[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Notices]
[Pages 73634-73640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30666]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB; Capital
Plans; Final Agency Information Collection Activities
SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB)
delegated to the Board of Governors of the Federal Reserve System
(Board) its approval authority under the Paperwork Reduction Act (PRA),
pursuant to its regulations, to approve of and assign OMB control
numbers to collection of information requests and requirements
conducted or sponsored by the Board under conditions set forth in its
regulations. Board-approved collections of information are incorporated
into the official OMB inventory of currently approved collections of
information. Copies of the PRA submission, supporting statements and
approved collection of information instruments are placed into OMB's
public docket files. The Federal Reserve may not conduct or sponsor,
and the respondent is not required to respond to, an information
collection that has been extended, revised, or implemented on or after
October 1, 1995, unless it displays a currently valid OMB control
number.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance
Officer--Cynthia Ayouch--Division of Research and Statistics, Board of
Governors of the Federal Reserve System, Washington, DC 20551 (202)
452-3829. Telecommunications Device for the Deaf (TDD) users may
contact (202) 263-4869. Board of Governors of the Federal Reserve
System, Washington, DC 20551. OMB Desk Officer--Shagufta Ahmed--Office
of Information and Regulatory Affairs, Office of Management and Budget,
New Executive Office Building, Room 10235, 725 17th Street NW.,
Washington, DC 20503.
Final approval under OMB delegated authority for the implementation
of the following report:
Report title: Capital Assessments and Stress Testing.
Agency form number: FR Y-14A and FR Y-14Q.
OMB control number: 7100-0341.
Frequency: Annual and Quarterly.
Reporters: Large domestic bank holding companies (BHCs), that
participated in the 2009 Supervisory Capital Assessment Program (SCAP)
exercise.
Estimated annual reporting hours: FR Y-14A: Summary, 15,580 hours;
Macro scenario, 589 hours; Counterparty credit risk (CCR), 2,292 hours;
Basel III, 380 hours; and Regulatory capital instruments, 380 hours. FR
Y-14 Q: Securities risk, 760 hours; Retail risk, 431,908 hours; Pre-
provision net revenue (PPNR), 47,500 hours; Wholesale corporate loans,
3,840 hours; Wholesale commercial real estate (CRE) loans, 4,560 hours;
Trading, private equity, and other fair value assets (Trading risk),
41,280 hours; Basel III, 1,520 hours; and Regulatory capital
instruments, 3,040 hours.
Estimated average hours per response: FR Y-14A: Summary, 820 hours;
Macro scenario, 31 hours; CCR, 382 hours; Basel III, 20 hours; and
Regulatory capital instruments, 20 hours. FR Y-14 Q: Securities risk,
10 hours; Retail risk, 5,683 hours; PPNR, 625 hours; Wholesale
corporate loans, 60 hours; Wholesale CRE loans, 60 hours; Trading risk,
1,720 hours; Basel III, 20 hours; and Regulatory capital instruments,
40 hours.
Number of respondents: 19.
General description of report: The FR Y-14A and Q are authorized by
section 165 of the Dodd-Frank Act which requires the Federal Reserve to
ensure that certain BHCs and nonbank financial companies supervised by
the Federal Reserve are subject to enhanced risk-based and leverage
standards in order to mitigate risks to the financial stability of the
United States. 12 U.S.C 5365. Additionally, Section 5 of the BHC Act
authorizes the Board to issue regulations and conduct information
collections with regard to the supervision of BHCs. 12 U.S.C. 1844.
As these data will be collected as part of the supervisory process,
they are
[[Page 73635]]
subject to confidential treatment under exemption 8 of the Freedom of
Information Act. 5 U.S.C. 552(b)(8). In addition, commercial and
financial information contained in these information collections may be
exempt from disclosure under Exemption 4. 5 U.S.C. 552(b)(4).
Disclosure determinations would be made on a case-by-case basis.
Abstract: During the years leading up to the recent financial
crisis, many BHCs made significant distributions of capital, in the
form of stock repurchases and dividends, without due consideration of
the effects that a prolonged economic downturn could have on their
capital adequacy and ability to continue to operate and remain credit
intermediaries during times of economic and financial stress. In 2009,
the Board conducted the SCAP, a ``stress test'' of 19 large, domestic
BHCs. The SCAP was focused on identifying whether large BHCs had
capital sufficient to weather a more-adverse-than-anticipated economic
environment while maintaining their capacity to lend. In early 2011,
the Federal Reserve continued its supervisory evaluation of the
resiliency and capital adequacy processes of the same 19 BHCs through
the Comprehensive Capital Analysis and Review (CCAR 2011). The CCAR
2011 involved the Federal Reserve's forward-looking evaluation of the
internal capital planning processes of the BHCs and their anticipated
capital actions in 2011, such as increasing dividend payments or
repurchasing or redeeming stock.
