written request for reconsideration.
(2) Timing of request. A request for reconsideration of a stress
capital buffer requirement, provided under paragraph (h) of this
section, must be received within 15 calendar days of receipt of a
notice of a bank holding company's stress capital buffer requirement.
(3) Contents of request. (i) A request for reconsideration must
include a detailed explanation of why reconsideration should be granted
(that is, why a stress capital buffer requirement should be
reconsidered). With respect to any information that was not previously
provided to the Federal Reserve in the bank holding company's capital
plan, the request should include an explanation of why the information
should be considered.
(ii) A request for reconsideration may include a request for an
informal hearing on the bank holding company's request for
reconsideration.
(4) Hearing. (i) The Board may, in its sole discretion, order an
informal hearing if the Board finds that a hearing is appropriate or
necessary to resolve disputes regarding material issues of fact.
(ii) An informal hearing shall be held within 30 calendar days of a
request, if granted, provided that the Board may extend this period
upon notice to the requesting party.
(5) Response to request. Within 30 calendar days of receipt of the
bank holding company's request for reconsideration of its stress
capital buffer requirement submitted under paragraph (i)(2) of this
section or within 30 days of the conclusion of an informal hearing
conducted under paragraph (i)(4) of this section, the Board will notify
the company of its decision to affirm or modify the bank holding
company's stress capital buffer requirement, provided that the Board
may extend this period upon notice to the bank holding company.
(6) Distributions during the pendency of a request for
reconsideration. During the pendency of the Board's decision under
paragraph (i)(5) of this section, the bank holding company may make
capital distributions that are consistent with effective distribution
limitations, unless prior approval is required under paragraph (j)(1)
of this section.
(j) Approval requirements for certain capital actions--(1)
Circumstances requiring approval--resubmission of a capital plan.
Unless it receives prior approval pursuant to paragraph (j)(3) of this
section, a bank holding company may not make a capital distribution
(excluding any capital distribution arising from the issuance of a
capital instrument eligible for inclusion in the numerator of a
regulatory capital ratio) if the capital distribution would occur after
the occurrence of an event requiring resubmission under paragraph
(e)(4)(i)(A) or (B) of this section.
(2) Contents of request. A request for a capital distribution under
this section must contain the following information:
(i) The bank holding company's capital plan or a discussion of
changes to the bank holding company's capital plan since it was last
submitted to the Federal Reserve;
(ii) The purpose of the transaction;
(iii) A description of the capital distribution, including for
redemptions or repurchases of securities, the gross consideration to be
paid and the terms and sources of funding for the transaction, and for
dividends, the amount of the dividend(s); and
(iv) Any additional information requested by the Board or the
appropriate Reserve Bank (which may include, among other things, an
assessment of the bank holding company's capital adequacy under a
severely adverse scenario, a revised capital plan, and supporting
data).
(3) Approval of certain capital distributions. (i) The Board, or
the appropriate Reserve Bank with concurrence of the Board, will act on
a request for prior approval of a capital distribution within 30
calendar days after the receipt of all the information required under
paragraph (j)(2) of this section.
(ii) In acting on a request for prior approval of a capital
distribution, the Board, or appropriate Reserve Bank with concurrence
of the Board, will apply the considerations and principles in paragraph
(g) of this section, as appropriate. In addition, the Board, or the
appropriate Reserve Bank with concurrence of the Board, may disapprove
the transaction if the bank holding company does not provide all of the
information required to be submitted under paragraph (j)(2) of this
section.
(4) Disapproval and hearing. (i) The Board, or the appropriate
Reserve Bank with concurrence of the Board, will notify the bank
holding company in writing of the reasons for a decision to disapprove
any proposed capital distribution. Within 15 calendar days after
receipt of a disapproval by the Board, the bank holding company may
submit a written request for a hearing.
(ii) The Board may, in its sole discretion, order an informal
hearing if the Board finds that a hearing is appropriate or necessary
to resolve disputes regarding material issues of fact. An informal
hearing shall be held within 30 calendar days of a request, if granted,
provided that the Board may extend this period upon notice to the
requesting party.
(iii) Written notice of the final decision of the Board shall be
given to the bank holding company within 60 calendar days of the
conclusion of any informal hearing ordered by the Board, provided that
the Board may extend this period upon notice to the requesting party.
(iv) While the Board's decision is pending and until such time as
the Board, or the appropriate Reserve Bank with concurrence of the
Board, approves the capital distribution at issue, the bank holding
company may not make such capital distribution.
