[Federal Register Volume 77, Number 130 (Friday, July 6, 2012)]
[Notices]
[Pages 40051-40058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-16484]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
Proposed Agency Information Collection Activities; Comment
Request
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: On June 15, 1984, the Office of Management and Budget (OMB)
delegated to the Board of Governors of the Federal Reserve System
(Board) its approval authority under the Paperwork Reduction Act (PRA),
pursuant to 5 CFR 1320.16, to approve of and assign OMB control numbers
to collection of information requests and requirements conducted or
sponsored by the Board under conditions set forth in 5 CFR 1320
Appendix A.1. Board-approved collections of information are
incorporated into the official OMB inventory of currently approved
collections of information. Copies of the Paperwork Reduction Act
Submission, supporting statements and approved collection of
information instruments are placed into OMB's public docket files. The
Federal Reserve may not conduct or sponsor, and the respondent is not
required to respond to, an information collection that has been
extended, revised, or implemented on or after October 1, 1995, unless
it displays a currently valid OMB control number.
[[Page 40052]]
DATES: Comments must be submitted on or before September 4, 2012.
ADDRESSES: You may submit comments, identified by FR Y-14A/Q/M, by any
of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include OMB
number in the subject line of the message.
FAX: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
All public comments are available from the Board's Web site at
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper form in Room MP-
500 of the Board's Martin Building (20th and C Streets NW.) between
9:00 a.m. and 5:00 p.m. on weekdays.
Additionally, commenters may send a copy of their comments to the
OMB Desk Officer--Shagufta Ahmed--Office of Information and Regulatory
Affairs, Office of Management and Budget, New Executive Office
Building, Room 10235, 725 17th Street NW., Washington, DC 20503 or by
fax to 202-395-6974.
FOR FURTHER INFORMATION CONTACT: A copy of the PRA OMB submission,
including the proposed reporting form and instructions, supporting
statement, and other documentation will be placed into OMB's public
docket files, once approved. These documents will also be made
available on the Federal Reserve Board's public Web site at: http://www.federalreserve.gov/boarddocs/reportforms/review.cfm or may be
requested from the agency clearance officer, whose name appears below.
Federal Reserve Board Clearance Officer--Cynthia Ayouch--Division
of Research and Statistics, Board of Governors of the Federal Reserve
System, Washington, DC 20551 (202-452-3829). Telecommunications Device
for the Deaf (TDD) users may contact (202-263-4869), Board of Governors
of the Federal Reserve System, Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
Request for Comment on Information Collection Proposal
The following information collection, which is being handled under
this delegated authority, has received initial Board approval and is
hereby published for comment. At the end of the comment period, the
proposed information collection, along with an analysis of comments and
recommendations received, will be submitted to the Board for final
approval under OMB delegated authority. Comments are invited on the
following:
a. Whether the proposed collection of information is necessary for
the proper performance of the Federal Reserve's functions; including
whether the information has practical utility;
b. The accuracy of the Federal Reserve's estimate of the burden of
the proposed information collection, including the validity of the
methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the
information to be collected;
d. Ways to minimize the burden of information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
e. Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
Proposal To Approve Under OMB Delegated Authority the Extension, With
Revision of the Following Report
Report title: Capital Assessments and Stress Testing information
collection.
Agency form number: FR Y-14A/Q/M.
OMB control number: 7100-0341.
Frequency: Annually, Quarterly, and Monthly.
Reporters: Large banking organizations that meet an annual
threshold of $50 billion or more in total consolidated assets (large
Bank Holding Companies or large BHCs), as defined by the Capital Plan
rule (12 CFR 225.8).\1\
---------------------------------------------------------------------------
\1\ The Capital Plan rule applies to every top-tier large BHC.
This asset threshold is consistent with the threshold established by
section 165 of the Dodd-Frank Act relating to enhanced supervision
and prudential standards for certain BHCs.
---------------------------------------------------------------------------
Estimated annual reporting hours: FR Y-14A: Summary, 25,080 hours;
Macro scenario, 930 hours; Counterparty credit risk (CCR), 2,292 hours;
Basel III/Dodd-Frank, 600 hours; and Regulatory capital, 600 hours. FR
Y-14 Q: Securities risk, 1,200 hours; Retail risk, 1,920 hours; Pre-
provision net revenue (PPNR), 75,000 hours; Wholesale corporate loans,
6,720 hours; Wholesale commercial real estate (CRE) loans, 6,480 hours;
Trading risk, 41,280 hours; Basel III/Dodd-Frank, 1,800 hours;
Regulatory capital, 3,600 hours; and Operational risk, 3,360 hours; and
Mortgage Servicing Rights (MSR) Valuation, 864 hours; Supplemental, 960
hours; and Retail Fair Value Option/Held for Sale (Retail FVO/HFS),
1,216 hours. FR Y-14M: Retail 1st lien mortgage, 129,000 hours; Retail
home equity, 123,840 hours; and Retail credit card, 77,400 hours. FR Y-
14 Implementation and On-Going Automation: Start-up for new
respondents, 79,200 hours; and On-going revisions for existing
respondents, 9,120 hours.
Estimated average hours per response: FR Y-14A: Summary, 836 hours;
Macro scenario, 31 hours; CCR, 382 hours; Basel III/Dodd-Frank, 20
hours; and Regulatory capital, 20 hours. FR Y-14Q: Securities risk, 10
hours; Retail risk, 16 hours; PPNR, 625 hours; Wholesale corporate
loans, 60 hours; Wholesale CRE loans, 60 hours; Trading risk, 1,720
hours; Basel III/Dodd-Frank, 20 hours; Regulatory capital, 40 hours;
Operational risk, 28 hours, MSR Valuation, 24 hours; Supplemental, 8
hours; and Retail FVO/HFS, 16 hours. FR Y-14M: Retail 1st lien
mortgage, 430 hours; Retail home equity, 430 hours; and Retail credit
card, 430 hours. FR Y-14 Implementation and On-Going Automation: Start-
up for new respondents, 7,200 hours; and On-going revisions for
existing respondents, 480 hours.