On June 17, 2011, the Federal Reserve published the Capital Plan
rulemaking (or proposed rule) in the Federal Register for public
comment (76 FR 35351) that would revise the Board's Regulation Y to
require large BHCs to submit capital plans to the Federal Reserve
annually among other things. The public comment period for the capital
plan rule ended on August 5, 2011. In connection with submissions of
capital plans to the Federal Reserve, BHCs would be required, pursuant
to proposed section 225.8(d)(3), to provide certain data to the Federal
Reserve. At the time of the proposed rule, the Federal Reserve did not
have sufficient detail about the data to be submitted by the BHCs under
proposed section 225.8(d)(3). For this reason, the Federal Reserve put
forth this proposal to collect the data to support the ongoing CCAR
exercise, which would fulfill the data collection contemplated under
proposed section 225.8(d)(3).
As proposed, the FR Y-14A will collect annually BHCs' quantitative
projections of balance sheet assets and liabilities, income, losses,
and capital across a range of macroeconomic scenarios and qualitative
information on methodologies used to develop internal projections of
capital across scenarios. One or more of the scenarios would include a
market shock that the BHCs would assume when making trading and
counterparty loss projections. Also, as proposed, the FR Y-14Q will
collect detailed data on BHCs' various asset classes and PPNR for the
reporting period, which would be used to support supervisory stress
test models and for continuous monitoring efforts, on a quarterly
basis.\1\ These data will be used to assess the capital adequacy of
large BHCs using forward-looking projections of revenue and losses. In
addition, these data will be used to help inform the Federal Reserve's
operational decision making as the agency moves ahead with implementing
the capital plan rulemaking.
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\1\ For some schedules, except as noted in the discussion of
comments, BHCs will be required to submit both quarterly and annual
schedules for third quarter data.
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Under section 165 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (Dodd-Frank Act), the Federal Reserve is
required to issue regulations relating to stress testing (DFAST) for
certain BHCs and nonbank financial companies supervised by the Board.
It is expected that any reporting requirements associated with DFAST
will be incorporated into the new FR Y-14A/Q information collection.
Current Actions: On August 31, 2011, the Board granted initial
approval of this proposal. Notice of the proposed action was published
in the Federal Register on September 7, 2011 (76 FR 55288); the comment
period expired on November 7, 2011.
General Summary of Public Comments
The Board received comments from 11 BHCs, 5 trade associations, and
a software vendor by letter, email, and orally through outreach calls
conducted with prospective respondents. Most of the comments received
requested clarification of the instructions for information to be
reported, or were technical in nature. Response to these comments will
be addressed in the final FR Y-14 reporting instructions. Substantive
comments received either addressed the FR Y-14 collection in general,
or addressed specific proposed reporting schedules. The final reporting
schedules and instructions that incorporate the comments submitted by
the public and that were approved by the Board have been provided to
the respondent BHCs. The substantive comments are addressed below.
Detailed Discussion of Public Comments and Federal Reserve Responses
The following is a detailed discussion of aspects of the proposed
FR Y-14 collection for which the Federal Reserve received one or more
substantive comments and the Federal Reserve's responses to the
comments received.
A. General
In their combined comments, four trade groups provided support for
the publication of the proposed data schedules for comment and agreed
with the relevance of much of the data sought to discern the capital
distribution process. However, they expressed concerns with the
substance of data requested on several components of the schedules and
also sought further clarification. Their substantive comments are
discussed below. Another trade group expressed support for the proposed
data schedules as they apply to the 19 respondent BHCs, both in terms
of the breadth and the depth of the data requested. However, they
strongly cautioned against imposing similar reporting requirements on
smaller community banks.
The Federal Reserve proposed that respondents would submit a data
schedule for any portfolio that meets certain materiality thresholds,
which are generally defined as those portfolios with asset balances
greater than $5 billion or asset balances relative to Tier 1 capital
greater than 5 percent on average for the four quarters preceding the
reporting quarter. A number of commenters requested an increase of
these materiality thresholds and to allow the BHCs to exclude certain
portfolios on a case-by-case basis.