(k) Post notice requirement. A bank holding company must notify the
Board and the appropriate Reserve Bank
[[Page 63234]]
within 15 days of making a capital distribution if:
(1) The capital distribution was approved pursuant to paragraph
(j)(3) of this section; or
(2) The dollar amount of the capital distribution will exceed the
dollar amount of the bank holding company's final planned capital
distributions, as measured on an aggregate basis beginning in the
fourth quarter of the planning horizon through the quarter at issue.
PART 238--SAVINGS AND LOAN HOLDING COMPANIES (REGULATION LL)
0
3. The authority citation for part 238 continues to read as follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462, 1462a, 1463, 1464,
1467, 1467a, 1468, 5365; 1813, 1817, 1829e, 1831i, 1972, 15 U.S.C.
78 l.
Subpart O--Supervisory Stress Test Requirements for Covered Savings
and Loan Holding Companies
0
4. In Sec. 238.132, add paragraphs (a)(4) and (d) to read as follows:
Sec. 238.132 Analysis conducted by the Board.
(a) * * *
(4) In conducting the analysis, the Board will not incorporate
changes to a firm's business plan that are likely to have a material
impact on the covered company's capital adequacy and funding profile in
its projections of losses, net income, pro forma capital levels, and
capital ratios.
* * * * *
(d) Capital action assumptions. In conducting a stress test under
this section, the Board will make the following assumptions regarding a
covered company's capital actions over the planning horizon:
(1) The covered company will not pay any dividends on any
instruments that qualify as common equity tier 1 capital;
(2) The covered company will make payments on instruments that
qualify as additional tier 1 capital or tier 2 capital equal to the
stated dividend, interest, or principal due on such instrument;
(3) The covered company will not make a redemption or repurchase of
any capital instrument that is eligible for inclusion in the numerator
of a regulatory capital ratio; and
(4) The covered company will not make any issuances of common stock
or preferred stock.
Subpart P--Company-Run Stress Test Requirements for Savings and
Loan Holding Companies
0
5. Amend Sec. 238.144 by revising paragraphs (a)(2) and (b)(1) and (2)
and adding paragraphs (b)(3) and (4) to read as follows:
Sec. 238.144 Methodologies and practices.
(a) * * *
(2) The potential impact on pro forma regulatory capital levels and
pro forma capital ratios (including regulatory capital ratios and any
other capital ratios specified by the Board), and in so doing must:
(i) Incorporate the effects of any capital actions over the
planning horizon and maintenance of an allowance for credit losses
appropriate for credit exposures throughout the planning horizon; and
(ii) Exclude the impacts of changes to a firm's business plan that
are likely to have a material impact on the covered company's capital
adequacy and funding profile.
(b) * * *
(1) The covered company will not pay any dividends on any
instruments that qualify as common equity tier 1 capital;
(2) The covered company will make payments on instruments that
qualify as additional tier 1 capital or tier 2 capital equal to the
stated dividend, interest, or principal due on such instrument;
(3) The covered company will not make a redemption or repurchase of
any capital instrument that is eligible for inclusion in the numerator
of a regulatory capital ratio; and
(4) The covered company will not make any issuances of common stock
or preferred stock.
* * * * *
0
6. In Sec. 238.146, revise paragraph (a)(1) to read as follows:
Sec. 238.146 Disclosure of stress test results.
(a) * * *
(1) In general. (i) A covered company that is subject to a
supervisory stress test under Sec. 238.132 must publicly disclose a
summary of the results of the stress test required under Sec. 238.143
within the period that is 15 calendar days after the Board publicly
discloses the results of its supervisory stress test of the covered
company pursuant to Sec. 238.134, unless that time is extended by the
Board in writing; and
(ii) A covered company that is not subject to a supervisory stress
test under Sec. 238.132 must publicly disclose a summary of the
results of the stress test required under Sec. 238.143 in the period
beginning on June 15 and ending on June 30 in the year in which the
stress test is conducted, unless that time is extended by the Board in
writing.
* * * * *
PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)
0
7. The authority citation for part 252 continues to read as follows:
Authority: 12 U.S.C. 321-338a, 481-486, 1467a, 1818, 1828,
1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1844(c), 3101 et seq.,
3101 note, 3904, 3906-3909, 4808, 5361, 5362, 5365, 5366, 5367,
5368, 5371.
Subpart E--Supervisory Stress Test Requirements for Certain U.S.
