[Federal Register Volume 76, Number 231 (Thursday, December 1, 2011)]
[Rules and Regulations]
[Pages 74631-74648]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30665]


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FEDERAL RESERVE SYSTEM

12 CFR Part 225

[Regulation Y; Docket No. R-1425]
RIN 7100-AD 77


Capital Plans

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Final rule.

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SUMMARY: The Board is adopting amendments to Regulation Y to require 
large bank holding companies to submit capital plans to the Federal 
Reserve on an annual basis and to require such bank holding companies 
to obtain approval from the Federal Reserve under certain circumstances 
before making a capital distribution. This rule applies only to bank 
holding companies with $50 billion or more of total consolidated 
assets.

DATES: The final rule will become effective on December 30, 2011.

FOR FURTHER INFORMATION CONTACT: Benjamin W. McDonough, Senior Counsel, 
(202) 452-2036, April C. Snyder, Senior Counsel, (202) 452-3099, or 
Christine E. Graham, Senior Attorney, (202) 452-3005, Legal Division; 
Timothy P. Clark, Senior Advisor, (202) 452-5264, Michael Foley, Senior 
Associate Director, (202) 452-6420, Anna Lee Hewko, Assistant Director, 
(202) 530-6260, or Thomas R. Boemio, Manager, (202) 452-2982, Division 
of Banking Supervision and Regulation, Board of Governors of the 
Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551. 
Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-
4869.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Overview of Comments
III. Scope
IV. Capital Planning
    A. Annual Capital Planning Requirement
    B. Mandatory Elements of a Capital Plan
    C. Data Submissions
    D. Federal Reserve Review of a Capital Plan
    E. Federal Reserve Action on a Capital Plan
    F. Federal Reserve Objection to a Capital Plan
    G. Re-submission of a Capital Plan
V. Approval Requirements
    A. General Requirements
    B. Contents of Request for Approval and Procedures for Review
VI. Conforming Changes to Section 225.4(b) of Regulation Y
VII. Administrative Law Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act

I. Background

    On June 17, 2011, the Board published a proposal in the Federal 
Register to require large bank holding companies to submit capital 
plans to the Federal Reserve on an annual basis and to require such 
bank holding companies to provide prior notice to the Federal Reserve 
under certain circumstances before making a capital distribution (the 
proposed rule or NPR).\1\ The public comment period on the proposed 
rule closed on August 5, 2011. The Board is adopting the rule in final 
form with certain modifications that are discussed below (final 
rule).\2\ The final rule

[[Page 74632]]

applies only to bank holding companies with $50 billion or more of 
total consolidated assets.
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    \1\ 76 FR 35351 (June 17, 2011).
    \2\ The amendments to Regulation Y are codified at 12 CFR 225.8. 
As discussed in section VI of this preamble, the rule also makes 
conforming changes to section 225.4(b) of Regulation Y (12 CFR 
225.4(b)).
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    During the years leading up to the recent financial crisis, many 
bank holding companies 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. The final 
rule is intended to address such practices, building upon the Federal 
Reserve's existing supervisory expectation that large bank holding 
companies have robust systems and processes that incorporate forward-
looking projections of revenue and losses to monitor and maintain their 
internal capital adequacy.\3\
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    \3\ See SR letter 09-4 (Revised March 27, 2009), available at 
http://www.federalreserve.gov/boarddocs/srletters/2009/SR0904.htm; 
see also Revised Temporary Addendum to SR letter 09-4 (November 17, 
2010) (SR 09-4), available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20101117b1.pdf.
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    The Federal Reserve has long held the view that bank holding 
companies generally should operate with capital positions well above 
the minimum regulatory capital ratios, with the amount of capital held 
commensurate with the bank holding company's risk profile.\4\ Bank 
holding companies should have internal processes for assessing their 
capital adequacy that reflect a full understanding of their risks and 
ensure that they hold capital corresponding to those risks to maintain 
overall capital adequacy.\5\ Bank holding companies that are subject to 
the Board's advanced approaches risk-based capital requirements must 
satisfy specific requirements relating to their internal capital 
adequacy processes in order to use the advanced approaches to calculate 
their minimum risk-based capital requirements.\6\
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    \4\ See 12 CFR part 225, Appendix A; see also SR letter 99-18 
(July 1, 1999), available at http://www.federalreserve.gov/boarddocs/srletters/1999/SR9918.HTM.
    \5\ See SR 09-4.
    \6\ See 12 CFR part 225, Appendix G, section 22(a); see also, 
Supervisory Guidance: Supervisory Review Process of Capital Adequacy 
(Pillar 2) Related to the Implementation of the Basel II Advanced 
Capital Framework, 73 FR 44620 (July 31, 2008).
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    As part of their fiduciary responsibilities to a bank holding 
company, the board of directors and senior management bear the primary 
responsibility for developing, implementing, and monitoring a bank 
holding company's capital planning strategies and internal capital 
adequacy process. The final rule does not diminish that responsibility. 
Rather, the final rule is designed to (i) establish common minimum 
supervisory standards for such strategies and processes for certain 
large bank holding companies; (ii) describe how boards of directors and 
senior management of these bank holding companies should communicate 
the strategies and processes, including any material changes thereto, 
to the Federal Reserve; and (iii) provide the Federal Reserve with an 
opportunity to review large bank holding companies' proposed capital 
distributions under certain circumstances.
    In the Board's view, the analytical techniques and other 
requirements set forth in the final rule are necessary to identify, 
measure, and monitor risks to the financial stability of the United 
States.\7\ An elevated capital planning standard for large bank holding 
companies is appropriate because of the heightened risk they pose to 
the financial system and the importance of capital in mitigating these 
risks.\8\ Under section 165 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 (Dodd-Frank Act), the Board is required 
to impose enhanced prudential standards on large bank holding 
companies, including stress testing requirements; enhanced capital, 
leverage, liquidity, and risk management requirements; and a 
requirement to establish a risk committee.\9\ The Board expects that 
large bank holding companies will reflect these enhanced prudential 
standards, including the results of any required stress tests, in their 
capital planning strategies and internal capital adequacy processes.
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    \7\ See section 165(i)(1)(B)(iii) of Public Law 111-203, 124 
Stat. 1376 (2010) (Dodd-Frank Act); 12 U.S.C. 5365(i)(1)(B)(iii).
    \8\ Currently, savings and loan holding companies are not 
subject to minimum regulatory capital ratio requirements. As 
discussed in the Board's Notice of Intent To Apply Certain 
Supervisory Guidance to Savings and Loan Holding Companies, the 
Board is considering applying to savings and loan holding companies 
the same consolidated risk-based and leverage capital requirements 
as bank holding companies to the extent reasonable and feasible 
taking into consideration the unique characteristics of savings and 
loan holding companies and the requirements of Home Owners' Loan 
Act. See 76 FR 22662, 22665 (April 22, 2011). The Board may extend 
the capital plan rule's requirements to savings and loan holding 
companies at such time as the Board applies minimum regulatory 
capital ratio requirements to them.
    \9\ See generally section 165 of the Dodd Frank Act; 12 U.S.C. 
5365. One commenter expressed support for enhanced capital and 
leverage requirements.
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    The Dodd-Frank Act also requires the Board to implement early 
remediation requirements on large bank holding companies under which a 
large bank holding company experiencing financial distress must take 
specific remedial actions in order to minimize the probability that the 
company will become insolvent and minimize the potential harm of such 
insolvency to the United States.\10\ These early remediation 
requirements must impose limitations on capital distributions in the 
initial stages of financial decline and increase in stringency as the 
financial condition of the company declines.\11\ Depending on a large 
bank holding company's financial condition, early remediation 
requirements imposed under the Dodd-Frank Act may result in limitations 
on a company's capital distributions in addition to the requirements 
that are imposed by the final rule.
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    \10\ See section 166 of the Dodd-Frank Act; 12 U.S.C. 5366.
    \11\ Id.
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II. Overview of Comments

    The Board received 16 comments on the proposed rule. Commenters 
included financial trade associations, bank holding companies, policy 
institutions, and individuals. Commenters generally expressed support 
for the proposed rule. Several commenters recommended one or more 
changes to specific provisions of the proposed rule.
    For instance, many commenters provided suggestions on the timeframe 
under which the Federal Reserve would review and act on a bank holding 
company's capital plan. Commenters asked for more information related 
to the data submissions that accompany the capital plan submission. In 
addition, many of the commenters asked for clarification on the content 
of the capital plans and provided views on the standards under which 
the Federal Reserve could object to capital plans. Other commenters 
provided suggestions on whether firms should be able to make capital 
distributions not specified in their capital plans without providing 
prior notice to the Federal Reserve and how such a standard should be 
crafted. In addition, three commenters raised issues that would be 
relevant to savings and loan holding companies should the final rule's 
requirements extend to these institutions at a future date.
    In developing this final rule, the Board has carefully considered 
the comments received on the proposed rule. In response to these 
comments, the Board has clarified the requirements of the rule and 
modified the proposed rule in certain respects. For example, the Board 
has--
     Clarified in the preamble that a notice of a non-objection 
to a capital

[[Page 74633]]

plan will extend through the first quarter of the subsequent year;
     Clarified in the preamble that large bank holding 
companies will remain subject to SR letter 09-4, which provides 
guidance regarding capital distributions;
     Revised the final rule to provide that, if the Federal 
Reserve objects to a bank holding company's capital plan, the bank 
holding company may not make any capital distribution (other than a 
capital distribution with respect to which the Federal Reserve did not 
object) until such time as the Federal Reserve issues a non-objection 
to the company's capital plan; and
     Added a limited exception that permits well capitalized 
large bank holding companies that are performing in accordance with 
baseline projections to make modest capital distributions in excess of 
the amount described in the company's capital plan under certain 
circumstances.
    In addition, in response to commenters' requests for additional 
guidance on the data collection, the Federal Reserve has published a 
detailed description of the data that it intends to collect for 
supervisory purposes and to support the review of capital plans in a 
separate Federal Register notice.\12\
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    \12\ 76 FR 55288 (September 7, 2011).
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    These changes, as well as the Board's other responses to the 
comments received, are discussed in greater detail below.