In selecting the materiality thresholds, the Federal Reserve
weighed the benefit of minimizing burden to BHCs against obtaining
comprehensive data, which will allow the Federal Reserve to
consistently produce supervisory estimates of loss for each BHC under a
given scenario. The Federal Reserve believes that the proposed
materiality thresholds strike the right balance between the two
considerations and, therefore, will implement the materiality
thresholds as proposed.
The proposal stated that the Federal Reserve expects to make the
final data schedules available to respondents in late November and to
receive completed FR Y-14Q data submissions by mid-December and FR Y-
14A data submissions by early January. Several
[[Page 73636]]
commenters expressed concerns about the short turnaround time to submit
the data once the data schedules are finalized, particularly given the
granularity of the data requested.
The timeline for the initial data submission largely reflects the
timeline for implementation of the proposed capital plan rule. As
stated in the initial Federal Register notice and in the proposed FR Y-
14Q instructions, the quarterly data will be used to produce
supervisory model estimates, which will be a key input to the CCAR
process. The Federal Reserve weighed the benefit of providing
additional time to complete the data submission against the need to
have sufficient time to validate the data and produce supervisory model
estimates based on the submitted data in order to provide timely
responses to BHCs to their Capital Plan. After further consideration,
the Federal Reserve will implement the timeline as proposed. However,
in response to other comments discussed below, the Federal Reserve will
implement several changes to the data schedules to reduce burden.
Two commenters further suggested that respondents should be exempt
from submitting the fourth quarter 2011 data given a later filing
deadline for the third quarter data. The quarterly data collection will
help the Federal Reserve enhance its supervisory models and support
ongoing supervisory activities. The BHCs will be required to submit the
fourth quarter 2011 data 45 days after the quarter ends or
approximately two months after the third quarter 2011 data are due. The
Federal Reserve will implement a February 14, 2012, due date for the
fourth quarter FR Y-14Q as proposed.
Several commenters requested clarification on the reporting of
particular data items when the BHCs do not maintain the data in their
systems. The same commenters suggested either eliminating the
particular data items or allowing BHCs to leave the data items blank.
In response to other comments discussed below, the Federal Reserve will
implement several changes to the data schedules to reduce burden and to
ease the completion of the data schedules.
A couple of commenters suggested a staggered approach to data
collection where some data are collected for the initial submission,
but other data, particularly historical data, are collected in future
quarters. They suggested staggered due dates to lessen the burden for
the initial submission, given the short turnaround time, while allowing
the Federal Reserve to collect data in the future.
The data reported on the FR Y-14Q schedules, which include, in some
cases, a one-time request for historical data, are essential for
supervisory models and allow the Federal Reserve to produce supervisory
estimates consistently across all BHCs. However, in response to other
comments discussed below, the Federal Reserve will implement several
changes to the data schedules to reduce burden.
Several commenters stated that there is a significant overlap
between certain FR Y-14 data schedules and data currently provided by
large national banks to their banking regulator. Other commenters noted
an overlap between certain FR Y-14 data schedules (e.g. Securities) and
other existing Federal Reserve supervisory data collections. Upon
implementation, BHCs will be required to submit the FR Y-14 schedules.
The Federal Reserve does not believe that other data collections
overlap with the FR Y-14. Upon implementation, the FR Y-14 data
schedules would replace the Federal Reserve's ongoing supervisory data
collection of a similar nature for all 19 BHCs.
Several commenters noted inconsistencies in the reporting
requirements for loans classified as held for sale and held for
investment accounted for under a fair value option. Recognizing the
inconsistencies noted by the commenters, the Federal Reserve will add
new data items to the Wholesale, Retail, and Summary schedules to
ensure the consistent treatment of these assets across portfolios.
Recommended changes to the affected schedules are described below.
One commenter noted that BHCs should have the opportunity to
review, provide feedback, and amend the market shocks, particularly as
it applies to the CCAR 2012 exercise. The Federal Reserve does not
agree that it would be beneficial to engage the BHCs in an iterative
process to determine the market shocks provided. BHCs will have the
opportunity to provide their own shocks in the BHC specified scenarios.
The trade groups expressed concern about the delay in the Federal
Reserve's responses to technical and clarifying questions and urged the
Federal Reserve to clearly set forth a robust and transparent process
for responding to future inquiries in a timely manner. The Federal
Reserve will implement an enhanced and streamlined process for
answering these types of questions in a timely manner during the CCAR
2012 exercise.
B. Trading Risk Schedule
One commenter suggested, citing a potentially heavy reporting
burden, allowing BHCs to interpolate the data for the Trading Risk
schedule using the data produced on a regular basis for internal risk
reports, where appropriate. The Federal Reserve recognizes the
potential significant reporting burden and will allow BHCs to
interpolate the data to map into the Trading Risk schedule.