Number of respondents: 30.
General description of report: The FR Y-14 series of reports are
authorized by section 165 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act), which requires the
Federal Reserve to ensure that certain BHCs and nonbank financial
companies supervised by the Federal Reserve are subject to enhanced
risk-based and leverage standards in order to mitigate risks to the
financial stability of the United States (12 U.S.C. 5365).
Additionally, section 5 of the BHC Act authorizes the Board to issue
regulations and conduct information collections with regard to the
supervision of BHCs (12 U.S.C. 1844).
As these data are collected as part of the supervisory process,
they are subject to confidential treatment under exemption 8 of the
Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(8)). In addition,
commercial and financial information contained in these information
collections may be exempt from disclosure under FOIA exemption
[[Page 40053]]
4 (5 U.S.C. 552(b)(4)). Such exemptions would be made on a case-by-case
basis.
Abstract: The data collected through the FR Y-14A/Q/M provides the
Federal Reserve with the additional information and perspective needed
to help ensure that large BHCs have strong, firm[hyphen]wide risk
measurement and management processes supporting their internal
assessments of capital adequacy and that their capital resources are
sufficient given their business focus, activities, and resulting risk
exposures. The annual Comprehensive Capital Analysis and Review (CCAR)
is also complemented by other Federal Reserve supervisory efforts aimed
at enhancing the continued viability of large BHCs, including (1)
continuous monitoring of BHCs' planning and management of liquidity and
funding resources, and (2) regular assessments of credit, market and
operational risks, and associated risk management practices.
Information gathered in this data collection is also used in the
supervision and regulation of these financial institutions. In order to
fully evaluate the data submissions, the Federal Reserve may conduct
follow up discussions with or request responses to follow up questions
from respondents, as needed. Respondent BHCs are required to complete
and submit up to 17 filings each year: one annual FR Y-14A filing, four
quarterly FR Y-14Q filings, and 12 monthly FR Y-14M filings. Compliance
with these information collections is mandatory.
The annual FR Y-14A collects large BHCs' quantitative projections
of balance sheet, income, losses, and capital across a range of
macroeconomic scenarios and qualitative information on methodologies
used to develop internal projections of capital across scenarios.\2\
The quarterly FR Y-14Q collects granular data on BHCs' various asset
classes and PPNR for the reporting period, which are used to support
supervisory stress test models and for continuous monitoring
efforts.\3\ The monthly FR Y-14M comprises three loan- and portfolio-
level collections, and one detailed address matching collection to
supplement the two loan-level collections.
---------------------------------------------------------------------------
\2\ BHCs that must re-submit their capital plan generally also
must provide a revised FR Y-14A in connection with their
resubmission.
\3\ BHCs are required to submit both quarterly and annual
schedules for third quarter data, with the exception of the Basel
III/Dodd-Frank and Regulatory Capital Instruments schedules. For
these schedules, only data for the annual schedules are submitted
for third quarter data.
---------------------------------------------------------------------------
Under section 165 of the Dodd-Frank Act, the Federal Reserve is
required to issue regulations relating to stress testing (DFAST) for
certain BHCs and nonbank financial companies supervised by the Board.
On January 5, 2012, the Board published rulemakings (77 FR 594) which
would include new reporting requirements found in 12 CFR 252.134(a),
252.146(a), and 252.146(b) related to stress testing. The Federal
Reserve anticipates that these new reporting requirements and the PRA
burden associated with these requirements would be addressed in detail
in a future FR Y-14 proposal.\4\
---------------------------------------------------------------------------
\4\ The proposed rules would implement the enhanced prudential
standards required to be established under section 165 of the Dodd-
Frank Act and the early remediation framework established under
section 166 of the Act. The enhanced standards include risk-based
capital and leverage requirements, liquidity standards, requirements
for overall risk management, single-counterparty credit limits,
DFAST requirements, and debt-to-equity limits for companies that the
Financial Stability Oversight Council has determined pose a grave
threat to financial stability. The 2011 proposal implementing the FR
Y-14A and Q acknowledged the impending publication of the DFAST
reporting requirements under section 165 of the Dodd-Frank Act. That
proposal included a statement noting that revisions to the quarterly
and annual data collections, based on the enhanced standards
rulemaking, would be incorporated into the FR Y-14A and Q
information collection.
---------------------------------------------------------------------------
Current actions: The Federal Reserve proposes revising various
annual and quarterly FR Y-14 schedules and several general revisions to
the entire collection, effective September 30, 2012. The revisions
would include: (1) Implementing three new quarterly reporting
schedules, (2) revising the respondent panel, (3) enhancing data items
previously collected, (4) deleting data items that are no longer
needed, (5) adding attestation requirements, and (6) collecting contact
information. The Federal Reserve proposes the revisions based on
experience gained from previous capital review and stress testing
efforts. The revisions would provide the Federal Reserve with new
information to refine its analysis, while removing data items that are
no longer deemed necessary for such analysis. A summary of the proposed
revisions is provided below.