III. Scope

    The final rule applies to every top-tier bank holding company 
domiciled in the United States that has $50 billion or more in total 
consolidated assets (large bank holding companies).\13\ As of September 
30, 2011, there were approximately 34 large bank holding companies. The 
Board notes that the asset threshold of $50 billion is consistent with 
the threshold established by section 165 of the Dodd-Frank Act relating 
to enhanced supervision and prudential standards for certain bank 
holding companies.\14\
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    \13\ Thus, the final rule will not apply to a foreign bank or 
foreign banking organization that is itself a bank holding company 
or treated as a bank holding company pursuant to section 8(a) of the 
International Banking Act of 1978 (12 U.S.C. 3106(a)), but generally 
will apply to any U.S.-domiciled bank holding company subsidiary of 
the foreign bank or foreign banking organization that meets the 
final rule's size threshold.
    \14\ See section 165(a) of the Dodd-Frank Act; 12 U.S.C. 
5365(a). The Dodd-Frank Act provides that the Board may, upon the 
recommendation of the Financial Stability Oversight Council, 
increase the $50 billion asset threshold for the application of the 
resolution plan, concentration limit, and credit exposure report 
requirements. See 12 U.S.C. 5365(a)(2)(B).
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    The Board received a comment suggesting that the $50 billion asset 
threshold be measured over a four-quarter period in order to minimize 
the likelihood that temporary asset fluctuations would trigger the 
rule's application. In response to this comment, the Board has amended 
the proposal to measure ``total consolidated assets'' as the average of 
a company's total consolidated assets over the previous four calendar 
quarters, as reflected on the bank holding company's Consolidated 
Financial Statements for Bank Holding Companies (FR Y-9C). This 
calculation will be effective as of the due date of the bank holding 
company's most recent FR Y-9C. The final rule also applies to any 
institution that the Board determines, by order, shall be subject in 
whole or in part to the rule's requirements based on the institution's 
size, level of complexity, risk profile, scope of operations, or 
financial condition. The final rule provides that a bank holding 
company that becomes subject to the final rule by operation of the 
asset threshold after the 5th of January of a calendar year will not be 
subject until January 1 of the next calendar year to the final rule's 
requirement to file a capital plan with the Federal Reserve, resubmit a 
capital plan under certain circumstances, or to obtain prior approval 
of capital distributions in excess of those described in the firm's 
capital plan.
    Consistent with the phase-in period for the imposition of minimum 
risk-based and leverage capital requirements established in section 171 
of the Dodd-Frank Act, until July 21, 2015, the final rule does not 
apply to any bank holding company subsidiary of a foreign banking 
organization that is currently relying on Supervision and Regulation 
Letter SR 01-01 issued by the Board of Governors (as in effect on May 
19, 2010).\15\
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    \15\ Under Supervision and Regulation Letter SR 01-01, as a 
general matter, a U.S. bank holding company that is owned and 
controlled by a foreign bank that is a financial holding company 
that the Board has determined to be well-capitalized and well-
managed is not required to comply with the Board's capital adequacy 
guidelines. See SR letter 01-01 (January 5, 2001), available at 
http://www.federalreserve.gov/boarddocs/srletters/2001/sr0101.htm.
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    Several commenters suggested that the Board grant a transition 
period to large bank holding companies that did not participate in the 
2011 Comprehensive Capital Analysis and Review (CCAR). One commenter 
further suggested that, during the transition period, this set of large 
bank holding companies (non-CCAR firms) participate in a capital 
planning exercise where they would submit data templates and conduct 
stress testing, but would not be subject to the other requirements of 
the rule, including the prior notice requirements. The Board has 
carefully considered these comments and has decided not to provide for 
a formal transition period for non-CCAR firms. Thus, all large bank 
holding companies will be required to submit capital plans in January 
2012 and will generally be subject to the rule's requirements. The 
Board notes that the final rule is designed to be flexible enough to 
accommodate bank holding companies of varying degrees of complexity and 
to adjust to changing conditions over time. The level of detail and 
analysis expected in a capital plan will vary based on the large bank 
holding company's size, complexity, risk profile, and scope of 
operations. Moreover, the Federal Reserve will work with non-CCAR firms 
to communicate the review process and the information requirements of 
the rule.
    The Board understands that non-CCAR firms may need additional time 
to build and implement the internal systems necessary to satisfy the 
data collection requirements required with respect to stress scenarios 
provided by the Board. Thus, for purposes of the Federal Reserve's 
evaluation of capital plans due January 5, 2012, non-CCAR firms will 
not be required to submit the complete set of data templates required 
of the CCAR firms. Instead, as discussed in section IV.C. of the 
preamble, some non-CCAR firms may be asked to submit limited, summary 
information to the Federal Reserve about their projections of revenues 
and losses.
    Finally, three commenters raised issues that would be relevant to 
savings and loan holding companies should the final rule's requirements 
extend to these institutions at a future date. If the Board decides to 
extend the final rule to savings and loan holding companies through 
separate rulemaking or by order, it intends to take these comments into 
account.

IV. Capital Planning

A. Annual Capital Planning Requirement

    The final rule requires a large bank holding company to develop and 
maintain a capital plan. At least annually, the bank holding company's 
board of directors or a designated committee thereof is required to 
review the robustness \16\ of the holding

[[Page 74634]]

company's process for assessing capital adequacy, ensure that any 
deficiencies in the firm's process for assessing capital adequacy are 
appropriately remedied, and approve the bank holding company's capital 
plan.\17\
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    \16\ The proposed rule would have required a bank holding 
company's board of directors or designated committee to review the 
``effectiveness'' of the holding company's process for assessing 
internal capital adequacy. In response to comments that this 
requirement was unclear, the Board has replaced the term 
``effectiveness'' with the term ``robustness'' and provided guidance 
on how robustness should be evaluated.
    \17\ As part of this review, the board of directors should 
consider any remaining uncertainties, limitations, and assumptions 
associated with the bank holding company's capital adequacy process.
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    Robustness of a large bank holding company's capital adequacy 
process should be evaluated based on the following elements:
    (i) A sound risk management infrastructure that supports the 
identification, measurement, and assessment of all material enterprise-
level risks arising from the exposures and business activities of the 
bank holding company;
    (ii) An effective process for translating risk measures into 
estimates of potential loss over a range of adverse scenarios and 
environments--using multiple, complementary loss forecasting 
methodologies--and for aggregating those estimated losses across the 
bank holding company; \18\
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    \18\ While a company should use multiple, complementary loss 
forecasting methodologies in its process for assessing capital 
adequacy (see section 225.8(d)(2)(ii) of the final rule), a company 
is not required to use multiple methodologies when estimating the 
expected uses and sources of capital for purposes of section 
225.8(d)(2)(i) of the final rule.
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    (iii) A clear definition of available capital resources and an 
effective process for forecasting available capital resources 
(including any forecasted revenues) over the same range of adverse 
scenarios and environments used for loss forecasting;
    (iv) A process for considering the impact of loss and resource 
estimates on capital adequacy, in line with the bank holding company's 
stated goals for the level and composition of capital, and taking into 
account any limitations of the company's capital adequacy process and 
its components;
    (v) A process, supported by the bank holding company's capital 
policy, to use its assessments of the impact of loss and resource 
estimates on capital adequacy to make key decisions regarding the 
current level and composition of capital, specific capital actions, and 
capital contingency plans as they affect capital adequacy;
    (vi) Robust internal controls governing capital adequacy process 
components, including sufficient documentation; change control; model 
validation and independent review; and audit testing; and
    (vii) Effective board and senior management oversight of the bank 
holding company's capital adequacy process, including periodic review 
of capital goals, assessment of the appropriateness of adverse 
scenarios considered in capital planning, regular review of any 
limitations and uncertainties in the process, and approval of planned 
capital actions.
    Under the proposed rule, a large bank holding company would have 
been required to submit its capital plan by January 5th. Commenters 
provided suggestions on the proposed deadline. One commenter expressed 
the concern that a large bank holding company will be required to rely 
on tentative fourth quarter financial statements in developing its 
capital plan and suggested that the deadline be pushed to later in the 
first quarter. Another commenter suggested that the Board adopt a 
rolling submission process to permit firms to align capital plan 
submission with internal capital planning process. As discussed below, 
these concerns were motivated in part by the concern that the timing of 
the capital plan submission and review interrupted firms' ability to 
make capital distributions in the first quarter. The Board has 
addressed these concerns to a degree by clarifying in the preamble 
that, for a capital plan submitted in the first quarter, a non-
objection would cover the four-quarter period commencing with the 
second quarter and extend through the first quarter of the following 
year. For a capital plan resubmitted after the first quarter, a non-
objection would extend through the first quarter of the subsequent 
year.
    As further discussed below, the Board has decided to maintain the 
proposed submission date of January 5th for capital plans. Doing so 
will permit review of capital plans within the first quarter, thus 
minimizing to the greatest extent possible the potential to disrupt a 
large bank holding company's ability to make capital distributions in 
subsequent quarters of that year. In addition, a single submission date 
ensures that firms are finalizing their capital plans based on the same 
quarter's data, which permits the Board to perform a cross-firm 
comparison of capital plans based on the same scenarios and to 
determine whether to object to firms' capital plans based on consistent 
scenarios.

B. Mandatory Elements of a Capital Plan

    Consistent with the NPR, the final rule defines a capital plan as a 
written presentation of a large bank holding company's capital planning 
strategies and capital adequacy process that includes certain mandatory 
elements. These mandatory elements are organized into four main 
components:
    (i) An assessment of the expected uses and sources of capital over 
the planning horizon (at least nine quarters, beginning with the 
quarter preceding the quarter in which the bank holding company submits 
its capital plan) that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions;
    (ii) A detailed description of the bank holding company's process 
for assessing capital adequacy;
    (iii) The bank holding company's capital policy; and
    (iv) A discussion of any expected changes to the bank holding 
company's business plan that are likely to have a material impact on 
the firm's capital adequacy or liquidity.
    The mandatory elements under each component are described below. 
While the final rule reflects a different organizational structure than 
the proposed rule, the elements are substantively the same.\19\
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    \19\ The proposed rule defined a ``capital plan'' as ``a written 
presentation of a bank holding company's capital planning strategies 
and capital adequacy processes that includes: (i) An assessment of 
the expected uses and sources of capital over a nine-quarter 
forward-looking planning period (beginning with the quarter 
preceding the quarter in which the bank holding company submits its 
capital plan) that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions, (ii) a detailed description of 
the bank holding company's processes for assessing capital adequacy, 
and (iii) an analysis of the effectiveness of these processes.'' 
Section 225.8(d)(2) of the proposed rule set forth additional 
mandatory elements of a capital plan. The final rule simplifies the 
organization by locating all of the required elements of a capital 
plan in one place. The final rule defines a ``capital plan'' as 
``written presentation of a bank holding company's capital planning 
strategies and capital adequacy processes that includes the 
mandatory elements set forth in [section 225.8(d)(2) of the final 
rule].'' Section 225.8(d)(2) of the final rule sets forth the 
comprehensive list of elements required to be included in a firm's 
capital plan, including elements of the definition of a ``capital 
plan'' in the proposed rule.
     The final rule does not require a capital plan to include an 
analysis of the effectiveness of the large bank holding company's 
processes for assessing capital adequacy. As described in section 
IV.A of this preamble, the board of directors of a large bank 
holding company is required to assess the robustness of the bank 
holding company's capital plan at least annually. In light of the 
Board's supervisory review of this assessment, the Board will not 
require a large bank holding company to include a separate analysis 
in its capital plan.

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[[Page 74635]]