Several commenters noted structural problems with the equities and
commodities spot/volatility grids in the proposed schedule and urged
the Federal Reserve to make modifications to the schedule.
Specifically, they argued that the range of shocks defining the grid go
beyond those that would reasonably be expected given historical
volatility and that some of the spot/volatility combinations were not
reflective of the historical relationship between prices and
volatility. The Federal Reserve recognizes the commenters' concern and
will adjust the range of shocks to be consistent with the range of
historical volatility across the term structure. Further, the Federal
Reserve will remove the reporting requirements for the combinations of
spots and volatility points that would be inconsistent with the
historical distribution of combinations.
Two commenters suggested that the commingling of directional risk
and basis risk in the DV01 worksheet of the Trading Risk schedule
obfuscates the interest rate exposure, and that it would be more
appropriate to distinguish between the risks. The Federal Reserve
agrees with the comment, and will separate the base curves and basis
risk in the tables so that they are clearly differentiated.
Several commenters suggested changes to the Trading Risk schedule,
including increasing granularity or adding risk metrics in the Trading
Risk schedule. The Federal Reserve will not make such changes at this
time but will consider those comments for potential future revisions to
the schedule.
One commenter suggested adding business line materiality
thresholds, in addition to the BHC-level materiality thresholds
described above, because it is operationally difficult to capture small
amounts of risk in business lines where risk is not the main risk
factor. The commenter further proposed not completing the exposures
portion of the worksheets for immaterial risk (e.g. less than 5 percent
of total for a given risk exposure metric). The Federal Reserve
believes that the exposure should be aggregated at a firm-level, not by
[[Page 73637]]
business line, and therefore, recommends using existing minimum
thresholds in the proposed worksheets. The estimated aggregate exposure
of positions not included should be less than the stated minimum
threshold for each table.
The initial Federal Register notice indicated that the as-of date
for the Trading Risk schedule for the third quarter, the annual CCR
schedule, and the Trading Risk worksheet in the Summary schedule would
be communicated to the BHCs sometime in the third or fourth quarter of
each year. Two commenters noted that the BHCs should be permitted to
submit data using the BHCs regular weekly report as long as this date
falls during the week of the official as-of date. Another commenter
suggested that the Federal Reserve should shorten the time period from
which the as-of date would be selected.
The Federal Reserve agrees with both comments and will allow BHCs
to submit the trading data as of the most recent date that corresponds
to the regular reporting cycle that falls prior to the official trading
as-of date. In addition, the Federal Reserve will communicate the as-of
date in the fourth quarter of each year.
C. CCR Schedule
Several commenters indicated that there is significant burden
associated with the requirement to run multiple scenarios and
specifications to capture Expected Exposure (EE) profiles (i.e. running
two separate specifications for each of the unstressed EE profile,
stressed EE profile using the BHC shock scenario, and stressed EE
profile using the Federal Reserve shock scenario) to complete the CCR
schedule. The Federal Reserve acknowledges the burden placed on BHCs of
running all six combinations of scenarios and specifications and the
resulting effects on data quality. Therefore, the Federal Reserve will
remove two of the three specified EE profiles under the Federal Reserve
specification, namely, the unstressed EE profile and stressed EE
profile using the BHC shock scenario. Unstressed EE profiles as well as
EE profiles using both the BHC and Federal Reserve shock scenarios are
required for the BHC specification. In addition, the stressed EE
profile using the Federal Reserve shock scenarios and the Federal
Reserve specification is also required.
One commenter stated that the ``Trading IDR losses from securitized
products'' data item should not include losses from asset-backed
securitized (ABS) products which typically have multiple-name
underlying reference obligations (such as residential mortgage-backed
securities (RMBS) or commercial mortgage-backed securities (CMBS)). The
dominant part of the risk in these products (when held in the trading
book and marked to market) is general market risk, and is therefore
fully captured as mark-to market losses in the trading book loss
calculation. The commenter noted that this view is also reflected in
the proposed rule on the Capital Adequacy Guidelines for Bank Holding
Companies: Market Risk Measure (Appendix E of 12 CFR part 225), which
does not propose calculating an incremental default risk measure for
these products.
The Federal Reserve disagrees with the comment and believes that in
order to fully capture all default and impairment risk for assets under
a given scenario, all securitization structure types, including ABS,
CMBS, and RMBS, should be included in the calculation. The underlying
assets incur additional default, which translates into impairment to
the bonds. The additional incremental loss above and beyond the market
risk shock should be included in the calculation.