The proposed revisions to the FR Y-14A (annual collection) include:
(1) Revising 10 of the worksheets to the Summary schedule and combining
the Retail Balance Projections and Retail Loss Projections worksheets;
(2) adding two new worksheets and refining the Planned Action worksheet
for the Basel III/Dodd-Frank schedule and making definitional and
calculation revisions consistent with the final Market Risk Capital
rulemaking; \5\ (3) streamlining the Regulatory Capital Instruments
schedule and adding CUSIP-level \6\ data; and (4) revising the CCR
schedule to collect additional data.
---------------------------------------------------------------------------
\5\ On June 12, 2012, the Federal Reserve Board, Office of the
Comptroller of the Currency (OCC), and the Federal Deposit Insurance
Corporation (FDIC) published a joint press release announcing the
finalization of the Market Risk Capital rulemaking that was proposed
in 2011. Attached to the press release is a copy of the signed, pre-
published version of this final rulemaking.
\6\ CUSIP refers to the Committee on Uniform Security
Identification Procedures. This 9-character alphanumeric code
identifies any North American security for the purposes of
facilitating clearing and settlement of trades.
---------------------------------------------------------------------------
The proposed revisions to the FR Y-14Q (quarterly collection)
include: (1) Implementing a new MSR Valuation schedule; (2)
implementing a new Supplemental schedule; (3) implementing a new Retail
FVO/HFS schedule; (4) revising the Retail Risk schedule to remove data
items no longer needed and add risk characteristics to existing
collections; (5) revising various worksheets and adding a new worksheet
in the Trading Risk schedule; (6) revising the PPNR schedule; (7)
adding new worksheets and data items to the Basel III/Dodd-Frank
schedule and making definitional and calculation revisions consistent
with the final Market Risk Capital rulemaking; and (8) incorporating
minor revisions and other clarifications to Securities and Regulatory
Capital Instruments schedules.
The proposed revisions to the collection of PPNR data in the FR Y-
14A worksheets (contained within the Summary schedule) and FR Y-14Q
schedule include: (1) Expanding the data collection on non-interest
income and expense and (2) collecting on a one-time basis, historical
data for proposed data items and inclusion of one-time items in PPNR on
the PPNR Submission worksheet, the PPNR Net Interest Income (NII)
worksheet, and the PPNR Metrics worksheet.
The proposed revisions to the FR Y-14A, Q, and M include: (1)
Revising the respondent panel to be more consistent with the scope of
application in the notice of proposed rulemaking regarding enhanced
prudential standards (77 FR 594); (2) adding an attestation to the FR
Y-14 submission that must be signed by the Chief Financial Officer
(CFO) of the BHC (or by the individual performing this equivalent
function); and (3) collecting contact information for each reported
schedule.
Draft files illustrating the proposed new schedules and
instructions, and the proposed revisions to the current reporting
schedules and instructions are available on the Federal Reserve Board's
public Web site at: http://www.federalreserve.gov/boarddocs/reportforms/review.cfm.
[[Page 40054]]
Proposed Revisions to the FR Y-14A (Annual Collection) Summary Schedule
The Federal Reserve proposes revising several worksheets included
in the Summary schedule: Income Statement, Balance Sheet, ASC 310-30,
Retail Balance and Loss Projections, Retail Repurchase, Trading Risk,
CCR, and PPNR \7\ worksheets. The proposed revisions to these
worksheets are necessary for the Federal Reserve to better understand
the characteristics underlying the risks to which BHCs are exposed.
---------------------------------------------------------------------------
\7\ The discussion of the revisions to the annual PPNR
worksheets (contained in the Summary schedule) and the quarterly
PPNR Schedule is listed below.
---------------------------------------------------------------------------
Income Statement worksheet. The Federal Reserve proposes revising
this worksheet to expand the definitions of several loan categories
(such as, certain domestic and international real estate and CRE loans,
international Commercial and Industrial (C&I) loans, credit card and
other consumer loans). The Federal Reserve proposes changing the
definitions of certain loan categories from their FR Y-9C definitions
in order to better align the categories with Federal Reserve stress
testing methods (for example, certain types of credit cards may be
included in more than one data item on the FR Y-9C but should be
consolidated on the FR Y-14A). For three sections of the worksheet
(Accrual Loan Losses, Losses Associated with HFS and Loans Associated
for Under the FVO, and ALLL), the Federal Reserve proposes splitting
real estate loans by loans originated in domestic and foreign offices.
The Federal Reserve also proposes separating accrual loans from HFS
loans or held under the FVO to distinguish between the different risk
characteristics of the loans booked under these accounting standards.
The Federal Reserve proposes a new data item, Other CCR Losses,
under the Trading Account section on the Income Statement worksheet to
allow BHCs to include losses due to counterparty risk that are not
directly included in the other types of loss categories available. A
breakout under Other Losses on the Income Statement worksheet would
include Goodwill Impairment, Valuation Adjustments for the BHCs' own
debt under a FVO, and Other Losses. This breakout would give BHCs
greater flexibility to distinguish between these types of loss, which
have very different implications when assessing the BHCs' underlying
risk.
The Federal Reserve also proposes adding to the Income Statement
worksheet more granular breakouts by loan category of the ALLL and
loan-loss provisions. These breakouts would give greater insight into
BHCs' reserving policies and provide clarity as to how losses in the
banking book move through the income statement to affect capital. The
data items requested would closely mirror the loan categories reported
on the balance sheet. However, in an effort to reduce burden, only an
aggregate figure would be reported for first lien mortgages;
residential mortgages, CRE, and farmland not in domestic offices;
credit card; other consumer; and other loans in the ALLL and loan-loss
provisions section.