    These mandatory elements of a capital plan are consistent with the 
Federal Reserve's existing supervisory practice with respect to the 
information that it expects large bank holding companies to include in 
a capital plan for internal planning purposes. A large bank holding 
company should include in its capital plan other information and 
analysis that it determines is relevant to its capital planning 
strategies and internal capital adequacy process.
    The level of detail and analysis expected in a capital plan will 
vary based on the large bank holding company's size, complexity, risk 
profile, and scope of operations. Thus, for example, a large bank 
holding company that has extensive credit exposures to commercial real 
estate but very limited trading activities will be expected to have 
robust systems in place to identify and monitor its commercial real 
estate exposures, but its systems related to trading activities will 
not need to be as sophisticated or extensive. In contrast, a large bank 
holding company with extensive exposure to a variety of risk exposures, 
including both retail and wholesale exposures, as well as significant 
trading activities and international operations, will be expected to 
have an integrated system for measuring and aggregating all of these 
risk exposures.
    One commenter requested that the Board clarify that the capital 
planning process should focus on the consolidated organization. The 
Board confirms that the capital planning process should focus on the 
consolidated organization, but should also provide for the specific 
capital needs of material subsidiaries consistent with the large bank 
holding company's obligations to serve as a source of strength to its 
subsidiary depository institutions.
    Another commenter requested that the Federal Reserve recognize that 
bank holding companies that are wholly-owned subsidiaries of foreign 
banking organizations have different capital planning goals than 
publicly-traded domestic bank holding companies. In particular, capital 
planning by these institutions should take into account the financial 
condition of their parent foreign bank and/or developments in the 
parent foreign bank's home country. The Board recognizes that the 
capital planning considerations will be different for domestic 
subsidiaries of foreign banking organizations than for publicly traded 
domestic bank holding companies and expects that the capital plans of 
such domestic subsidiaries will reflect these differences.
1. Assessment of the Expected Uses and Sources of Capital Over the 
Planning Horizon That Reflects the Large Bank Holding Company's Size, 
Complexity, Risk Profile, and Scope of Operations, Assuming Both 
Expected and Stressful Conditions
    The first component of a large bank holding company's capital plan 
is an assessment of the expected uses and sources of capital over the 
planning horizon, assuming both expected and stressful conditions. This 
assessment must contain the following elements:
    (1) Estimates of projected revenues, losses, reserves, and pro 
forma capital levels, including any minimum regulatory capital ratios 
(for example, leverage, tier 1 risk-based, and total risk-based capital 
ratios) and any additional capital measures deemed relevant by the bank 
holding company, over the planning horizon under expected conditions 
and under a range of stressed scenarios, including any scenarios 
provided by the Federal Reserve and at least one stressed scenario 
developed by the bank holding company appropriate to its business model 
and portfolios; \20\
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    \20\ Whereas the proposed rule required a large bank holding 
company to conduct a probabilistic assessment of the likelihood of 
the bank holding company-developed scenario, the Board has not 
included it as a mandatory element in the final rule because it does 
not believe that such a probabilistic assessment will assist the 
bank holding company's board of directors in determining the 
robustness of a capital plan in all circumstances. The Board has 
also provided additional guidance on its expectations in regard to 
the bank holding company-developed scenarios.
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    (2) A calculation of the pro forma tier 1 common ratio over the 
planning horizon under expected conditions and under a range of 
stressed scenarios and discussion of how the company will maintain a 
pro forma tier 1 common ratio above 5 percent under the stressed 
scenarios required by the final rule;
    (3) a discussion of the results of any stress test required by law 
or regulation, and an explanation of how the capital plan takes these 
results into account; and
    (4) a description of all planned capital actions over the planning 
horizon.
a. Stress Scenarios
    In assessing its expected uses and sources of capital over the 
planning horizon, a large bank holding company must estimate projected 
revenues, losses, reserves, and pro forma capital levels under expected 
conditions and under a range of stressed scenarios, including any 
scenarios provided by the Federal Reserve. Several commenters asked 
that the Board provide more guidance on these stressed scenarios and to 
provide the scenarios to a bank holding company well before the 
company's capital plan is due. Because the Board expects that the 
stressed scenarios will change over time and in order for the scenarios 
to reflect current data, the Board intends to provide the stressed 
scenarios to a firm at least several weeks before the capital plans are 
due.
    Other commenters requested guidance on the relationship between 
these stressed scenarios and the scenarios that the Board is required 
to provide under section 165(i) of the Dodd-Frank Act. The Board 
expects that the stress scenarios that it provides under the final rule 
will be consistent with the stress scenarios it will provide to firms 
for stress tests they conduct under section 165 of the Dodd-Frank Act. 
In addition, the Board confirms that stress testing should be conducted 
in accordance with any applicable supervisory guidance.
    One commenter suggested that the Board design stress scenarios 
based on extreme yet plausible conditions that are administered 
simultaneously across multiple banks. Generally, the Board expects that 
the stressed scenarios will consist of forecasts of key economic and 
financial variables consistent with a stressful environment. In 
calibrating the severity of a stress scenario, the Federal Reserve will 
target a severe scenario that is not outside the range of 
possibilities. There are multiple quantitative and qualitative 
approaches to achieve this level of target severity, described below.
    One approach involves the construction of a baseline forecast from 
a large-scale macroeconomic model and identification of a scenario that 
would have a specific probabilistic likelihood given the baseline 
forecast. For example, a scenario may be constructed that has a 5 
percent chance of occurring, conditional on the baseline outlook. While 
many scenarios would be equally likely using this ``probabilistic 
approach'' there are a variety of statistical approaches (together with 
some judgment) that help to select an appropriate scenario from this 
set. However, given that the probabilities of macroeconomic events can 
only be imprecisely estimated, and that many macroeconomic models tend 
to underestimate the true probabilities of stressful economic outcomes, 
such an approach may not, by itself, be well-suited to scenario design.
    An alternative approach assumes that the future path of the U.S. 
economy would follow the path experienced during post-war recessions. 
For example, of the 9 recessions since 1957, the average increase in 
the unemployment rate was 2.4 percentage points and the average peak-
to-trough

[[Page 74636]]

decline in GDP was 2.2 percent; the stress scenario could thus be 
designed to match these changes, or one could select from among 
scenarios that were worse than the average one. While this ``recession 
approach'' is transparent and straightforward to implement, it may not 
account for the underlying state of the economy at the time the stress 
test is conducted. The same shocks may lead to better or worse 
macroeconomic performance at a particular point in time depending on 
the scope for monetary or fiscal policy to offset the shocks or other 
factors. The ``recession approach'' may be augmented with a 
macroeconomic model to take into account the effect of current 
conditions on macroeconomic performance.
    Another approach augments the scenario generated by either the 
``probabilistic approach'' or ``recession approach'' with one or more 
particularly salient risks facing the economy or the financial system. 
As an example, while the more adverse macroeconomic scenario used in 
the 2009 Supervisory Capital Assessment Program (SCAP) was designed to 
capture a generally stressful macroeconomic environment, it also 
assumed an unprecedented 30 percent fall in house prices in 2009-2010, 
in part because of the important role that house prices had played in 
the macro-financial stress over the previous few years and expectations 
that house price declines would continue to be a salient risk facing 
the economy and the banking system.
    The stress scenarios will provide forecasts for a number of 
macroeconomic variables. In SCAP, the Federal Reserve defined the macro 
scenarios by providing forecasts for three variables: GDP, unemployment 
and house prices. In CCAR, the Federal Reserve defined the 
macroeconomic scenarios using nine variables: GDP, the consumer price 
index, disposable personal income, the unemployment rate, the three-
month T-bill rate, the 10-year Treasury rate, the rate on triple-B 
rated corporate bonds, the value of a broad index of U.S. stock prices, 
and house prices. Going forward, the Federal Reserve will likely 
modestly increase the number of variables used to define the scenarios. 
In particular, it will likely increase the number of U.S. macroeconomic 
indicators, as well as variables summarizing global macroeconomic 
conditions and exchange rates. In increasing the number of variables, 
the Federal Reserve intends to balance the benefits of additional 
precision to the scenarios with the cost of increased complexity.
    Measuring the effects of the scenarios on a firm's trading 
exposures requires the consideration of additional variables. 
Evaluating the profit and loss sensitivity of a firm's trading 
portfolio in response to an adverse market shock requires defining a 
large set of specific factors for which macroeconomic models can give 
only limited guidance (e.g., the Libor-overnight indexed swap rate 
spread). In the SCAP and CCAR, the Federal Reserve used financial 
market shocks consistent with what actually occurred from the end of 
June 2008 to year-end 2008, a period of severe financial dislocation. 
In the future, as the financial products traded by firms evolve, the 
trading scenario will likely rely less on a particular historical 
episode, and be guided more by a statistical framework based on 
historical experience, or hypothetical assumptions, reflecting salient 
risks facing the financial system. However, the trading book shock will 
not be inconsistent with the environment and circumstances 
characterized by the general macroeconomic scenario that is used.
    The Board intends that a large bank holding company will integrate 
into its capital plan, as one part of the underlying analysis, the 
results of the company-run stress tests conducted under section 165 of 
the Dodd-Frank Act, when implemented, and the Federal Reserve will 
consider the results of those stress tests in its evaluation of that 
bank holding company's capital plan.\21\ However, the Board does not 
expect that the results of stress tests conducted under the Dodd-Frank 
Act alone will be sufficient to address all relevant adverse outcomes 
that should be covered in a satisfactory capital plan for purposes of 
the final rule. The bank holding company-designed stress scenario 
should reflect an individual company's unique vulnerabilities to 
factors that affect its firm-wide activities and risk exposures, 
including macroeconomic, market-wide, and firm-specific events.
---------------------------------------------------------------------------

    \21\ See section 165(i)(1) and (2) of the Dodd-Frank Act; 12 
U.S.C. 5365(i)(1) and (2). In reviewing stress test results of U.S. 
subsidiaries of foreign banking organizations, the Federal Reserve 
intends to take into account any stress tests applicable to the 
foreign consolidated group.
---------------------------------------------------------------------------

b. Minimum Regulatory Capital Ratios and 5 Percent Tier 1 Common Ratio
    The following discussion provides more detail on the requirement 
that a company calculate pro forma capital levels, including any 
minimum regulatory capital ratios, and its pro forma tier 1 common 
ratio over the planning horizon under expected and stressful 
conditions. The final rule defines minimum regulatory capital ratios as 
any minimum regulatory capital ratio that the Federal Reserve may 
require of a large bank holding company, by regulation or order, 
including the bank holding company's leverage ratio and tier 1 and 
total risk-based capital ratios as calculated under Appendices A, D, E, 
and G to this part 225 (12 CFR part 225, Appendices A, D, E, and G), or 
any successor regulation. In the future, the Board may propose to 
modify, or add to, the existing minimum regulatory capital 
requirements.
    In addition to the requirements discussed above, under the proposed 
rule, until January 1, 2016, a large bank holding company would have 
been required to calculate its pro forma tier 1 common ratio under 
expected and stressful conditions and discuss in its capital plan how 
the bank holding company will maintain a pro forma tier 1 common ratio 
above 5 percent under those conditions throughout the planning horizon. 
This level reflects a supervisory assessment of the minimum capital 
needed to be a going concern throughout stressful conditions and on a 
post-stress basis, based on an analysis of the historical distribution 
of earnings by large banking organizations.
    For purposes of this requirement, a large bank holding company's 
tier 1 common ratio means the ratio of a large bank holding company's 
tier 1 common capital to its total risk-weighted assets. Tier 1 common 
capital is calculated as tier 1 capital less non-common elements in 
tier 1 capital, including perpetual preferred stock and related 
surplus, minority interest in subsidiaries, trust preferred securities 
and mandatory convertible preferred securities.\22\ Tier 1 capital has 
the same meaning as under Appendix A to Regulation Y, or any successor 
regulation, and total risk-weighted assets has the same meaning as 
under Appendices A, E, and G of Regulation Y, or any successor 
regulation.\23\
---------------------------------------------------------------------------

    \22\ Specifically, non-common elements will include the 
following items captured in the FR Y-9C: Schedule HC, line item 23 
net of Schedule HC-R, line item 5; and Schedule HC-R, line items 6a, 
6b, and 6c.
    \23\ See 12 CFR part 225, Appendices A, E, and G.
---------------------------------------------------------------------------

    This definition of tier 1 common capital is consistent with the 
definition that the Federal Reserve has used for supervisory purposes, 
including in CCAR. The Basel III framework proposed by the Basel 
Committee on Bank Supervision includes a different definition of tier 1 
common capital.\24\ In recognition of the fact that the Board

[[Page 74637]]

and the other federal banking agencies continue to work on implementing 
Basel III in the United States, the Board is requiring a large bank 
holding company to demonstrate how it will maintain a minimum tier 1 
common ratio above 5 percent under stressful conditions using the 
Board's existing supervisory definition of tier 1 common capital. The 
Board will work with the other federal banking agencies to implement 
Basel III and to propose a Basel III tier 1 common capital ratio as a 
new minimum regulatory capital ratio. The existing supervisory 
definition of tier 1 common capital will remain in force under the 
final capital plan rule until the Board adopts the Basel III tier 1 
common ratio, which the Board remains strongly committed to implement.
---------------------------------------------------------------------------

    \24\ See Basel Committee on Banking Supervision, Basel III: A 
global framework for more resilient banks and banking systems 
(December 2010), available at http://www.bis.org/publ/bcbs189.pdf.
---------------------------------------------------------------------------

c. Planned Capital Actions
    In its assessment of the uses and sources of capital, a large bank 
holding company's capital plan must describe all planned capital 
actions over the planning horizon. The final rule defines a capital 
action as any issuance of a debt or equity capital instrument, capital 
distribution, and any similar action that the Federal Reserve 
determines could impact a large bank holding company's consolidated 
capital. A capital distribution is defined as a redemption or 
repurchase of any debt or equity capital instrument, a payment of 
common or preferred stock dividends, a payment that may be temporarily 
or permanently suspended by the issuer on any instrument that is 
eligible for inclusion in the numerator of any minimum regulatory 
capital ratio, and any similar transaction that the Federal Reserve 
determines to be in substance a distribution of capital.\25\
---------------------------------------------------------------------------

    \25\ For example, this definition includes payments on trust 
preferred securities, but does not include payments on subordinated 
debt that could not be temporarily or permanently suspended by the 
issuer under the terms of the instrument.
---------------------------------------------------------------------------