One commenter noted that in a prior CCR submission, the BHC
provided additional columns and rows of data in order to better explain
the portfolio. The commenter asked if they could continue to
voluntarily provide this additional explanatory data, and if so,
whether the FR Y-14 reporting format would allow the submission of such
additional data. The Federal Reserve agrees and appreciates BHCs
providing any additional data to give clarity to the portfolio
analysis. The Federal Reserve will create a separate tab and add a
separate column on the existing schedule for BHCs to provide additional
explanatory data at their option.
D. Retail Risk Schedule
One commenter suggested that non-purpose securities-based lending
should be excluded from the Other Consumer Loans worksheet, given that
the risk characteristics of this lending type are markedly different
from other loans reported in the worksheet. In referencing the relevant
corresponding data item collected on the FR Y-9C\2\, the proposed
worksheet indicates that securities-based lending is included in the
definition of other consumer loans. The Federal Reserve agrees with the
comment and will exclude non-purpose securities-based lending from the
definition of other consumer loans.
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\2\ The Consolidated Financial Statements for Bank Holding
Companies (FR Y-9C; OMB No. 7100-0128).
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One commenter indicated that the difference in segment breaks
across retail schedules presents a logistical challenge, and
recommended creating consistent segmentations across portfolios. The
Federal Reserve carefully weighed the need for consistency against
potential added burden and the need to capture risk characteristics of
each portfolio in selecting segment breaks, and will maintain the
segment breaks as proposed.
In response to the comments noted above related to inconsistent
treatment of held for sale and held for investment loans accounted for
under the fair value option, the Federal Reserve will replace a segment
variable, ``SOP 03-3'' with a variable for ``Accounting Treatment'' to
the domestic mortgage schedule. The segment will have an option for
Held for Investment--ASC 310-30\3\ Purchase Impaired, Held for Sale/
Held for Investment under a Fair Value Option or Other.\4\
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\3\ ASC 310-30 is the new FASB codification for SOP 03-3.
\4\ Other includes all mortgage loans that are not reported
under fair value accounting or under ASC 310-30.
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One commenter suggested that an additional segment should be added
in the Small and Medium Enterprise schedules to separate lines of
credit from loans. The Federal Reserve will not make a change at this
time as a full assessment of the effect of such a change on burden has
not been completed. However, the Federal Reserve will consider this
comment for potential future updates to the schedules.
E. Wholesale Schedule (CRE data)
Several commenters indicated that reporting data on cross-
collateralized loans as requested for the CRE collection would present
a significant challenge. Some commenters suggested that the due date
for the initial submission of CRE data should be moved to December 31
in order to allow the BHCs to make necessary changes. The commenters
also suggested that the definition for the data item that captures the
loan numbers of cross collateralized loans should be changed from
``cross collateralized and/or cross defaulted'' to ``cross
collateralized and cross defaulted.'' Finally, they commented that
loans that have less than $1 million committed should be excluded for
the purpose of cross-collateralization, given its statistical
irrelevance and the significant operational challenges.
The Federal Reserve will retain the initial CRE submission deadline
of December 15, consistent with the
[[Page 73638]]
deadline for all other quarterly schedules. However, in response to
comments, the Federal Reserve will revise the CRE collection so that
BHCs will only report the loan numbers of other cross collateralized
loans, not other cross defaulted loans. In addition, for loans less
than $1 million that are cross collateralized with loans that have
commitments greater than $1 million, the Federal Reserve will require
BHCs to report only three data items--Loan Number, Outstanding Balance,
and Committed Balance. All other data items will be optional. However,
as proposed, BHCs will report all loans greater than $1 million based
on committed balance.
One commenter suggested that by not capturing non-CRE collateral,
the data resulting from the proposed CRE schedule would overstate loan-
to-value ratios. The Federal Reserve agrees with the comment, and will
add an optional data item for BHCs to report cash and marketable
securities where a BHC has a first perfected security interest.
In response to the comments noted above related to inconsistent
treatment of held for sale and held for investment loans accounted for
under a fair value option, the Federal Reserve will add mandatory data
items to capture the reserve applied to the loan subject to ASC 310-10,
the ASC 310-30 related adjustment for debt securities acquired in a
transfer and the fair value adjustment on loans classified as held for
sale and held for investment at fair value.
F. Wholesale Schedule (Corporate Loan Data)
Many commenters expressed a concern that the significant amount of
detail (44 data items) proposed for collection of corporate loan
facilities in the Corporate Loan schedule will represent a significant
burden for BHCs. In response to these comments, the Federal Reserve
will modify the Corporate Loan collection to implement a $1 million
threshold for certain ``other'' loan categories and to exclude
unplanned overdraft and loans for purchasing and carrying securities
(secured or unsecured).