Balance Sheet worksheet. The Federal Reserve proposes revising the
loan categories in this worksheet to mirror the new categories on the
Income Statement worksheet. The Premises and Fixed Assets section of
the Balance Sheet worksheet would be revised to add a new subcomponent,
Collateral underlying leases for which the bank is the lessor. Adding
this data item would allow the Federal Reserve to track which BHCs have
material exposure to operating leases as this asset type is not broken
out separately on the FR Y-9C.
ASC 310-30 worksheet. The Federal Reserve proposes significantly
revising this worksheet, which collects data on purchased credit
impaired loans. The worksheet would collect data separately for three
portfolios (first lien mortgages, second lien home equity loans, and
home equity lines of credit), as well as any other portfolios subject
to ASC 310-30 accounting, whether they are currently on BHCs'
portfolios or are expected to be acquired. The current worksheet
collects aggregate figures for all ASC 310-30 assets. These data items
would be revised in an effort to better align with accounting
definitions for the loans reported in the purchased credit impaired
portfolio. The revised worksheet would collect the carrying value,
allowance, provisions to and charge-offs from the allowance, estimates
of cash flows to be collected over the life of the loan, the
nonaccretable difference and its components, changes to the
nonaccretable difference, and the accretable yield and its components.
Collecting this more detailed information would improve the Federal
Reserve's ability to track the effect of the stress scenario on ASC
310-30 portfolios.
Retail Balance and Loss Projections worksheets. In an effort to
streamline the schedule, the Federal Reserve proposes combining these
two worksheets. The combined worksheets would include a new data item
to capture loan losses, which had previously been captured only on the
Income Statement worksheet. The new data item would be reported only
once on either the Income Statement worksheet or the newly combined
worksheet, and the data would be automatically populated in the second
worksheet.
Retail Repurchase worksheet. The Federal Reserve proposes revising
this worksheet to collect more granular data on the categories of
repurchase exposure. Collecting this level of data would improve the
Federal Reserve's ability to more precisely assess repurchase risk
exposure. The revisions would separate portfolios sold to Fannie Mae
and Freddie Mac, as well as add a category for loans insured by the US
government (e.g. the Federal Housing Administration (FHA)/the U.S.
Department of Veterans Administration (VA) loans). The revisions would
separate portfolios securitized with and without monoline insurance.\8\
For all of the portfolio categories, the worksheet would collect
separately information on loans for which a BHC is and is not able to
report delinquency information.
---------------------------------------------------------------------------
\8\ Monoline insurance is a type of insurance for loans and
bonds to cover the interest and principal when an issuer defaults.
---------------------------------------------------------------------------
Trading Risk worksheet. For each of the eight risk categories for
which BHCs report Profit/Loss (P/L) data, the Federal Reserve proposes
adding new data items to this worksheet to capture and conduct analysis
on the contribution of higher-order risks (inter-asset risks
attributable to terms not represented in the FR-Y14Q Trading Risk
schedule) and Counterparty Valuation Adjustment (CVA) \9\ hedges to the
BHCs' exposure to trading risk.
---------------------------------------------------------------------------
\9\ CVA is the difference between the risk-free portfolio value
and the true portfolio value that takes into account the possibility
of default by a counterparty. In other words, CVA is the market
value of counterparty credit risk.
---------------------------------------------------------------------------
CCR worksheet. The Federal Reserve proposes revising this worksheet
to breakout Counterparty Credit mark-to-market Losses (CVA losses) into
Counterparty CVA losses and Offline Reserve CVA Losses. This breakout
would give the Federal Reserve additional insight into the
decomposition of CVA losses, which may vary across institutions.
Basel III/Dodd-Frank Schedule
The Federal Reserve proposes adding a new Balance Sheet worksheet
to the Basel III/Dodd-Frank schedule to collect supplemental balance
sheet data for BHCs' banking and trading books to better assess the
impact and trends relative to changes in Risk-Weighted Assets (RWA) and
implications resulting from planned actions. For BHCs that are not
among the 19 SCAP
[[Page 40055]]
BHCs \10\ and are not mandatory Basel II or opt-in Basel II
respondents, the Federal Reserve proposes adding a new simplified Risk-
Weighted Assets (B) worksheet that the BHCs would be permitted to use
at their option. This worksheet would exclude data items that are not
relevant to the respondents.
On the Capital Composition worksheet the Federal Reserve proposes
collecting additional earnings data for the entire forecast period
(eight years of fourth quarter projections) in order to facilitate
future earnings analysis. Under Periodic Changes in Common Stock,
Common Stock and Related Surplus (Net of Treasury Stock), the Federal
Reserve proposes collecting two new data items (issuance of common
stock, including conversion to common stock; and repurchases of common
stock). Under Periodic Changes in Retained Earnings, the Federal
Reserve proposes collecting three new data items (net income/loss
attributable to bank holding company, cash dividends declared on
preferred stock, and cash dividends declared on common stock).
Additionally, the Federal Reserve proposes adding two data items, RWA
type and Balance Sheet Impact, to the Planned Action worksheet to
better capture the type of exposure that the action would have on a
BHCs' risk-weighted assets. The Federal Reserve also proposes requiring
BHCs to submit additional supporting documentation on the anticipated
market size for the capital action, planned unwinds and run-offs of
balance sheet positions, hedging strategies, risk-weighted calculation
methodologies, and use of clearing houses.
---------------------------------------------------------------------------
\10\ These 19 BHCs participated in both the 2009 Supervisory
Capital Assessment Program (SCAP) and the 2011 and 2012 CCAR
exercises.