    One commenter requested that the Board permit a capital plan to 
specify alternative uses of capital. The Board believes that the 
effects on a bank holding company's capital adequacy may vary 
significantly depending on the nature of a capital distribution and 
thus has not changed the requirement that a capital plan must include a 
description of all planned capital actions over the planning horizon.
2. Description of the Bank Holding Company's Process for Assessing 
Capital Adequacy
    The second component of a large bank holding company's plan is a 
description of the bank holding company's process for assessing capital 
adequacy. This description must contain the following elements:
    (1) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital ratios 
and above a tier 1 common ratio of 5 percent, and serve as a source of 
strength to its subsidiary depository institutions; and
    (2) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain sufficient capital to 
continue its operations by maintaining ready access to funding, meeting 
its obligations to creditors and other counterparties, and continuing 
to serve as a credit intermediary.
    One commenter requested that the Board clarify that bank holding 
companies subject to an internal capital adequacy assessment process 
(ICAAP) requirement under the Federal Reserve's advanced approaches 
rules would be able to combine components of their ICAAP with their 
capital plan submissions and submit them on the capital plan timeline. 
ICAAP would constitute an internal capital adequacy process for 
purposes of the final rule, and bank holding companies that have a 
satisfactory ICAAP generally would be considered to have a satisfactory 
internal capital adequacy process for purposes of the final rule.
    Moreover, the description of the bank holding company's process for 
assessing capital adequacy may be presented in a document separate from 
the capital plan. Like other elements of a large bank holding company's 
capital plan, this description must be submitted to the Federal Reserve 
on an annual basis and must describe any changes to the bank holding 
company's capital planning process and any new analyses supporting 
changes to this process.
3. Capital Policy
    The third component of a large bank holding company's plan is its 
capital policy. A capital policy is defined as the bank holding 
company's written assessment of the principles and guidelines used for 
capital planning, capital issuance, usage and distributions, including 
internal capital goals; the quantitative or qualitative guidelines for 
dividend and stock repurchases; the strategies for addressing potential 
capital shortfalls; and the internal governance procedures around 
capital policy principles and guidelines. A large bank holding company 
should be able to demonstrate that achieving its stated internal 
capital goals will allow it to maintain ready access to funding, meet 
its obligations to creditors and other counterparties, and continue to 
serve as a credit intermediary during and after the impact of the 
stressed scenarios included in its capital plan over the planning 
horizon.\26\ Similarly, a large bank holding company's capital policy 
should reflect strategies for addressing potential capital shortfalls, 
such as by reducing or eliminating capital distributions, raising 
additional capital, or preserving its existing capital, to support 
circumstances where the economic outlook has deteriorated, the bank 
holding company has underestimated its risks, or the bank holding 
company's performance has not met its expectations.
---------------------------------------------------------------------------

    \26\ In addition, each bank holding company should ensure that 
its internal capital goals reflect any relevant minimum regulatory 
capital ratio levels, any higher levels of regulatory capital ratios 
(above regulatory minimums), and any additional capital measures 
that, when maintained, will allow the bank holding company to 
continue its operations.
---------------------------------------------------------------------------

4. Discussion of Any Expected Changes to the Bank Holding Company's 
Business Plan That Are Likely To Have a Material Impact on the Firm's 
Capital Adequacy or Liquidity
    The fourth element of a large bank holding company's capital plan 
is a discussion of any expected changes to the bank holding company's 
business plan that are likely to have a material impact on the firm's 
capital adequacy or liquidity. For example, the capital plan should 
reflect any expected material effects of new lines of business or 
activities on the bank holding company's capital adequacy or liquidity, 
including revenue and losses.

C. Data Submissions

    In connection with its submission of a capital plan to the Federal 
Reserve, a large bank holding company is required to provide certain 
data to the Federal Reserve. To the greatest extent possible, the data 
templates, and any other data requests, are designed to minimize burden 
on the bank holding company and to avoid duplication, particularly in 
light of potential new reporting requirements arising from the Dodd-
Frank Act. Data required by the Federal Reserve may include, but are 
not limited to, information regarding the bank holding company's 
financial condition, structure, assets, risk exposure, policies and 
procedures, liquidity, and management.
    Commenters requested that the Board provide more guidance on the 
nature and scope of the data requirements and

[[Page 74638]]

to provide any data templates at the time that the final rule becomes 
effective. Commenters also asked that the Federal Reserve be mindful to 
avoid duplicative data requests.
    In response to these comments, the Board has published a separate 
notice in the Federal Register that clarifies the nature and scope of 
the data requirements on the large bank holding companies firms that 
participated in CCAR, including the data templates, and is soliciting 
public comments on this information collection.\27\
---------------------------------------------------------------------------

    \27\ 76 FR 55288 (September 7, 2011).
---------------------------------------------------------------------------

    Commenters suggested that companies be given additional time to 
develop technology and processes to the extent strict compliance with a 
data request would result in undue burden or expense. The Board 
understands that non-CCAR firms are less likely to have technology and 
processes relevant for the specific data collection than the bank 
holding companies that participated in CCAR, and thus only large bank 
holding companies that previously participated in CCAR will be required 
to provide the complete set of data templates in connection with the 
submission of the capital plan due on January 5, 2012. In connection 
with this capital plan submission, non-CCAR firms may be required to 
submit certain limited, summary information under the baseline and 
stress scenarios, which may include income, balance sheet, capital, and 
revenue information by asset class. Going forward, the Federal Reserve 
will require a more complete set of data from non-CCAR firms to support 
their future capital plan submissions.
    In addition, the Board recognizes that non-CCAR firms have not had 
the benefit of receiving the supervisory review and feedback provided 
in the CCAR and Supervisory Capital Assessment Program. The Federal 
Reserve is engaging in extensive dialogue with these non-CCAR firms to 
communicate its expectations on capital planning and capital policies.
    In addition, commenters requested that the Board provide additional 
information regarding the security controls and processes the Board and 
the Reserve Banks have in place to safeguard data. The Board and 
Reserve Banks have internal controls and processes in place to help to 
ensure the integrity of confidential and proprietary data. In addition, 
the Board follows the National Institute of Standards and Technology 
guidance and adheres to Federal Information Security Management Act 
compliance for all the information collections and storage where 
sensitive data are concerned.\28\
---------------------------------------------------------------------------

    \28\ See generally National Institute of Standards and 
Technology, http://csrc.nist.gov/; 44 U.S.C. 3541, et seq.
---------------------------------------------------------------------------

    One commenter suggested that capital plans, non-objections or 
objections to capital plans, requests for reconsideration, approvals or 
rejections of any such requests, prior notice filings, and results of 
stressed scenarios be treated as confidential supervisory information. 
The confidentiality of information submitted to the Board under the 
final rule 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).

D. Federal Reserve Review of a Capital Plan

    The final rule provides that the Federal Reserve will consider the 
following factors in reviewing a large bank holding company's capital 
plan:
    (i) The comprehensiveness of the capital plan, including the extent 
to which the analysis underlying the capital plan captures and 
addresses potential risks stemming from activities across the firm and 
the company's capital policy;
    (ii) The reasonableness of the bank holding company's assumptions 
and analysis underlying the capital plan and its methodologies for 
reviewing the robustness of its capital adequacy process; and
    (iii) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio and above a tier 1 common ratio 
of 5 percent on a pro forma basis under expected and stressful 
conditions throughout the planning horizon, including but not limited 
to any stressed scenarios required under the final rule.
    The Federal Reserve will also consider the following information in 
reviewing a large bank holding company's capital plan:
    (i) Relevant supervisory information about the bank holding company 
and its subsidiaries;
    (ii) The bank holding company's regulatory and financial reports, 
as well as supporting data that will allow for an analysis of the bank 
holding company's loss, revenue, and reserve projections;
    (iii) As applicable, the Federal Reserve's own pro forma estimates 
of the firm's potential losses, revenues, reserves, and resulting 
capital adequacy under expected and stressful conditions, including but 
not limited to any stressed scenarios required under the final rule, as 
well as the results of any stress tests conducted by the bank holding 
company or the Federal Reserve; and
    (iv) Other information requested or required by the Federal 
Reserve, as well as any other information relevant, or related, to the 
bank holding company's capital adequacy.
    A commenter suggested that the Federal Reserve recognize the 
significance of consultation and coordination with appropriate home 
country supervisory authorities to the capital planning and review 
process. The Federal Reserve intends to continue consultation and 
coordination with home country supervisors in evaluating compliance 
with prudential standards.

E. Federal Reserve Action on a Capital Plan

    Nearly all commenters expressed the concern that the timing of the 
capital plan submission and review will interrupt the ability of bank 
holding companies to make capital distributions in the first quarter. 
Commenters proposed several alternatives, including a rolling 
submission process to allow greater flexibility and both earlier and 
later submission due dates to address blackout periods under the 
federal securities laws.
    In response to these commenters, the Board has adjusted the period 
over which a non-objection applies. For a capital plan submitted in the 
first quarter, a non-objection would cover the four-quarter period 
commencing with the second quarter. For a capital plan resubmitted 
after the first quarter, a non-objection would extend through the first 
quarter of the subsequent year. This change is intended to permit bank 
holding companies to continue to engage in planned capital actions 
throughout the first quarter of the calendar year while their capital 
plans are under review.
    In the final rule, a large bank holding company is required to 
submit a complete annual capital plan by January 5 of each calendar 
year. The Federal Reserve will object by March 31 to the capital plan, 
in whole or in part, or provide the large bank holding company with a 
notice of non-objection. With respect to a large bank holding company 
that submits its 2012 capital plan on a timely basis in January 2012, 
the Federal Reserve commits to respond by March 15, 2012, in order to 
give the bank holding company adequate opportunity to make adjustments 
to its capital distributions in the first quarter of 2012.
    This timeframe is intended to balance the Federal Reserve's 
interest in having

[[Page 74639]]

adequate time to review a capital plan with the bank holding company's 
interest in a process that does not unduly interfere with the ability 
of its board of directors and senior management to take appropriate 
capital actions. For example, if a firm submitted a capital plan to the 
Federal Reserve on a timely basis in January 2012, the Federal Reserve 
would provide a response by no later than March 15, 2012. The Federal 
Reserve's non-objection to that capital plan would extend through the 
first quarter of 2013, meaning that the firm could continue to make 
capital distributions during the first quarter of 2013 in accordance 
with the capital plan it submitted in 2012. If the firm submitted its 
2013 capital plan on a timely basis in January 2013, the firm would be 
notified by March 31, 2013, whether or not the Federal Reserve had any 
objection to its 2013 capital plan. If the Federal Reserve did not 
object to the firm's 2013 capital plan, the firm could begin making 
capital distributions under that capital plan in the second quarter of 
2013. Thus, for this hypothetical firm, the Federal Reserve's review of 
its capital plan should not delay the bank holding company's ability to 
pay dividends or take other capital actions while awaiting a response 
from the Federal Reserve.
    Commenters also suggested that the Board make appropriate 
transitional arrangements so that bank holding companies are not 
unnecessarily prevented from making capital distributions in the period 
between the effective date of the final rule and the first date on 
which a large bank holding company would be permitted to make capital 
distributions pursuant to its initial capital plan.
    Large bank holding companies remain subject to the SR letter 09-4. 
SR letter 09-4 states that a banking organization should consult with 
the Federal Reserve before making certain capital distributions. \29\ 
In addition, SR letter 09-4 states that a banking organization should 
hold capital commensurate with its overall risk profile and that a 
banking organization should include a full understanding of its risks 
in its assessment of capital adequacy and ensure that it holds capital 
corresponding to those risks to maintain overall capital adequacy.\30\
---------------------------------------------------------------------------

    \29\ See supra note 3.
    \30\ Id.
---------------------------------------------------------------------------

    With respect to the period between the effective date of the final 
rule and the date on which capital distributions would be permitted 
pursuant to a bank holding company's initial capital plan, bank holding 
companies that participated in CCAR will continue to be subject to 
Revised Temporary Addendum to SR letter 09-4 until the firms receive a 
notice of objection or non-objection from the Federal Reserve with 
respect to the capital plan due January 5, 2012.\31\ Thus, the Board 
expects such firms would not increase their capital distributions above 
the amount described in an approved capital plan, which may include an 
updated and resubmitted capital plan. Non-CCAR firms--which are subject 
to SR letter 09-4 but not the Revised Temporary Addendum to SR letter 
09-4--may make capital distributions before receiving a response from 
the Federal Reserve with respect to their capital plans due January 5, 
2012, but are expected to consult with their appropriate Reserve Bank 
before increasing capital distributions.\32\
---------------------------------------------------------------------------

    \31\ Id.
    \32\ Id.
---------------------------------------------------------------------------

    The Board recognizes that certain bank holding companies may have 
to align their internal capital planning processes with the required 
dates for capital plan submission. However, the Board believes that the 
timeframes set forth in the final rule balance the Federal Reserve's 
interest in performing a cross-firm comparison of capital plans based 
on the same scenarios with the bank holding company's interest in 
minimizing disruptions to firms' capital planning processes. In order 
to adhere to the schedule set forth in the final rule, the Federal 
Reserve may require bank holding companies to submit data templates and 
other required information several weeks before complete capital plans 
are due.