Banking Organizations With $100 Billion or More in Total
Consolidated Assets and Nonbank Financial Companies Supervised by
the Board
0
8. In Sec. 252.44, revise paragraphs (a)(3) and (d) to read as
follows:
Sec. 252.44 Analysis conducted by the Board.
(a) * * *
(3) In conducting the analysis, the Board will not incorporate
changes to a firm's business plan that are likely to have a material
impact on the covered company's capital adequacy and funding profile in
its projections of losses, net income, pro forma capital levels, and
capital ratios.
* * * * *
(d) Frequency of analysis conducted by the Board--(1) General.
Except as provided in paragraph (d)(2) of this section, the Board will
conduct its analysis of a covered company according to the frequency in
Table 1 to this paragraph (d)(1).
Table 1 to Paragraph (g)(1)
------------------------------------------------------------------------
Then the Board will conduct its
If the covered company is a analysis
------------------------------------------------------------------------
Global systemically important BHC.. Annually.
Category II bank holding company... Annually.
Category II U.S. intermediate Annually.
holding company.
Category III bank holding company.. Annually.
Category III U.S. intermediate Annually.
holding company.
Category IV bank holding company... Biennially, occurring in each year
ending in an even number.
[[Page 63235]]
Category IV U.S. intermediate Biennially, occurring in each year
holding company. ending in an even number.
Nonbank financial company Annually.
supervised by the Board.
------------------------------------------------------------------------
(2) Change in frequency. (i) The Board may conduct a stress test of
a covered company on a more or less frequent basis than would be
required under paragraph (d)(1) of this section based on the company's
financial condition, size, complexity, risk profile, scope of
operations, or activities, or risks to the U.S. economy.
(ii) A Category IV bank holding company or Category IV U.S.
intermediate holding company may elect to have the Board conduct a
stress test with respect to the company in a year ending in an odd
number by providing notice to the Board by December 31 of the preceding
year (ending in an even number). Notwithstanding the previous sentence,
such a company may elect to have the Board conduct a stress test with
respect to the company in the year 2021 by providing notice to the
Board by February 15, 2021.
(3) Notice and response--(i) Notification of change in frequency.
If the Board determines to change the frequency of the stress test
under paragraph (d)(2)(i) of this section, the Board will notify the
company in writing and provide a discussion of the basis for its
determination.
(ii) Request for reconsideration and Board response. Within 14
calendar days of receipt of a notification under paragraph (d)(3)(i) of
this section, a covered company may request in writing that the Board
reconsider the requirement to conduct a stress test on a more or less
frequent basis than would be required under paragraph (d)(1) of this
section. A covered company's request for reconsideration must include
an explanation as to why the request for reconsideration should be
granted. The Board will respond in writing within 14 calendar days of
receipt of the company's request.
Subpart F--Company-Run Stress Test Requirements for Certain U.S.
Bank Holding Companies and Nonbank Financial Companies Supervised
by the Board
0
9. In Sec. 252.54, revise paragraph (b)(2)(i)(B) to read as follows:
Sec. 252.54 Stress test.
* * * * *
(b) * * *
(2) * * *
(i) * * *
(B) Is not a Category IV bank holding company as the term is used
in 12 CFR 225.8.
* * * * *
0
10. In Sec. 252.56, revise paragraph (a)(2) to read as follows:
Sec. 252.56 Methodologies and practices.
(a) * * *
(2) The potential impact on the regulatory capital levels and
ratios applicable to the covered bank, and any other capital ratios
specified by the Board, and in doing so must:
(i) Incorporate the effects of any capital action over the planning
horizon and maintenance of an allowance for loan losses or adjusted
allowance for credit losses, as appropriate, for credit exposures
throughout the planning horizon; and
(ii) Exclude the impacts of changes to a firm's business plan that
are likely to have a material impact on the covered company's capital
adequacy and funding profile.
* * * * *
0
11. In Sec. 252.58, revise paragraph (a)(1) to read as follows:
Sec. 252.58 Disclosure of stress test results.
(a) * * *
(1) In general. A covered company must publicly disclose a summary
of the results of the stress test required under Sec. 252.54 within
the period that is 15 calendar days after the Board publicly discloses
the results of its supervisory stress test of the covered company
pursuant to Sec. 252.46(b), unless that time is extended by the Board
in writing.
* * * * *
Appendix B to Part 252--[Amended]
0
12. Amend appendix B to part 252 by removing and reserving section 2.6.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2020-22166 Filed 10-6-20; 8:45 am]
BILLING CODE 6210-01-P