---------------------------------------------------------------------------
Regulatory Capital Instruments Schedule
The Federal Reserve proposes streamlining the Regulatory Capital
schedule to simplify the data collection by replacing five issuances
and redemptions worksheets with the new Projected Actions and Balances
worksheet. For all forecasted periods (reported on the new worksheet),
the Federal Reserve proposes collecting only instrument-type data,
rather than regulatory capital instrument data at the CUSIP-level. For
all current periods (reported on the new worksheet), the Federal
Reserve proposes collecting CUSIP-level data for actual issuances and
actual redemptions. This streamlining would reduce burden on BHCs and
alleviate some of the difficulties BHCs had in projecting the specific
CUSIP-level capital instruments they had planned to redeem. The
streamlining would also enhance both the quality and accuracy of the
ongoing monitoring and assessments of BHCs' capital structure.
CCR Schedule
The Federal Reserve proposes revising the CCR schedule to improve
the ability to monitor counterparty risk and perform stress-testing.
The revised schedule would collect more information on single name
credit default swaps whose purpose is to hedge the default of the
counterparty. This information would enable the Federal Reserve to
estimate the effect of specific hedges on CVA losses under a variety of
stress scenarios. In addition, the CCR schedule would collect data on
the Loss Given Default (LGD) of a counterparty default \11\ to allow
the Federal Reserve to independently estimate a CVA. An additional
column for the sensitivity to a 300 basis point shock to
counterparties' credit spreads would be added to improve the ability to
analyze counterparty risk under large risk factor shocks. The Federal
Reserve proposes collecting country identifiers for the counterparty
and data regarding whether counterparties included downgrade triggers
in collateral arrangements. These additional data would provide the
Federal Reserve the flexibility needed to develop independent loss
estimates. The Federal Reserve also proposes to clarify the
instructions related to how BHCs should document their internal data
generation and modeling used to complete the CCR schedule.
---------------------------------------------------------------------------
\11\ This is the LGD of counterparties to the BHCs that are used
in the BHCs' CVA calculations.
---------------------------------------------------------------------------
Proposed Revisions to FR Y-14Q (Quarterly Collection) MSR Valuation
Schedule
The Federal Reserve proposes implementing the new quarterly MSR
Valuation schedule that would collect information on the data that BHCs
use to value their MSRs and the sensitivities of those valuations to
changes in economic factors. Data items collected would include the
book and market value of MSRs, the number and dollar value of loans
serviced, capitalization rates by product type, valuation methodology
data (such as the type of valuation models used), valuation sensitivity
items (such as the sensitivity of valuations to changes in interest
rates and macroeconomic variables), and valuations metrics on servicing
portfolios (such as the discount rate used, the option-adjusted spread,
prepayment and default rates, and servicing costs). This proposed
schedule would enhance the ability to monitor and stress-test MSR
valuations, which tend to be volatile and sensitive to macroeconomic
shocks.
To minimize burden on the BHCs, the Federal Reserve proposes
implementing a materiality threshold for determining whether a BHC
would be required to report. BHCs would be required to complete the MSR
Valuation schedule if they meet either of the following materiality
thresholds: (1) The average fair market value of MSRs is greater than
five percent of the firm's average Tier 1 capital during the last four
quarters or (2) the unpaid principal balance of loans under contract
for servicing for which an MSR value is calculated greater than $100
billion. This schedule would have different materiality thresholds than
the other schedules subject to a threshold. The first threshold would
be similar to the materiality thresholds for other schedules in that
BHCs must complete the schedule if the average fair market value of
MSRs divided by average Tier 1 capital during the last four quarters is
greater than five percent. The second threshold would not be based on
the value of the MSR itself; instead it would be based on the unpaid
principal balance of the loans serviced under the MSR contract. This
approach was taken because MSR valuations tend to be quite volatile and
BHCs with high levels of servicing exposure may report low levels of
MSR valuation for several quarters. The balance of the serviced loans
better captures the BHCs' exposure to and dependence on mortgage
servicing income.
Supplemental Schedule
Currently, the Federal Reserve collects data on BHCs' exposures at
different levels of granularity on different reporting forms. For
example, the FR Y-9C collects aggregate exposure information, while the
FR Y-14 collects more granular data on the risk dimensions to which
BHCs are exposed. The Federal Reserve proposes implementing the
quarterly Supplemental schedule to ensure that the Federal Reserve has
a consistent view of BHCs' exposures that are collected at different
levels of granularity. The proposed schedule would collect information
or breakouts of data omitted from the more granular FR Y-14Q/M
schedules, such as balances of non-purpose securities-based loans, or
balances of loans in immaterial portfolios to allow the Federal Reserve
to identify factors contributing to the gaps between the FR Y-9C
aggregate data and the data
[[Page 40056]]
collected in the FR Y-14. The Federal Reserve proposes this aggregate-
level schedule because the burden on the institutions for reporting the
data at the granular segment- and loan-level outweighs the value of the
data to the Federal Reserve. The proposed schedule would allow the
Federal Reserve to understand the variation of such factors across
institutions and over time, and also enable the Federal Reserve to
remain abreast of BHCs' changing exposures to portfolios not currently
captured in the FR Y-14. Lastly, collecting this supplemental data
would provide more precise stress test measures.
Retail FVO/HFS Schedule
The Federal Reserve proposes implementing the quarterly Retail FVO/
HFS Schedule that would collect specific information on loans that are
accounted for under the FVO or HFS. The schedule would collect the
value of loans segmented by various criteria, including the type of
loan (residential loans in forward contract, residential loans
repurchased with FHA/VA insurance,\12\ other residential loans, non-
residential loans in forward contract, student loans not in forward
contract, credit card loans not in forward contract, and auto loans not
in forward contract), and the origination vintage. These data are
necessary for the Federal Reserve to model losses on the FVO/HFS loans.