F. Federal Reserve Objection to a Capital Plan

    As under the NPR, the final rule provides that the Federal Reserve 
may object to a capital plan, in whole or in part, if:
    (i) The Federal Reserve determines that the bank holding company 
has material unresolved supervisory issues, including but not limited 
to issues associated with its capital adequacy process;
    (ii) The assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies for 
reviewing the robustness of its capital adequacy process, are not 
reasonable or appropriate;
    (iii) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio or above a 
tier 1 common ratio of 5 percent on a pro forma basis under expected 
and stressful conditions throughout the planning horizon; or
    (iv) The bank holding company's capital planning process or 
proposed capital distributions otherwise constitute an unsafe or 
unsound practice, or would violate any law, regulation, Board order, 
directive, or any condition imposed by, or written agreement with, the 
Board. In determining whether a capital plan or proposed capital 
distributions would constitute an unsafe or unsound practice, the 
Federal Reserve will consider whether the bank holding company is and 
will remain in sound financial condition after giving effect to the 
capital plan and all proposed capital distributions.
    The Federal Reserve received general comments on the grounds for 
objection. One commenter suggested that the Federal Reserve not 
substitute its judgment regarding capital distributions for the board 
of directors' judgment. As noted above, the Board believes that the 
board of directors and senior management of a large bank holding 
company bear the primary responsibility for developing, implementing, 
and monitoring the bank holding company's capital planning strategies 
and internal capital adequacy process. The Federal Reserve's review of 
capital plans is intended to ensure that large bank holding companies 
have sufficient capital to weather stressful economic conditions and 
help to mitigate any systemic risks posed by the firms. In this manner, 
the Board intends to strike a balance between maintaining the board of 
directors and senior management's primary responsibility in capital 
planning and ensuring that these firms have sufficient capital to 
operate in a manner that is safe and sound and does not pose material 
risk to the financial system.
    The Federal Reserve intends to review capital plans on a firm-by-
firm basis in accordance with the regulatory standards set forth in the 
final rule. When evaluating capital adequacy and reviewing banks' 
estimates of capital adequacy, the Federal Reserve may consider 
macroprudential factors, including financial stability, in determining 
whether the assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies for 
assessing its capital adequacy, are reasonable or appropriate.
    Commenters also had several comments on the use of material 
unresolved supervisory issues as grounds for objection. For example, 
commenters requested that the Board confirm that not every ``matter 
requiring

[[Page 74640]]

attention'' will constitute a ``material unresolved supervisory 
issue.'' Commenters also suggested that supervisory issues unlikely to 
have a material impact on a large bank holding company's capital 
position, liquidity, or financial results should not be grounds for 
objecting to a proposed capital plan.
    Under the final rule, not every ``matter requiring attention'' will 
constitute a ``material unresolved supervisory issue''; rather, the 
Federal Reserve will review supervisory issues on a case-by-case basis. 
The Federal Reserve generally expects an institution to correct such 
deficiencies before making any significant capital distributions.
    The Federal Reserve will notify the bank holding company in writing 
of the reasons for a decision to object to a capital plan. The Federal 
Reserve will communicate the basis for the objection when it notifies 
the firm of the objection. Within ten calendar days of receipt of a 
notice of objection, the bank holding company may submit a written 
request for reconsideration of the objection, including an explanation 
of why reconsideration should be granted. Within ten calendar days of 
receipt of the bank holding company's request, the Board will notify 
the company of its decision to affirm or withdraw the objection to the 
bank holding company's capital plan.
    Under the final rule, the period in which a large bank holding 
company is permitted to submit a written request for reconsideration 
was increased from five days to ten days in response to a commenter 
request. The Board had initially proposed the five-day period to permit 
adequate processing time with respect to dividend proposals before the 
end of the first quarter. The commenter suggested giving a large bank 
holding company the ability to respond within ten days would not 
necessarily interfere with that process. The final rule provides that 
the Federal Reserve will respond to a request for reconsideration 
within ten days of receipt. With respect to a capital plan submitted on 
a timely basis in January 2012, a large bank holding company that 
chooses to submit a written request for reconsideration not later than 
ten days before quarter-end will receive a response before the end of 
the quarter. With respect to a capital plan submitted on a timely basis 
in future years, the timing of a written request for reconsideration 
would not constrain a large bank holding company's ability to make 
capital distributions in the first quarter.
    Under the final rule, as an alternative to requesting 
reconsideration of the Federal Reserve's objection to a capital plan, a 
large bank holding company may instead choose to request a hearing. The 
hearing procedures would be the same as those that apply following the 
Federal Reserve's disapproval of a capital distribution. These 
procedures are discussed in section V.B. of this preamble.
    To the extent that the Federal Reserve objects to a capital plan 
and to the capital actions described therein, and until such time as 
the Federal Reserve determines that the bank holding company's capital 
plan satisfies the factors provided in the final rule, the bank holding 
company generally may not make any capital distribution, other than as 
provided below.

G. Re-Submission of a Capital Plan

    A large bank holding company is required to update and re-submit 
its capital plan to the Federal Reserve within 30 calendar days after 
the occurrence of one of the following events:
    (i) The bank holding company determines there has been or will be a 
material change in the bank holding company's risk profile (including a 
material change in its business strategy or any material risk 
exposures), financial condition, or corporate structure since the bank 
holding company adopted the capital plan; \33\
---------------------------------------------------------------------------

    \33\ For purposes of determining whether a change in its risk 
profile is material, a bank holding company will be required to 
consider a variety of risks, including credit, market, operational, 
liquidity, and interest rate risks.
---------------------------------------------------------------------------

    (ii) The Federal Reserve objects to the capital plan; or
    (iii) The Federal Reserve directs the bank holding company in 
writing to revise and resubmit its capital plan for any of the 
following reasons: \34\
---------------------------------------------------------------------------

    \34\ At the request of a commenter, the Board clarifies that a 
bank holding company is not required to file a new full capital plan 
under section 225.8(d)(4)(i)(A) if the Federal Reserve has required 
that an updated plan be filed under section 225.8(d)(4)(i)(C).
---------------------------------------------------------------------------

    (1) The capital plan is incomplete or the capital plan, or the bank 
holding company's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been or will likely be a material change in the bank 
holding company's risk profile (including a material change in its 
business strategy or any risk exposure), financial condition, or 
corporate structure;
    (3) The stressed scenario(s) developed by the bank holding company 
is not appropriate to its business model and portfolios, or changes in 
financial markets or the macro-economic outlook that could have a 
material impact on the bank holding company's risk profile and 
financial condition require the use of updated scenarios; or
    (4) The capital plan or the condition of the bank holding company 
raise any issues to which the Federal Reserve could object to in its 
review of a capital plan.
    While the final rule reflects a different organizational structure 
than the proposed rule, the requirements for resubmission are 
substantively the same.\35\
---------------------------------------------------------------------------

    \35\ In the proposed rule, section 225.8(d)(1)(iv) imposed the 
resubmission requirement and section 225.8(e)(4) set forth 
additional grounds for resubmission. The final rule simplifies the 
organization by locating all of the resubmission provisions in 
section 225.8(d)(4).
---------------------------------------------------------------------------

    Commenters asked for more guidance on the first condition for 
resubmission, which requires a large bank holding company to resubmit 
its capital plan if the bank holding company determines there has been 
or will be a material change in the bank holding company's risk 
profile, financial condition, or corporate structure since the bank 
holding company adopted the capital plan. For example, resubmission may 
be required if the financial performance of the bank holding company is 
substantially worse than anticipated in its initial capital plan, or if 
the company engages in a significant acquisition. In addition, one 
commenter requested that the Board limit a ``material change'' 
requiring a large bank holding company to resubmit its capital plan to 
one that would adversely affect the bank holding company's financial 
condition and capital position.
    The final rule leaves the decision to resubmit based on ``a 
material change in the bank holding company's risk profile'' to the 
bank holding company in the first instance. In addition, the Federal 
Reserve may notify the bank holding company in writing that the Federal 
Reserve had determined that a material change in the company's risk 
profile, financial condition, or corporate structure had occurred or 
was likely to occur.
    One commenter suggested that the criteria for plan resubmission 
should focus only on events that occurred after the date that the 
Federal Reserve issued its non-objection. The Federal Reserve generally 
does not intend to reevaluate a firm's capital plan to which it has 
issued a non-objection, but reserves the right to determine that such a 
capital plan was incomplete or the scenarios used in the capital plan 
were not sufficiently stressed based on new information or changed 
circumstances.
    The Federal Reserve may extend the 30-day period for resubmission 
for up to an additional 60 calendar days. The

[[Page 74641]]

Board considered a commenter's suggestion that the timing of a 
resubmission should depend on the nature of the triggering event. Under 
the final rule, the Federal Reserve may exercise its authority to 
extend the 30-day period to provide for a longer resubmission period as 
necessary to adjust for the nature of the triggering event.
    Under the final rule, a large bank holding company is only required 
to resubmit those portions of its capital plan that have changed. To 
the extent that information contained in an initial capital plan were 
still considered accurate and appropriate, the bank holding company 
would be able to continue to rely on this information for purposes of 
any revised or updated plan, provided that the bank holding company 
provides an explanation of how the information should be considered in 
the light of any new capital actions or changes in the bank holding 
company's risk profile or strategy.
    One commenter suggested that a large bank holding company be able 
to comply with the resubmission requirement by updating portions of the 
plan affected by the change or providing an informational supplement to 
the plan describing its change and its impact. The Board expects that 
bank holding companies will be able to incorporate by reference 
portions of their previously filed capital plan to the extent those 
portions were unaffected by the change requiring resubmission, and that 
an informational supplement may be appropriate depending on the nature 
of the revisions. However, in cases in which a large bank holding 
company anticipates undertaking a significant acquisition of a 
financial company, the Federal Reserve expects that nearly all of a 
company's capital plan will be affected. Furthermore, to the extent 
that the firm elects to develop new stressed scenarios or must 
incorporate new stressed scenarios provided by the Federal Reserve into 
its capital plan, the bank holding company should resubmit all portions 
of the capital plan affected by those new stressed scenarios.
    Another commenter suggested that the criteria for the issuance of a 
non-objection to a revised and resubmitted capital plan focus on 
whether the plan addresses the deficiencies identified in the Federal 
Reserve's objection to the capital plan. Under the final rule, the 
Federal Reserve intends to focus on whether the plan addresses 
deficiencies identified in the objection, but will consider all aspects 
of a company's capital adequacy in connection with a resubmission. In 
conducting this review, the Federal Reserve will apply the same 
standards that would apply to the review of an initial capital plan.
    Another commenter requested that capital plan resubmissions be 
responded to within 15 days, subject to a 15-day extension. The final 
rule provides that the Federal Reserve will respond to a resubmitted 
capital plan within 75 days of its resubmission. However, the Federal 
Reserve intends to respond to a resubmitted capital plan in a shorter 
time period if possible. The length of the review period will depend on 
the materiality of the issues raised in the resubmission.