In response to the comments noted above related to inconsistent
treatment of held for sale and held for investment loans accounted for
under a fair value option, the Federal Reserve will replace the
proposed mandatory field ``Other Than Temporary Impairment (OTTI)''
which captured only credit impairment charges with a mandatory data
item, ``Fair Value Adjustments (FVA)'' to capture any fair value
adjustments on held for sale and held for investment loans accounted
for under a fair value option.
G. PPNR Schedule
Several commenters expressed concerns about the level of
granularity requested in the PPNR schedule and their ability to provide
the data within the timeframe for the initial submission. The
commenters expressed concerns about the PPNR Submission/Projections
worksheet, particularly related to the section on net interest income
by business segment, noting that historical and projected periods would
be challenging to map to existing internal management reporting
systems. Commenters noted that any estimates would have significant
data quality concerns. In addition, they noted that data on the PPNR
Metrics worksheet would be difficult to provide on a forward looking
and historical basis. The commenters also expressed concerns about
their ability to provide data as requested on the Net Interest Income
(NII) worksheet, and requested that BHCs should have an option to
submit either the PPNR Submission worksheet or the NII worksheet, not
both. Further, several commenters suggested that materiality thresholds
should be considered for data items collected in the PPNR schedule as
they are for balance sheet items.
In response to these comments, the Federal Reserve will implement
several revisions to the PPNR worksheets. First, the instructions will
be modified to underscore that BHCs for which deposits comprise less
than one third of total liabilities for any reported period need only
complete the PPNR Submission/Projections worksheets and the related
portion of the PPNR Metrics worksheets. Such BHCs would designate the
PPNR Submission/Projections worksheets as ``Primary Net Interest
Income'' and the NII worksheet as ``Not Applicable.'' Second, all other
BHCs will specify either the PPNR Submission/Projections or the NII
worksheet as ``Primary Net Interest Income'' and the other as
``Supplementary Net Interest Income'' through a pull down menu at the
top of each worksheet. Note that this designation will refer only to
the NII portion of the worksheets; all other items on the PPNR
Submission worksheet and the related portion of the PPNR Metrics
worksheet must be completed.
The schedule designated as ``Primary Net Interest Income'' and the
related portions of the PPNR Metrics worksheet will be the main sources
of analysis and assessment by the Federal Reserve. Therefore, the
Federal Reserve will require that BHCs continue to complete all data
items in the primary schedule and the related portion of the PPNR
Metrics worksheet. The Federal Reserve will require that BHCs also
provide additional information in the supporting documentation for the
PPNR schedule, including the discussion of consistency of a given
schedule with the BHC's external reporting and internal reporting and
forecasting; a description of broadly-defined types of business models
they currently use (e.g. Asset/Liability, Relationship, Business
Product/Services/Activity and others); high-level descriptions of
motivations for their choices of models for conducting business,
reporting (internal/external) and forecasting profit and loss result;
benefits/challenges associated with those models; and methodologies
employed. For purposes of the FR Y-14 schedules, once a BHC makes a
``primary'' designation, it will continue to treat a given schedule as
``primary'' for all historical and forecast periods.
The ``Supplementary Net Interest Income'' worksheet and the related
portion of the PPNR Metrics worksheet will be used as supplementary
sources of analysis and assessment by the Federal Reserve. BHCs will
provide the data for the ``supplementary'' worksheet on a ``best
efforts'' basis and complete this worksheet to the fullest extent
possible. It is expected that all data items identified with a number
(e.g. 6), but not a number and letter (e.g. 6A) will be completed. In
the supporting documentation, the BHCs will provide information on
which data items or areas were particularly challenging to complete and
reasons for the challenge.
Third, the Federal Reserve will add a materiality threshold for the
business segments within the PPNR Submissions/Projections worksheets.
For each of the 10 major segments, BHCs will be required to report the
PPNR Submission/Projections and PPNR Actual/Projection data only if
revenues for that segment relative to total revenues exceeded 5 percent
in any of the last four quarters preceding the first projection period
requested on the PPNR schedule. BHCs will report all immaterial
business segment revenue in a separate catch-all data item on the PPNR
Submission/Projections worksheet and report no data for those
immaterial segments on the PPNR Metrics worksheet. Additionally, if the
total immaterial business segment revenue relative to total revenue is
greater than 10 percent in any of the last four quarters preceding the
first projection period requested on the PPNR schedule, the BHCs must
report
[[Page 73639]]
actuals/projections for the largest business segment among the
immaterial business segments for all quarters in the PPNR Submissions/
Projections and PPNR Metrics worksheets. Note that for purposes of the
PPNR schedule, revenue is defined as the sum of NII and non-interest
income adjusted for selected exclusions.