Loans that are under a forward contract for sale have much lower price
volatility than those loans that are not under a forward contract.
Vintage data are important because the age of the loan and the
conditions under which the loan was originated affect its vulnerability
to macroeconomic shocks. The carrying values of the FVO/HFS loans are
not available elsewhere because BHCs typically calculate the carrying
value on pools of loans and not at the loan-level.
---------------------------------------------------------------------------
\12\ Mortgage insurance is a policy that protects lenders
against losses that result from default on a home mortgage. The FHA
and the VA loan programs are the equivalent of private mortgage
insurance required for certain conventional home loans.
---------------------------------------------------------------------------
In an effort to reduce burden on respondents, the Federal Reserve
also proposes making this schedule subject to the following materiality
threshold: Material portfolios are defined as those with asset balances
greater than $5 billion or asset balances relative to Tier 1 capital
greater than 5 percent on average for the four quarters that precede
the reporting quarter.
Retail Risk Schedule
The Federal Reserve proposes incorporating three types of revisions
to the quarterly Retail Risk schedule. First, the Federal Reserve
proposes adding a number of additional risk characteristics to the
existing collections. These revisions would give more direct insight
into some potential emerging risk dimensions that were previously
captured latently through other variables. Second, the Federal Reserve
proposes making enhancements to the schedules to improve the
consistency across the retail schedules. These enhancements would allow
the Federal Reserve to have a more consistent view of BHCs' risk
profiles across portfolios, such as adding a gross charge-off summary
variable to the Domestic Other Consumer collection. Third, the Federal
Reserve proposes incorporating editorial changes across the portfolio
descriptions.
The Federal Reserve proposes making specific revisions to the
following portfolio collections in the Retail Risk schedule:
To the Domestic Student Loan portfolio, adding a segment
variable to capture the level of education being pursued by the
borrower;
To the Domestic Other Consumer and International Other
Consumer portfolio, deleting the line of credit and loan size segment
variables as similar information can be derived from a combination of
data items reported elsewhere on the schedule, and adding data items to
capture gross charge-offs, bankruptcy charge-offs, and recoveries on
loans and making this collection consistent with the other collections
within the Retail Risk schedule, thereby enhancing the Federal
Reserves' ability to do cross-portfolio analysis;
To the Domestic and International Small Business
portfolio, expanding the Product Type segment to separate lines of
credit from term loans (these product types exhibit different risk
characteristics which may not be completely captured by the existing
set of segment and summary variables) and adding a segment variable to
capture whether the loans are collateralized;
To the International Credit Card portfolio, expanding the
Product Type segment to separate bank cards from charge cards (these
product types exhibit different risk characteristics which may not be
completely captured by the existing set of segment and summary
variables);
To the International Auto portfolio, adding a geography
segment to make the collection consistent with the geography
information collected in the other international collections in the
Retail Risk schedule, and requesting the one-time collection of the
International Auto historical data (January 2007 to present) in order
to better capture how the geographic dimension of the risk distribution
contributed to portfolio risk during that period; and
To all portfolios that collect the Vintage segment
variable, converting the Vintage segment variable to an Age segment
variable in order to remove specific date dependencies from the
reporting requirements, which would make the ongoing maintenance of the
reporting documents and the reporting of the data less burdensome.
Trading Risk Schedule
The Federal Reserve proposes deleting the Top-Ten Equity List
worksheet, Top-Ten Sovereign Credit worksheet, and Alternative Equity
by Geography Input worksheet from the schedule because they are no
longer necessary for the calculation of the trading loss estimate.
The Federal Reserve proposes adding data items to capture long
versus short market value/notional exposures, missing product types,
and more granular credit rating information to allow the Federal
Reserve to better differentiate across different products. In addition,
the Federal Reserve proposes adding term structure (floating)
flexibility in the Commodities worksheet and revising the Spot/
Volatility Grid worksheet to increase coverage of products including
emissions and diversified commodity indices.
In order to improve the effectiveness of the P/L grids,\13\ the
Federal Reserve proposes clarifying current guidance to request wider
and denser P/L grids as well as expanding the rates worksheets to
include P/L grids by product level. The proposed revisions would take
into account historical price movements observed under adverse market
conditions and are meant to increase the effectiveness of interpolation
from the P/L grids.
---------------------------------------------------------------------------
\13\ P/L grids express the amount that firms gain or lose based
on the movements of a predefined set of fundamental risk factors
such as interest rates or credit spreads. They are used to model the
expected P/L firms will experience under a prescribed market
scenario.
---------------------------------------------------------------------------
The Federal Reserve proposes clarifying the instructions to
address: implementing the P/L calculations to generate P/L sensitivity
data in the Equity worksheet and FX worksheet, clarifying ambiguities
related to decomposition and placement of various trading assets within
the Securitized Products worksheet and
[[Page 40057]]
Commodities worksheet of the Trading Risk schedule, and missing items
such as countries and update geographic groupings.
Basel III/Dodd-Frank Schedule
The Federal Reserve proposes adding a new worksheet,
MonitoringInstr, to collect more detailed data on a quarterly basis for
ongoing monitoring and analysis to avoid unnecessary ad-hoc, follow-up
requests with the BHCs during the regular quarterly monitoring process.
The Federal Reserve also proposes adding a new Balance Sheet worksheet
to collect projections of 14 balance sheet items (held to maturity
(HTM) securities; available for sale (AFS) securities; loans and leases
(held for investment and HFS) net of unearned income and ALLL; trading
assets; total intangible assets; other assets; total assets; total RWA;
deposits; trading liabilities; subordinated notes payable to
unconsolidated trusts issuing trust preferred securities (TruPS) and
TruPS issued by consolidated special purpose entities; other
liabilities; total liabilities; and total equity capital) through 2019.