V. Approval Requirements

A. General Requirements

    The proposed rule would have required a large bank holding company 
to notify the Federal Reserve before making a capital distribution if 
the Federal Reserve objected to the bank holding company's capital plan 
and that objection was still outstanding.\36\ The Board is modifying 
this requirement in the final rule. The final rule provides that, if 
the Federal Reserve objects to a capital plan and until such time as 
the Federal Reserve issues a non-objection to the bank holding 
company's capital plan, the bank holding company may not make any 
capital distribution, other than those capital distributions with 
respect to which the Federal Reserve has indicated its non-objection. 
This prohibition would remain in place until the Federal Reserve issued 
a non-objection to the bank holding company's capital plan.
---------------------------------------------------------------------------

    \36\ Notwithstanding this requirement, prior notice would not 
have been required under the NPR with respect to specific capital 
distributions described in a company's capital plan that the Federal 
Reserve did not object to, unless other circumstances required prior 
notice.
---------------------------------------------------------------------------

    The change in the final rule is intended to avoid confusion on the 
part of a large bank holding company that has received an objection to 
its capital plan regarding whether it would be able to make a capital 
distribution. Under the final rule, consistent with the proposed rule, 
the Federal Reserve will evaluate a capital distribution using the same 
standards it uses to evaluate a capital plan; thus, the Federal Reserve 
would expect to disapprove a capital distribution request by a large 
bank holding company that had received an objection to its capital plan 
until the company had corrected the deficiencies that led to the 
objection to the plan. As discussed in section IV.G. of this preamble, 
the final rule provides a process for bank holding companies to 
resubmit their capital plans to the Federal Reserve and for the Federal 
Reserve to evaluate the re-submitted capital plans. If the Federal 
Reserve provides its non-objection to a re-submitted capital plan, the 
bank holding company generally may thereafter make capital 
distributions consistent with the resubmitted capital plan.
    In addition, there may be circumstances where the Federal Reserve 
objects to some but not all of a large bank holding company's proposed 
capital distributions as described in its capital plan. For example, 
the Federal Reserve may object to a large bank holding company's 
proposed payments of dividends on common stock, but notify the company 
that the Federal Reserve does not object to payments on its preferred 
stock. Unless changed circumstances would require approval of a capital 
distribution as described below, the bank holding company in this 
example may make payments on its preferred stock.
    The proposed rule provided circumstances where prior notice would 
be required for a capital distribution in circumstances where the 
Federal Reserve had provided a non-objection to a capital plan. The 
Board is modifying that requirement to require a large bank holding 
company to obtain the Federal Reserve's prior approval with respect to 
these capital distributions under the process set forth in the final 
rule. The Federal Reserve expects that a large bank holding company 
would apply the same rigorous capital planning process that it used to 
develop its capital plan to its evaluation of capital distributions 
that would cause the company to fall below its minimum capital 
requirements, capital distributions that are above the amount described 
in its capital plan, and capital distributions that follow a change in 
circumstances. Similarly, the Federal Reserve will need significant 
information to evaluate these types of proposed capital distributions. 
Accordingly, the Board believes that a prior approval process would be 
a more appropriate mechanism to evaluate these capital distributions.
    Under the final rule, a large bank holding company generally will 
need to obtain prior approval from the Federal Reserve before making 
capital distributions if:
    (i) After giving effect to the capital distribution, the bank 
holding company will not meet a minimum regulatory capital ratio or a 
tier 1 common ratio of at least 5 percent;
    (ii) The Federal Reserve notifies the company that the Federal 
Reserve has determined that the capital distribution will result in a 
material adverse change to the organization's capital or liquidity

[[Page 74642]]

structure or that the company's earnings were materially 
underperforming projections;
    (iii) The dollar amount of the capital distribution will exceed the 
amount described in the capital plan to which the Federal Reserve had 
issued a non-objection; or
    (iv) The capital distribution will occur during a period in which 
the Federal Reserve is reviewing, or has requested resubmission of, the 
bank holding company's capital plan.\37\ Commenters requested that the 
Board provide clarity on a large bank holding company's ability to make 
capital distributions in the following two periods: (1) During the 
period beginning when a large bank holding company resubmits its 
capital plan and the plan is under review by the Federal Reserve, and 
(2) during the first quarter of a calendar year if a large bank holding 
company receives an objection to its capital plan for the upcoming 
planning period, but where the Federal Reserve had previously issued a 
non-objection to capital distributions in the current quarter and 
planning period based on a prior capital plan. In the first case, the 
answer depends on whether the Federal Reserve has objected to the bank 
holding company's capital plan. If the Federal Reserve has objected to 
the capital plan, the bank holding company may not make any capital 
distribution, except for any distribution to which the Federal Reserve 
did not object. If the Federal Reserve has not objected to the capital 
plan and the resubmission is required because of a change in 
circumstances, the bank holding company must obtain the Federal 
Reserve's approval before making a capital distribution.
---------------------------------------------------------------------------

    \37\ The Board clarified in the final rule that prior notice is 
required during the period when the Board has requested 
resubmission, but the bank holding company has not yet resubmitted 
its capital plan.
---------------------------------------------------------------------------

    In the second case, during the first quarter of a calendar year, a 
large bank holding company may make a capital distribution to which the 
Federal Reserve did not object, unless the final rule would otherwise 
require the company to obtain approval of the capital distribution or 
the Federal Reserve has otherwise notified the company that it may not 
make the distribution.\38\ For instance, assuming the criteria for 
resubmission of a capital plan have not been triggered, if the Federal 
Reserve issued a non-objection to a firm's capital plan through the 
first quarter of Year 2 but objected to the capital plan submitted by 
that firm for the second quarter of Year 2 through the first quarter of 
Year 3, that firm would still be able to make all planned capital 
distributions in the first quarter of Year 2, unless the Federal 
Reserve specifically objected to any remaining first quarter 
distributions.
---------------------------------------------------------------------------

    \38\ See section 225.8(e)(2)(iv) of Regulation Y.
---------------------------------------------------------------------------

    Several commenters suggested that the Board adopt an exception to 
the prior notice requirements that permits a large bank holding company 
to increase its capital distributions to take advantage of changes in 
market conditions. The Board has adopted a modification to the rule to 
provide a limited exception to the prior approval requirements if:
    (A) The bank holding company is, and after the capital distribution 
would remain, well capitalized as defined in section 225.2(r) of 
Regulation Y (12 CFR 225.2(r));
    (B) The bank holding company's performance and capital levels are, 
and after the capital distribution would remain, consistent with the 
projections under expected conditions set forth in its capital plan;
    (C) The annual aggregate dollar amount of all capital distributions 
(beginning on April 1 of a calendar year and ending on March 31 of the 
following calendar year) would not exceed the total amounts described 
in the company's capital plan for which the bank holding company 
received a notice of non-objection by more than 1.00 percent multiplied 
by the bank holding company's tier 1 capital, as reported to the 
Federal Reserve on the bank holding company's first quarter FR Y-9C;
    (D) The bank holding company provides the appropriate Reserve Bank 
with notice 15 calendar days prior to a capital distribution that 
includes the elements described in section V.B. of this preamble, and
    (E) The Federal Reserve does not object to the transaction proposed 
in the notice. In determining whether to object to the proposed 
transaction, the Federal Reserve will apply the criteria under which it 
reviews requests related to proposed capital distributions that require 
Federal Reserve approval.
    The Federal Reserve may notify the bank holding company in writing 
that it may not take advantage of this exception. Examples of factors 
that the Federal Reserve would consider in notifying a large bank 
holding company that it may not take advantage of the exception 
include, but are not limited to, the bank holding company's risk 
profile and its actual financial performance relative to baseline 
projections in its capital plan.

B. Contents of Request for Approval and Procedures for Review

    Under the final rule, a large bank holding company that requests 
approval of a capital distribution to the Federal Reserve must include 
the following information in its request:
    (i) The capital plan to which the Federal Reserve had previously 
issued a non-objection or an attestation that there have been no 
changes to the capital plan;
    (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 Federal Reserve 
(which may include, among other information, an assessment of the bank 
holding company's capital adequacy under a revised stress scenario 
provided by the Federal Reserve, a revised capital plan, and supporting 
data).
    In addition, any request submitted for a capital distribution where 
the bank holding company would not meet a minimum regulatory capital 
ratio or a tier 1 common ratio of at least five percent after giving 
effect to the distribution must also include a plan for restoring the 
bank holding company's capital to an amount above a minimum level 
within 30 days and a rationale for why the capital distribution would 
be appropriate.
    The Federal Reserve will act on a request for prior approval within 
30 calendar days after the receipt of a request that contains all of 
the information set forth above.\39\ If the Federal Reserve requests 
that the bank holding company provide an assessment of its capital 
adequacy under a revised stress scenario, the Federal Reserve will not 
consider the 30-day period to begin until the bank holding company 
provides the requested information.
---------------------------------------------------------------------------

    \39\ As noted above, bank holding companies that qualify for the 
exception to the prior approval requirement need to provide 15 days 
prior notice of a qualifying capital distribution. Because the final 
rule provides the Federal Reserve with discretion to act on a 
shorter timeframe, the final rule does not include the proposed 
rule's provision permitting the Federal Reserve to shorten the 30-
day period.
---------------------------------------------------------------------------

    The final rule provides that the Board will notify the bank holding 
company in writing of the reasons for a decision to disapprove any 
proposed capital distribution. In reviewing a request under this 
section, the Federal Reserve will apply the considerations and 
principles under which it evaluates

[[Page 74643]]

capital plans. In addition, the Board may disapprove the transaction if 
the bank holding company does not provide the information required to 
be submitted. Within 10 calendar days of receipt of a disapproval, the 
bank holding company could submit a written request for a hearing.
    If the bank holding company requested a hearing, the Board will 
order a hearing within 10 calendar days of receipt of the request if it 
finds that material facts are in dispute, or if it otherwise appears 
appropriate. Any hearing conducted will be held in accordance with the 
Board's Rules of Practice for Formal Hearings (12 CFR part 263). At the 
conclusion of any hearing, the Board will by order approve or 
disapprove the proposed capital action on the basis of the record of 
the hearing.

VI. Conforming Amendments To Section 225.4(b) of Regulation Y

    In addition to the capital planning and approval requirements 
discussed above, the Board is making conforming changes to section 
225.4(b) of Regulation Y, which currently requires prior notice to the 
Federal Reserve of certain purchases and redemptions of a bank holding 
company's equity securities.\40\ Because such approval of certain 
capital distributions will be separately required in the rule at 
section 225.8 of Regulation Y, the Board is amending section 225.4(b) 
to provide that section 225.4(b) shall not apply to any bank holding 
company that is subject to section 225.8.
---------------------------------------------------------------------------

    \40\ See 12 CFR 225.4(b).
---------------------------------------------------------------------------

VII. Administrative Law Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), 
generally requires that an agency prepare and make available for public 
comment an initial regulatory flexibility analysis in connection with a 
notice of proposed rulemaking.\41\ The regulatory flexibility analysis 
otherwise required under section 604 of the RFA is not required if an 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities (defined for purposes 
of the RFA to include banks and bank holding companies with assets less 
than or equal to $175 million) and publishes its certification and a 
short, explanatory statement in the Federal Register along with its 
rule. As of December 31, 2010, there were approximately 4,493 small 
bank holding companies.
---------------------------------------------------------------------------

    \41\ See 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    The agencies solicited public comment on the rule in a notice of 
proposed rulemaking. The agencies did not receive any comments 
regarding burden to small banking organizations.
    As discussed above, the final rule applies to every top-tier bank 
holding company domiciled in the United States with $50 billion or more 
in total consolidated assets. Bank holding companies that are subject 
to the final rule therefore substantially exceed the $175 million asset 
threshold at which a banking entity would qualify as a small bank 
holding company, and the final rule will not apply to any small bank 
holding company for purposes of the RFA. The Board does not believe 
that the proposed rule duplicates, overlaps, or conflicts with any 
other Federal rules. In light of the foregoing, the Board does not 
believe that the final rule would have a significant economic impact on 
a substantial number of small entities.

B. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA) (44 U.S.C. 3501 et seq.), the Board may not conduct or 
sponsor, and the 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 
final rule under the authority delegated to the Board by OMB. The OMB 
control number for this information collection is 7100-0342.
    The Board received 16 comment letters, none of which specifically 
addressed the PRA analysis. Commenters did however requested that the 
Board provide more guidance on the nature and scope of the data 
requirements (as required by 225.8(d)(3)(i)-(vi)) and to provide any 
data templates at the time the final rule becomes effective. Commenters 
also asked that the Federal Reserve be mindful to avoid duplicative 
data requests. In response to these comments, the Board has published a 
separate Federal Register notice that clarifies the nature and scope of 
the data requirements, including the data templates, and solicited 
public comments on this information collection (Capital Assessments and 
Stress Testing; FR Y-14A/Q; OMB No. 7100-0341).\42\ In doing so, the 
Board is removing the majority of the burden for the data reporting 
requirements found in 225.8(d)(3) from the information collection 
associated with this rule and accounting for this burden under the new 
FR Y-14A/Q information collection.
---------------------------------------------------------------------------

    \42\ 76 FR 55288 (September 7, 2011). The comment period ended 
on November 7, 2011.
---------------------------------------------------------------------------

    Title of Information Collection: Recordkeeping and Reporting 
Requirements Associated with Regulation Y (Capital Plans) (Reg Y-13).
    Frequency of Response: Recordkeeping requirements, annually. 
Reporting requirements, varied--the capital plan exercise would be done 
at least annually, capital plan resubmissions and prior approval 
requirements would be event-generated.
    Affected Public: The final rule applies to every top-tier bank 
holding company domiciled in the United States that has $50 billion or 
more in total consolidated assets (large U.S. bank holding companies). 
As of September 30, 2011, there were approximately 34 large U.S. bank 
holding companies.
    General Description of Information Collection: This information 
collection is mandatory and the recordkeeping requirement to maintain 
the Capital Plan is in effect until either a bank holding company is no 
longer operational or until further notice by the Board. Section 616(a) 
of the Dodd-Frank Act amended section 5(b) of the Bank Holding Company 
Act (BHC Act) (12 U.S.C. 1844(b)) to specifically authorize the Board 
to issue regulations and orders relating to capital requirements for 
bank holding companies. The Board is also authorized to collect and 
require reports from bank holding companies pursuant to section 5(c) of 
the BHC Act (12 U.S.C. 1844(c)). Additionally, the Board's rulemaking 
authority for the information collection requirements associated with 
Reg Y-13 is found in sections 908 and 910 of the International Lending 
Supervision Act, as amended (12 U.S.C. 3907 and 3909). Additional 
support for Reg Y-13 is found in sections 165 and 166 of the Dodd-Frank 
Act (12 U.S.C. 5365 and 5366).
    The capital plan information submitted by the covered bank holding 
company would consist of confidential and proprietary modeling 
information and highly sensitive business plans, such as acquisition 
plans submitted to the Federal Reserve for approval. Therefore, it 
appears the information would be subject to withholding under exemption 
4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)).
    Abstract: Section 225.8(d)(1)(i) will require a bank holding 
company to develop and maintain an initial capital plan. The level of 
detail and analysis expected in a capital plan would vary based on the 
bank holding company's size, complexity, risk profile, scope of 
operations, and the effectiveness of its

[[Page 74644]]

processes for assessing capital adequacy. Section 225.8(d)(2) provides 
the list of mandatory elements to be included in the capital plan.
    Section 225.8(d)(1)(ii) will require a bank holding company to 
submit its complete capital plan to the appropriate Reserve Bank and 
the Board each year by the 5th of January, or such later date as 
directed by the appropriate Reserve Bank after consultation with the 
Board.
    Section 225.8(d)(1)(iii) will require the bank holding company's 
board of directors or a designated committee to review and approve the 
bank holding company's capital plan prior to its submission to the 
appropriate Federal Reserve Bank under section 225.8(d)(1)(ii).
    In connection with submissions of capital plans to the Federal 
Reserve, bank holding companies would be required pursuant to section 
225.8(d)(3) to provide certain data to the Federal Reserve. Data 
templates, and any other data requests, would be designed to minimize 
burden on the bank holding company and to avoid duplication. Data 
required by the Federal Reserve could include, but would not be limited 
to, information regarding the bank holding company's financial 
condition, structure, assets, risk exposure, policies and procedures, 
liquidity, and management. In addition, section 225.8(d)(4) would 
require the bank holding company to update and resubmit its capital 
plan within 30 days of the occurrence of certain events.
    Within 10 calendar days of receipt of a notice of objection by the 
Board of the bank holding company's capital plan, pursuant to section 
225.8(e)(3), the bank holding company may submit a written request for 
reconsideration or hearing, including an explanation of why 
reconsideration should be granted.
    In certain circumstances, large bank holding companies would be 
required, pursuant to section 225.8(f)(1), to obtain approval from the 
Federal Reserve before making capital distributions.\43\ As listed in 
section 225.8(f)(3), such an approval request would be required to 
contain the following information: the bank holding company's current 
capital plan or an attestation that there have been no changes to its 
current capital plan; the purpose of the transaction; a description of 
the capital action, 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 any additional information requested by the 
appropriate Reserve Bank or Board, which may include, among other 
information, an assessment of the bank holding company's capital 
adequacy under a revised stress scenario provided by the Federal 
Reserve, a revised capital plan, and supporting data.
---------------------------------------------------------------------------

    \43\ The final rule provides an exception to the prior approval 
requirements section 225.8(f)(2) for an institution that is well 
capitalized and meets certain other requirements.
---------------------------------------------------------------------------

    Under section 225.8(f)(5), if the Federal Reserve disapproves of a 
bank holding company's capital distribution, the bank holding company 
within 10 calendar days of receipt of a notice of disapproval by the 
Board may submit a written request for a hearing.

Estimated Burden

    Number of Respondents: 34 (19 CCAR firms and 15 non-CCAR firms).

Estimated Burden per Response

--.8(d)(1)(i) and (ii) Recordkeeping and Reporting, 12,000 hours
--.8(d)(1)(iii) Recordkeeping, 100 hours
--.8(d)(3)(i)-(vi) CCAR firm Reporting, 100 hours
--.8(d)(3)(i)-(vi) Non-CCAR firm Reporting, 1,000 hours
--.8(d)(4) Reporting, 100 hours
--.8(e)(3)(i) Reporting, 16 hours
--.8(f)(1), (2) and (3) Reporting, 3,400 hours
--.8(f)(5) Reporting, 16 hours

    Total Estimated Annual Burden: 432,764 hours.
    The Board has a continuing interest in the public's opinions of 
collections of information. At any time, comments regarding the burden 
estimate, or any other aspect of this collection of information, 
including suggestions for reducing the burden, may be sent to: 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551; and to the Office of Management and 
Budget, Paperwork Reduction Project (7100-0342), Washington, DC 20503.

List of Subjects in 12 CFR Part 225

    Administrative Practice and Procedure, Banks, Banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

12 CFR Chapter II

Authority and Issuance

    For the reasons stated in the preamble, the Board of Governors of 
the Federal Reserve System amends subpart A of part 225 of 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. Section 225.4 is amended by adding paragraph (b)(7):


Sec.  225.4  Corporate practices.

* * * * *
    (b) * * *
    (7) Exception for certain bank holding companies. This section 
225.4(b) shall not apply to any bank holding company that is subject to 
Sec.  225.8 of Regulation Y (12 CFR 225.8).
* * * * *

0
3. Add Sec.  225.8 to read as follows:


Sec.  225.8  Capital planning.

    (a) Purpose. This section establishes capital planning and prior 
notice and approval requirements for capital distributions by certain 
bank holding companies.
    (b) Scope and effective date. (1) This section applies to every 
top-tier bank holding company domiciled in the United States:
    (i) With total consolidated assets greater than or equal to $50 
billion computed on the basis of the average of the company's total 
consolidated assets over the course of the previous four calendar 
quarters, as reflected on the bank holding company's consolidated 
financial statement for bank holding companies (FR Y-9C (the 
calculation shall be effective as of the due date of the bank holding 
company's most recent FR Y-9C required to be filed under 12 CFR 
225.5(b))); or
    (ii) That is subject to this section, in whole or in part, by order 
of the Board based on the institution's size, level of complexity, risk 
profile, scope of operations, or financial condition.
    (2) Beginning on December 30, 2011, the provisions of this section 
shall apply to any bank holding company that is subject to this section 
pursuant to paragraph (b)(1) of this section, provided that:
    (i) Until July 21, 2015, this section will not apply to any bank 
holding company subsidiary of a foreign banking organization that is 
currently relying on Supervision and Regulation Letter SR 01-01 issued 
by the Board (as in effect on May 19, 2010); and

[[Page 74645]]

    (ii) A bank holding company that becomes subject to this section 
pursuant to paragraph (b)(1)(i) of this section after the 5th of 
January of a calendar year shall not be subject to the requirements of 
paragraphs (d)(1)(ii), (d)(4), and (f)(1)(iii) of this section until 
January 1 of the next calendar year.
    (3) Nothing in this section shall limit the authority of the 
Federal Reserve to issue a capital directive or take any other 
supervisory or enforcement action, including action to address unsafe 
or unsound practices or conditions or violations of law.
    (c) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Capital action means any issuance of a debt or equity capital 
instrument, any capital distribution, and any similar action that the 
Federal Reserve determines could impact a bank holding company's 
consolidated capital.
    (2) Capital distribution means a redemption or repurchase of any 
debt or equity capital instrument, a payment of common or preferred 
stock dividends, a payment that may be temporarily or permanently 
suspended by the issuer on any instrument that is eligible for 
inclusion in the numerator of any minimum regulatory capital ratio, and 
any similar transaction that the Federal Reserve determines to be in 
substance a distribution of capital.
    (3) Capital plan means a written presentation of a bank holding 
company's capital planning strategies and capital adequacy process that 
includes the mandatory elements set forth in paragraph (d)(2) of this 
section.
    (4) Capital policy means a bank holding company's written 
assessment of the principles and guidelines used for capital planning, 
capital issuance, usage and distributions, including internal capital 
goals; the quantitative or qualitative guidelines for dividend and 
stock repurchases; the strategies for addressing potential capital 
shortfalls; and the internal governance procedures around capital 
policy principles and guidelines.
    (5) Minimum regulatory capital ratio means any minimum regulatory 
capital ratio that the Federal Reserve may require of a bank holding 
company, by regulation or order, including the bank holding company's 
leverage ratio and tier 1 and total risk-based capital ratios as 
calculated under Appendices A, D, E, and G to this part (12 CFR part 
225), or any successor regulation.
    (6) Planning horizon means the period of at least nine quarters, 
beginning with the quarter preceding the quarter in which the bank 
holding company submits its capital plan, over which the relevant 
projections extend.
    (7) Tier 1 capital has the same meaning as under Appendix A to this 
part or any successor regulation.
    (8) Tier 1 common capital means tier 1 capital less the non-common 
elements of tier 1 capital, including perpetual preferred stock and 
related surplus, minority interest in subsidiaries, trust preferred 
securities and mandatory convertible preferred securities.
    (9) Tier 1 common ratio means the ratio of a bank holding company's 
tier 1 common capital to total risk-weighted assets. This definition 
will remain in effect until the Board adopts an alternative tier 1 
common ratio definition as a minimum regulatory capital ratio.
    (10) Total risk-weighted assets has the same meaning as under 
Appendices A, E, and G to this part, or any successor regulation.
    (d) General requirements--(1) Annual capital planning. (i) A bank 
holding company must develop and maintain a capital plan.
    (ii) A bank holding company must submit its complete capital plan 
to the appropriate Reserve Bank and the Board each year by the 5th of 
January, or such later date as directed by the Board or the appropriate 
Reserve Bank, after consultation with the Board.
    (iii) The bank holding company's board of directors or a designated 
committee thereof must at least annually and prior to submission of the 
capital plan under paragraph (d)(1)(ii) of this section:
    (A) Review the robustness of the bank holding company's process for 
assessing capital adequacy,
    (B) Ensure that any deficiencies in the bank holding company's 
process for assessing capital adequacy are appropriately remedied; and
    (C) Approve the bank holding company's capital plan.
    (2) Mandatory elements of capital plan. A capital plan must contain 
at least the following elements:
    (i) An assessment of the expected uses and sources of capital over 
the planning horizon that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions, including:
    (A) Estimates of projected revenues, losses, reserves, and pro 
forma capital levels, including any minimum regulatory capital ratios 
(for example, leverage, tier 1 risk-based, and total risk-based capital 
ratios) and any additional capital measures deemed relevant by the bank 
holding company, over the planning horizon under expected conditions 
and under a range of stressed scenarios, including any scenarios 
provided by the Federal Reserve and at least one stressed scenario 
developed by the bank holding company appropriate to its business model 
and portfolios;
    (B) A calculation of the pro forma tier 1 common ratio over the 
planning horizon under expected conditions and under a range of 
stressed scenarios and discussion of how the company will maintain a 
pro forma tier 1 common ratio above 5 percent under expected conditions 
and the stressed scenarios required under paragraphs (d)(2)(i)(A) and 
(ii) of this section;
    (C) A discussion of the results of any stress test required by law 
or regulation, and an explanation of how the capital plan takes these 
results into account; and
    (D) A description of all planned capital actions over the planning 
horizon.
    (ii) A detailed description of the bank holding company's process 
for assessing capital adequacy, including:
    (A) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital ratios 
and above a tier 1 common ratio of 5 percent, and serve as a source of 
strength to its subsidiary depository institutions;
    (B) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain sufficient capital to 
continue its operations by maintaining ready access to funding, meeting 
its obligations to creditors and other counterparties, and continuing 
to serve as a credit intermediary;
    (iii) The bank holding company's capital policy; and
    (iv) A discussion of any expected changes to the bank holding 
company's business plan that are likely to have a material impact on 
the firm's capital adequacy or liquidity.
    (3) Data collection. Upon the request of the Board or appropriate 
Reserve Bank, the bank holding company shall provide the Federal 
Reserve with information regarding--
    (i) The bank holding company's financial condition, including its 
capital;
    (ii) The bank holding company's structure;
    (iii) Amount and risk characteristics of the bank holding company's 
on- and off-balance sheet exposures, including exposures within the 
bank holding company's trading account, other trading-related exposures 
(such as counterparty-credit risk exposures) or other items sensitive 
to changes in market factors, including, as