Finally, the Federal Reserve will add materiality thresholds for
international breakouts by region based on whether international
revenue exceeded 5 percent of total revenue for a given BHC in any of
the last four quarters preceding the first projection period requested
on the PPNR schedule. Changes implemented for the PPNR schedule will
also apply to the relevant PPNR worksheets in the Summary schedule.
H. Regulatory Capital Instruments and Basel III Schedules
Two commenters raised concerns about potential duplicative data
requests related to Basel III with a potential overlap with the recent
Basel Committee's Basel III Implementation Monitoring Quantitative
Impact Study (QIS) data collection request. There are key differences
between FR Y-14 Basel III annual and quarterly schedules and the
template used for the QIS (the most recent submission of which was due
in October 2011). Whereas the Basel Committee intends to collect actual
point-in-time data twice a year as of the second and fourth quarters,
the annual FR Y-14 Basel III schedule will collect each year actual
balances as of the third quarter in addition to forecasted fourth
quarter balances for all future periods through year-end 2016. In
addition, the Basel III schedule will collect data and supplemental
information on material planned actions that the BHC intends to pursue
over that same forecasted period to address the impact of Basel III on
the BHC's capital, risk-weighted assets, and/or leverage exposures.
The quarterly Basel III schedule will be used to conduct quarterly
monitoring of each BHC's progress against the forecasted data provided
on the annual Basel III schedule. The data for the quarterly schedule
will not be as granular as the data collected in the annual schedule,
and will only be collected in quarters in which the annual schedule is
not collected.\5\ Specifically, the quarterly schedule collects
quarterly point-in-time total balances only for Tier 1 Common, Tier 1
Capital, Risk-weighted Assets and Leverage Exposures, including a few
select components of those balances.
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\5\ Likewise, the data for the Regulatory Capital Instruments
quarterly schedule will only be collected in quarters in which the
annual schedule is not collected.
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One commenter requested the collection of additional information on
the annual and quarterly Basel III schedules. The commenter stated that
fully understanding the Basel treatment for regulatory capital
instruments is crucial in order to assess the quality of each
instrument within a BHC's capital inventory (and the totality of the
capital instrument inventory), under the Basel I and Basel III capital
frameworks. Since Basel treatment is dependent on instrument-specific
characteristics, they suggested modification of the annual and
quarterly worksheets such that the BHC may specify the relevant Basel
treatment, especially in cases where no CUSIP \6\ number or other
internal identification number is provided.
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\6\ CUSIP refers to the Committee on Uniform Security
Identification Procedures. This 9-character alphanumeric code
identifies any North American security for the purposes of
facilitating clearing and settlement of trades.
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Specifically they suggested adding a column for Basel III treatment
to the Redemptions Q3 20YY worksheet and two columns for Basel I and
Basel III treatments, respectively, to the Redemptions 4QYY-4QZZ
worksheet in the FR Y-14A schedule. The commenter also suggested adding
two columns for Basel I and Basel III Treatments, respectively, to the
Planned Action Detail from the CCAR Submission section and also to the
Planned Redemption Details from the CCAR Submission and/or Report
Missing Planned Redemption section of the Confirm Proposed Redemption
worksheet. The commenter stated that they believe these data are
necessary to analyze the specific instrument that the BHC has redeemed
or plans to redeem (depending on whether the worksheet collects actual
or projected data).
In addition, in order to fully analyze and assess the composition
of Tier 1 and Tier 2 capital, the commenter recommended adding a column
titled ``Capital amount redeemed'' (between proposed columns R and S)
to the Confirm Proposed Redemptions worksheet of the quarterly
Regulatory Capital Instruments schedule. The commenter believes this
change is necessary in order to collect information on the amount of
the instrument actually redeemed. Although column L collects
information on the amount planned to be redeemed, this additional field
is necessary in the event the actual amount executed differs from the
amount that was originally planned.
The Federal Reserve agrees with these comments, and will implement
the suggested changes to the Regulatory Capital Instruments and Basel
III annual and quarterly schedules.