Insight into the BHCs' projected path for these categories of asset
balances would enable the Federal Reserve to better assess the
feasibility of plans for adhering to Basel III requirements. For BHCs
that are not among the 19 SCAP BHCs and are not mandatory Basel II or
opt-in Basel II respondents, the Federal Reserve proposes adding a new
simplified Risk-Weighted Assets (B) worksheet that the BHCs would be
permitted to use at their option. This worksheet would exclude data
items that are not relevant to the respondents.
The Federal Reserve proposes adding data items to the quarterly
Basel III/Dodd-Frank schedule in order to make the schedule consistent
with the annual Basel III/Dodd-Frank schedule. The new data items would
include: adding periodic charges in common stock and retained earnings
under the Capital Composition worksheet; changing the list of action
types, exposure types, and RWA types under Planned Action worksheet;
and adding more data items to verify the consistency of data within the
Basel III/Dodd-Frank schedule and in comparison to the FR Y-14A Summary
schedule. The latter would also provide additional clarification to
Basel III-related data collected on the annual and quarterly schedules.
Securities Risk Schedule
The Federal Reserve proposes revising the Securities schedule to
allow BHCs to report an international securities identification number
(ISIN) \14\ and identify it as such, when a security does not have a
CUSIP number. Also, the Federal Reserve proposes combining the domestic
and foreign corporate bond categories. In an effort to reduce burden,
the reporting of previously optional fields (purchase date, purchase
price, and purchase yield) have been eliminated.
---------------------------------------------------------------------------
\14\ An ISIN is a number that is assigned to almost every stock
and registered bond that trades throughout the world. It facilitates
trade and settlement by making each security unique to every other
security of the same class.
---------------------------------------------------------------------------
Proposed Revisions to the FR Y-14A/Q
PPNR Worksheets (Annual Collection) and PPNR Schedule (Quarterly
Collection)
The FR Y-14 collects PPNR data on an annual and quarterly basis.
The annual worksheets (contained in the Summary schedule) collect
projection information and the quarterly schedule monitors actual PPNR
data. The Federal Reserve proposes revising the three PPNR worksheets
(PPNR Projections, PPNR NII, and PPNR Metrics) and the quarterly PPNR
schedule based on industry feedback and the Federal Reserve's
experience analyzing these data thus far.
Currently, only BHCs with deposits comprising at least one-third of
total liabilities for any reported period are required to report data
on the PPNR NII worksheet. The Federal Reserve proposes reducing the
threshold for reporting to one-quarter of total liabilities because the
Federal Reserve believes that the current threshold does not capture
all the BHCs for which it needs to conduct an in-depth net interest
income assessment. Furthermore, while the Federal Reserve originally
sought to reduce burden on the industry, the agency proposes making all
data items on the PPNR Projections worksheet and the PPNR NII worksheet
required (removing the optional reporting status for certain data
items). As with the revision to the reporting threshold, these data are
needed to better analyze net interest income. Currently, BHCs can
choose ``Primary'' and ``Supplementary'' worksheets with reduced
reporting requirements on the ``Supplementary'' worksheet.
In an effort to better understand the core drivers of BHCs revenues
and expenses, the Federal Reserve proposes revising certain PPNR data
items, including: (1) The exclusion of one-time income and expense
items would be eliminated, in order to ensure a more consistent
definition of PPNR among BHCs and (2) the breakout of optional
immaterial revenues into net interest income and non-interest income,
in order to ensure consistency with other PPNR schedule instructions
that require reconciliation to the FRY-9C for each component of PPNR
(net interest income, non-interest income, and non-interest expense).
The Federal Reserve proposes adding several new breakouts and data
items as well as a new business line into the components revenues (on
the annual PPNR Projections worksheet and the quarterly PPNR Submission
worksheet), including:
A new breakout for credit card revenues would split out
interchange revenues from reward activity and partner-sharing contra-
revenue;
Revenue from the mortgage and home equity business line
would be split into production and servicing income; provisions to
reserves for representations and warranties and repurchase obligations
and other liabilities related to sold mortgages also would be split
out;
Revenue related to retail and small business deposits
would separate overdraft fees; and
A new business line for Merchant Banking/Private Equity
would be added; previously this business line had been included among
the other business lines, typically Investment Banking.
On the annual PPNR Projections worksheet and the quarterly PPNR
Submission worksheet, the Federal Reserve proposes substantively
expanding the data collected on non-interest expense. The new data
items would include Legal Expenses, Litigation Settlements and
Penalties, and Reserves for Repurchases and Litigation related to sold
and securitized mortgages. Other new data items would include marketing
expenses, credit card reward expenses, expenses related to premises,
fixed assets, and other real estate owned.
The Federal Reserve proposes adding several data items to the PPNR
Metrics worksheet:
To the Retail and Small Business section, data items
related to mortgage servicing would be expanded and would include
information on residential loans sold and servicing expenses; also the
number of credit card accounts and deposit accounts would be added;
To the Investment Banking section, the estimate of market
share would be replaced with measures of market size, and the number of
employees would be added;
To Investment Management section, Assets Under Management
would include a breakout of fixed income; and
[[Page 40058]]
To the Firm-Wide Metrics section, severance costs would be
added, and certain data items that correspond to FR Y-9C would be added
to the annual worksheet to collect projection data in order to compare
the business line perspective of the FR Y-14 to the FR Y-9C items.