[[Page 74646]]

appropriate, information about the sensitivity of positions to changes 
in market rates and prices;
    (iv) The bank holding company's relevant policies and procedures, 
including risk management policies and procedures;
    (v) The bank holding company's liquidity profile and management; 
and
    (vi) Any other relevant qualitative or quantitative information 
requested by the Board or the appropriate Reserve Bank to facilitate 
review of the bank holding company's capital plan under this section.
    (4) Re-submission of a capital plan. (i) A bank holding company 
must update and re-submit its capital plan to the appropriate Reserve 
Bank within 30 calendar days of the occurrence of one of the following 
events:
    (A) The bank holding company determines there has been or will be a 
material change in the bank holding company's risk profile, financial 
condition, or corporate structure since the bank holding company 
adopted the capital plan;
    (B) The Board or the appropriate Reserve Bank objects to the 
capital plan; or
    (C) The Board or the appropriate Reserve Bank, after consultation 
with the Board, directs the bank holding company in writing to revise 
and resubmit its capital plan for any of the following reasons:
    (1) The capital plan is incomplete or the capital plan, or the bank 
holding company's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been or will likely be a material change in the bank 
holding company's risk profile (including a material change in its 
business strategy or any risk exposure), financial condition, or 
corporate structure;
    (3) The stressed scenario(s) developed by the bank holding company 
is not appropriate to its business model and portfolios, or changes in 
financial markets or the macro-economic outlook that could have a 
material impact on a bank holding company's risk profile and financial 
condition require the use of updated scenarios; or
    (4) The capital plan or the condition of the bank holding company 
raise any of the issues described in paragraph (e)(2)(ii) of this 
section.
    (ii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, may, at its discretion, extend the 30-day period in 
paragraph (d)(4)(i) of this section for up to an additional 60 calendar 
days.
    (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.
    (e) Review of capital plans by the Federal Reserve--(1) 
Considerations and inputs. (i) The Board or the appropriate Reserve 
Bank, after consultation with the Board, will consider the following 
factors in reviewing a bank holding company's capital plan:
    (A) The comprehensiveness of the capital plan, including the extent 
to which the analysis underlying the capital plan captures and 
addresses potential risks stemming from activities across the firm and 
the company's capital policy;
    (B) The reasonableness of the bank holding company's assumptions 
and analysis underlying the capital plan and its methodologies for 
reviewing the robustness of its capital adequacy process; and
    (C) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio and above a tier 1 common ratio 
of 5 percent on a pro forma basis under expected and stressful 
conditions throughout the planning horizon, including but not limited 
to any stressed scenarios required under paragraphs (d)(2)(i)(A) and 
(ii) of this section.
    (ii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, will also consider the following information in 
reviewing a bank holding company's capital plan:
    (A) Relevant supervisory information about the bank holding company 
and its subsidiaries;
    (B) The bank holding company's regulatory and financial reports, as 
well as supporting data that would allow for an analysis of the bank 
holding company's loss, revenue, and reserve projections;
    (C) As applicable, the Federal Reserve's own pro forma estimates of 
the firm's potential losses, revenues, reserves, and resulting capital 
adequacy under expected and stressful conditions, including but not 
limited to any stressed scenarios required under paragraphs 
(d)(2)(i)(A) and (ii) of this section, as well as the results of any 
stress tests conducted by the bank holding company or the Federal 
Reserve; and
    (D) Other information requested or required by the appropriate 
Reserve Bank or the Board, as well as any other information relevant, 
or related, to the bank holding company's capital adequacy.
    (2) Federal Reserve action on a capital plan. (i) The Board or the 
appropriate Reserve Bank, after consultation with the Board, will 
object, in whole or in part, to the capital plan or provide the bank 
holding company with a notice of non-objection to the capital plan:
    (A) By March 31 of the calendar year in which a capital plan was 
submitted pursuant to paragraph (d)(1)(ii) of this section, and
    (B) By the date that is 75 calendar days after the date on which a 
capital plan was resubmitted pursuant to paragraph (d)(4) of this 
section.
    (ii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, may object to a capital plan if it determines that:
    (A) The bank holding company has material unresolved supervisory 
issues, including but not limited to issues associated with its capital 
adequacy process;
    (B) The assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies for 
reviewing the robustness of its capital adequacy process, are not 
reasonable or appropriate;
    (C) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio and above 
a tier 1 common ratio of 5 percent, on a pro forma basis under expected 
and stressful conditions throughout the planning horizon; or
    (D) The bank holding company's capital planning process or proposed 
capital distributions otherwise constitute an unsafe or unsound 
practice, or would violate any law, regulation, Board order, directive, 
or any condition imposed by, or written agreement with, the Board. In 
determining whether a capital plan or any proposed capital distribution 
would constitute an unsafe or unsound practice, the appropriate Reserve 
Bank would consider whether the bank holding company is and would 
remain in sound financial condition after giving effect to the capital 
plan and all proposed capital distributions.
    (iii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, will notify the bank holding company in writing of the 
reasons for a decision to object to a capital plan.
    (iv) If the Board or the appropriate Reserve Bank, after 
consultation with the Board, objects to a capital plan and until such 
time as the Board or the appropriate Reserve Bank, after consultation 
with the Board, issues a non-objection to the bank holding company's 
capital plan, the bank holding company may not make any capital 
distribution, other than those capital distributions with respect to

[[Page 74647]]

which the Board or the appropriate Reserve Bank has indicated in 
writing its non-objection.
    (3) Request for reconsideration or hearing. Within 10 calendar days 
of receipt of a notice of objection to a capital plan by the Board or 
the appropriate Reserve Bank:
    (i) A bank holding company may submit a written request to the 
Board requesting reconsideration of the objection, including an 
explanation of why reconsideration should be granted. Within 10 
calendar days of receipt of the bank holding company's request, the 
Board will notify the company of its decision to affirm or withdraw the 
objection to the bank holding company's capital plan or a specific 
capital distribution; or
    (ii) As an alternative to paragraph (e)(3)(i) of this section, a 
bank holding company may submit a written request to the Board for a 
hearing. Any hearing shall follow the procedures described in paragraph 
(f)(5)(ii)-(iii) of this section.
    (f) Approval requirements for certain capital actions--(1) 
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (e)(2)(i) of this section a bank holding 
company may not make a capital distribution under the following 
circumstances, unless it receives approval from the Board or 
appropriate Reserve Bank pursuant to paragraph (f)(4) of this section:
    (i) After giving effect to the capital distribution, the bank 
holding company would not meet a minimum regulatory capital ratio or a 
tier 1 common ratio of at least 5 percent;
    (ii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, notifies the company in writing that the Federal 
Reserve has determined that the capital distribution would result in a 
material adverse change to the organization's capital or liquidity 
structure or that the company's earnings were materially 
underperforming projections;
    (iii) Except as provided in paragraph (f)(2) of this section, the 
dollar amount of the capital distribution will exceed the amount 
described in the capital plan for which a non-objection was issued 
under this section; or
    (iv) The capital distribution would occur after the occurrence of 
an event requiring resubmission under paragraphs (d)(4)(A) and (C) of 
this section and before the Federal Reserve acted on the resubmitted 
capital plan.
    (2) Exception for well capitalized bank holding companies. (i) A 
bank holding company may make a capital distribution for which the 
dollar amount exceeds the amount described in the capital plan for 
which a non-objection was issued under this section if the following 
conditions are satisfied:
    (A) The bank holding company is, and after the capital distribution 
would remain, well capitalized as defined in Sec.  225.2(r) of 
Regulation Y (12 CFR 225.2(r));
    (B) The bank holding company's performance and capital levels are, 
and after the capital distribution would remain, consistent with its 
projections under expected conditions as set forth in its capital plan 
under paragraph (d)(2)(i) of this section;
    (C) The annual aggregate dollar amount of all capital distributions 
(beginning on April 1 of a calendar year and ending on March 31 of the 
following calendar year) would not exceed the total amounts described 
in the company's capital plan for which the bank holding company 
received a notice of non-objection by more than 1.00 percent multiplied 
by the bank holding company's tier 1 capital, as reported to the 
Federal Reserve on the bank holding company's first quarter FR Y-9C;
    (D) The bank holding company provides the appropriate Reserve Bank 
with notice 15 calendar days prior to a capital distribution that 
includes the elements described in paragraph (f)(3) of this section; 
and
    (E) The Board or the appropriate Reserve Bank, after consultation 
with the Board, does not object to the transaction proposed in the 
notice. In determining whether to object to the proposed transaction, 
the Board or the appropriate Reserve Bank, after consultation with the 
Board, shall apply the criteria described in paragraph (f)(4)(iv) of 
this section.
    (ii) The exception in this paragraph (f)(2) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it may not take advantage of this exception.
    (3) Contents of request. (i) A request for a capital distribution 
under this section shall be filed with the appropriate Reserve Bank and 
the Board and shall contain the following information:
    (A) The bank holding company's current capital plan or an 
attestation that there have been no changes to the capital plan since 
it was last submitted to the Federal Reserve;
    (B) The purpose of the transaction;
    (C) 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
    (D) 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 
revised stress scenario provided by the Federal Reserve, a revised 
capital plan, and supporting data).
    (ii) Any request submitted with respect to a capital distribution 
described in paragraph (f)(1)(i) of this section shall also include a 
plan for restoring the bank holding company's capital to an amount 
above a minimum level within 30 days and a rationale for why the 
capital distribution would be appropriate.
    (4) Approval of certain capital distributions. (i) A bank holding 
company must obtain approval from the Board or the appropriate Reserve 
Bank, after consultation with the Board, before making a capital 
distribution described in paragraph (f)(1) of this section.
    (ii) A request for a capital distribution under this section must 
be filed with the appropriate Reserve Bank and contain all the 
information set forth in paragraph (f)(3) of this section.
    (iii) The Board or the appropriate Reserve Bank, after consultation 
with the Board, will act on a request under this paragraph (f)(4) 
within 30 calendar days after the receipt of a complete request under 
paragraph (f)(4)(ii) of this section. The Board or the appropriate 
Reserve Bank may, at any time, request additional information that it 
believes is necessary for its decision.
    (iv) In acting on a request under this paragraph, the Board or 
appropriate Reserve Bank will apply the considerations and principles 
in paragraph (e) of this section. In addition, the Board or the 
appropriate Reserve Bank may disapprove the transaction if the bank 
holding company does not provide all of the information required to be 
submitted under paragraphs (f)(3) and (f)(5)(iii) of this section.
    (5) Disapproval and hearing. (i) The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to disapprove any proposed capital distribution. 
Within 10 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 will order a hearing within 10 calendar days of 
receipt of the request if it finds that material facts are in dispute, 
or if it otherwise appears appropriate. Any hearing conducted under 
this paragraph shall be held in

[[Page 74648]]

accordance with the Board's Rules of Practice for Formal Hearings (12 
CFR part 263).
    (iii) At the conclusion of the hearing, the Board will by order 
approve or disapprove the proposed capital distribution on the basis of 
the record of the hearing.


    By order of the Board of Governors of the Federal Reserve 
System, November 21, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-30665 Filed 11-28-11; 4:15 pm]
BILLING CODE 6210-01-P