I. Summary Schedule
One commenter requested the addition of new data items related to
repurchase reserve/liability for representations and warranties to the
Income Statement worksheet in the Summary schedule. Specifically they
requested the collection of the following data items (4 reported data
items and 1 data item calculated by an imbedded formula):
New data item 59, ``Reserve, prior quarter''
New data item 60, ``Provisions during the quarter''
New data item 61, ``Net charges during the quarter''
New data item 62, ``Reserve, current quarter'' (This data
item would be calculated and not reported by the BHC: sum of items 59
and 60 less item 61.)
New data item 63, ``Line item of PPNR Submission/
Projections worksheet where repurchase provision is recorded''
The commenter noted that these data items would allow supervisors to
view the evolution of BHCs' projections of repurchase reserve/liability
for representations and warranties.
The Federal Reserve recognizes that while BHCs have taken steps to
reduce the risk associated with representations and warranties, this
issue has not been fully resolved since CCAR 2011. The Federal Reserve
agrees with these comments and will implement the suggested changes to
the Income Statement worksheet in the Summary schedule. Note that these
data items were also reported by BHCs in their CCAR 2011 submission and
do not duplicate other data reported on this or any other information
collection.
One commenter noted that because information on settlements related
to representation and warranty breaches in both the Retail Repurchase
and Historical Operational Risk worksheets of the Summary schedule is
being collected that this may result in double counting related
exposures. The Federal Reserve agrees with this comment and will
clarify the instructions for the Summary schedule to ensure the
representation and warranty breaches captured in the Retail Repurchase
worksheet are not captured in the Historical Operational Risk
worksheet.
One commenter requested clarification of the difference between the
C&I Small Business (Graded) and Small Business (Scored/Delinquency
Managed) data items on the Income Statement and Balance Sheet
worksheets of the Summary schedule.
[[Page 73640]]
The Federal Reserve will better align these worksheets with other
regulatory report loan classification schemes, thereby ensuring no
overlap in reporting requirements across FR Y-14 schedules.
Two commenters requested a change to the allowance for loan and
lease losses (ALLL) referenced in the Income Statement worksheet of the
Summary schedule to an allowance for credit loss (ACL) reference, as
that would be in line with their practice of provisioning for ALLL and
for an allowance for unfunded credit commitments. In order to provide
greater distinction between the ALLL and that for off-balance sheet
credit exposures, the Federal Reserve will add a memorandum item to the
Balance Sheet worksheet and adjust the Income Statement worksheet to
capture a breakout of this component. These adjustments will allow BHCs
to provide both pieces of the total allowance.
One commenter noted that, in addition to net charge-offs, they
provision for neutral items and that the allowance roll-forward doesn't
allow the BHC to record these provision-neutral impacts. The Federal
Reserve agrees with this comment and will add a data item to the ALLL
section to capture non-provision or charge-off related changes to the
ALLL, making the section more consistent with Schedule HI-B, Part II of
the FR Y-9C.
One commenter raised concerns about the legal implications of
disclosing estimated litigation losses on a granular basis on the
Operations Risk worksheet in the Summary schedule. The Federal Reserve
notes that a number of data items collected on the FR Y-14A and Q,
including respondents' projections, may be considered trade secrets or
confidential supervisory information. As such, respondents' estimates
of litigation losses are expected to remain confidential.\7\
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\7\ The confidentiality of information submitted to the Board
under the data schedules and related materials shall be determined
in accordance with applicable exemptions under the Freedom of
Information Act (5 U.S.C. 552) and the Board's Rules Regarding
Availability of Information (12 CFR part 261).
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In response to the comments noted above related to the inconsistent
treatment of held for sale and held for investment loans accounted for
under a fair value option, the Federal Reserve will add a Fair Value
Loan worksheet, and a change to the income statement instructions to
capture the marks taken on fair value loans. The Fair Value Loan
worksheet will capture the aggregate fair values and unpaid principal
balances of loans classified as held for sale or held for investment
measured at fair value in the following asset classes: first lien
mortgage, home equity line of credit, credit card, auto loans and
leases, student loans, small business loans, and other consumer loans.
In addition, the instructions for the Summary schedule will be
clarified to indicate that any losses related to loans held for sale or
held for investment with the fair value option should be reported on
the Income Statement worksheet of the Summary schedule under ``Other
Losses.''
Finally, the Federal Reserve will remove data items related to
mortgage servicing rights (MSRs) from the Trading worksheet of the
Summary schedule to further reduce burden on respondents. All MSR-
related earnings, including those captured in the trading book, will be
reported on the PPNR worksheet of the Summary schedule.
Board of Governors of the Federal Reserve System.
November 21, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-30666 Filed 11-28-11; 8:45 am]
BILLING CODE 6210-01-P