The Federal Reserve also proposes a one-time collection of the
historical data only for these new data items on the PPNR Submission
worksheet, the PPNR NII worksheet, and the PPNR Metrics worksheet (from
first quarter 2009 through second quarter 2012) including elimination
of the one-time data items exclusions. BHCs should have the historical
data for the new data items available or would be able to calculate
them. In third quarter 2011, the Federal Reserve collected data dating
back to 2009 when PPNR data was collected for the first time under the
FR Y-14. The historical data previously collected is used to assess
trends in PPNR results among the BHCs and to assess whether the
projections presented in the FR Y-14A are consistent with past
performance. Based on the reasons stated above the Federal Reserve also
proposes requiring BHCs that are newly subject to the FR Y-14 reporting
requirements to submit historical data (back to first quarter 2009)
with their first quarter data submission.
General Revisions to the FR Y-14A/Q/M
Respondent Panel
The Federal Reserve proposes revising the respondent panel to be
consistent with the scope of application in the notice of proposed
rulemaking regarding enhanced prudential standards. As revised, the
respondent panel would be defined as: ``Any top-tier bank holding
company (other than a foreign banking organization), that has $50
billion or more in total consolidated assets, as determined based on:
(i) The average of the bank holding company's total consolidated assets
in the four most recent quarters as reported quarterly on the bank
holding company's Consolidated Financial Statements for Bank Holding
Companies (FR Y-9C); or (ii) the average of the bank holding company's
total consolidated assets in the most recent consecutive quarters as
reported quarterly on the bank holding company's FR Y-9Cs, if the bank
holding company has not filed an FR Y-9C for each of the most recent
four quarters.'' The Federal Reserve also proposes expanding the
respondent panel to include the 11 large BHCs that meet the asset
threshold for reporting but that did not participate in the previous
2009 SCAP or CCAR 2011 exercises, except for SR 01-01 firms. As of
September 30, 2011, there were approximately 33 large BHCs.\15\ 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 BHCs.
---------------------------------------------------------------------------
\15\ Although 33 BHCs currently meet the reporting asset
threshold, three are SR 01-01 BHCs and are therefore exempt from
reporting. SR 01-01 (Application of the Board's Capital Adequacy
Guidelines to BHCs owned by Foreign Banking Organizations) states,
``as a general matter, a U.S. BHC that is owned and controlled by a
foreign bank that is an FHC that the Board has determined to be
well-capitalized and well-managed will not be required to comply
with the Board's capital adequacy guidelines.''
---------------------------------------------------------------------------
Attestation
The Federal Reserve proposes requiring the signature of the BHCs'
CFO (or the individual performing this equivalent function) on the FR
Y-14 submission. The Federal Reserve proposes adding a new cover page
to provide the appropriate attestation language (consistent, as
appropriate, with the FR Y-9C) and stating in the general reporting
instructions for the FR Y-14A, Q, and M the following:
The Capital Assessments and Stress Testing (FR Y-14A/Q/M) data
submission must be signed by the Chief Financial Officer of the BHC
(or by the individual performing this equivalent function). By
signing the cover page of this report, the authorized officer
acknowledges that any knowing and willful misrepresentation or
omission of a material fact on this report constitutes fraud in the
inducement and may subject the officer to legal sanctions provided
by 18 U.S.C. 1001 and 1007.
Bank holding companies must maintain in their files a manually
signed and attested printout of the data submitted. The cover page
from the Federal Reserve's Web site reporting form should be used to
fulfill the signature and attestation requirement and this page
should be attached to the printout placed in the bank holding
company's files.
Contact Information
The Federal Reserve proposes collecting contact information for
each of the reported schedules to facilitate and expedite responses to
follow up questions. Consistent with the cover page of the FR Y-9C,
each schedule would include the statement, ``Person to whom questions
about this schedule should be directed,'' and would collect name/title,
phone number, fax number, and email address.
Request for Additional Feedback
The Federal Reserve is seeking additional feedback on the following
questions from first-time respondents of the FR Y-14Q/M on ways to
reduce reporting burden:
1. Should the Federal Reserve allow a transition period during
which first-time respondents of the FR Y-14Q/M may (1) use a tailored
materiality threshold, (2) submit the schedules under an extended
filing deadline, or (3) both?
2. If a transition period is allowed, how long should it be? Would
a tailored materiality threshold of 25% of tier 1 capital or a
threshold of 100% of tier 1 capital be more appropriate? For the
quarterly and monthly filings, how much additional time should the
Federal Reserve allow for filing the schedules?
The Federal Reserve is seeking feedback on the following question
from all respondents on the Basel III/Dodd-Frank schedule.
3. On June 12, 2012, the Federal Reserve Board, the OCC, and the
FDIC published a joint press release seeking comment on three proposed
rulemakings that would revise and replace the agencies' current capital
rules (the Basel III proposed rulemakings) and announcing the
finalization of the Market Risk Capital rulemaking. The Board's press
release with the pre-published rulemakings is available on the Board's
public Web site at: www.federalreserve.gov/newsevents/press/bcreg/20120612a.htm. With respect to the annual and quarterly Basel III/Dodd-
Frank schedules (except for that portion which relates to market RWAs),
what are the costs and benefits associated with allowing BHCs to
continue to follow existing BCBS guidance on Basel III, given that some
aspects of any final rule implementing Basel III in the United States,
may differ significantly from the BCBS guidance, and in particular
those aspects of the guidance involving securitization exposures and
credit ratings? On what basis (BCBS guidance, the proposed rulemakings,
or some combination thereof) should the Basel III/Dodd-Frank schedules
be based and why?
Board of Governors of the Federal Reserve System, June 29, 2012.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2012-16484 Filed 7-5-12; 8:45 am]
BILLING CODE 6210-01-P