[Federal Register Volume 77, Number 215 (Tuesday, November 6, 2012)]
[Notices]
[Pages 66663-66667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27171]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
Agency Information Collection Activities: Proposed Information
Collection; Submission for OMB Review
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice and request for comment.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), as part
of its continuing effort to reduce paperwork and respondent burden,
invites the general public and other Federal agencies to take this
opportunity to comment on a continuing information collection, as
required by the Paperwork Reduction Act of 1995.
An agency may not conduct or sponsor, and a respondent is not
required to respond to, an information collection unless it displays a
currently valid OMB control number. The OCC is soliciting comment
concerning its information collection titled, ``Company-Run Annual
Stress Test Reporting Template and Documentation for Covered
Institutions with Total Consolidated Assets of $50 Billion or More
under the Dodd-Frank Wall Street Reform and Consumer Protection Act.''
The OCC is also announcing that the proposed collection of
information has been submitted to the Office of Management and Budget
(OMB) for review and clearance under the Paperwork Reduction Act of
1995.
DATES: Comments must be received by December 6, 2012.
ADDRESSES: Communications Division, Office of the Comptroller of the
Currency, Mailstop 2-3, Attention: 1557-0237, 250 E Street SW.,
Washington, DC 20219. In addition, comments may be sent by fax to (202)
874-5274 or by electronic mail to [email protected]. You may
personally inspect and photocopy comments at the OCC, 250 E Street SW.,
Washington, DC 20219. For security reasons, the OCC requires that
visitors make an appointment to inspect comments. You may do so by
calling (202) 874-4700. Upon arrival, visitors will be required to
present valid government-issued photo identification and to submit to
security screening in order to inspect and photocopy comments.
Additionally, please send a copy of your comments by mail to: OCC
Desk Officer, 1557-0237, U.S. Office of Management and Budget, 725 17th
[[Page 66664]]
Street NW., 10235, Washington, DC 20503, or by fax to (202)
395-6974.
FOR FURTHER INFORMATION CONTACT: You can request additional information
or a copy of the collection from Johnny Vilela or Mary H. Gottlieb, OCC
Clearance Officers, (202) 874-5090, Legislative and Regulatory
Activities Division, Office of the Comptroller of the Currency, 250 E
Street SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION: In compliance with 44 U.S.C. 3507, OCC has
submitted the following proposed collection of information to OMB for
review and clearance.
Company-Run Annual Stress Test Reporting Template and Documentation for
Covered Institutions With Total Consolidated Assets of $50 Billion or
More Under the Dodd-Frank Wall Street Reform and Consumer Protection
Act
Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act \1\ (Dodd-Frank Act) requires certain financial
companies, including national banks and Federal savings associations,
to conduct annual stress tests \2\ and requires the primary financial
regulatory agency \3\ of those financial companies to issue regulations
implementing the stress test requirements.\4\ A national bank or
Federal savings association is a ``covered institution'' and therefore
subject to the stress test requirements if its total consolidated
assets are more than $10 billion. Under section 165(i)(2), a covered
institution is required to submit to the Board of Governors of the
Federal Reserve System (Board) and to its primary financial regulatory
agency a report at such time, in such form, and containing such
information as the primary financial regulatory agency may require.\5\
On October 9, 2012, the OCC published in the Federal Register a final
rule implementing the section 165(i)(2) annual stress test
requirement.\6\ This notice describes the reports and information
required to meet the reporting requirements under section 165(i)(2).
These information collections will be given confidential treatment (5
U.S.C. 552(b)(4)).
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\1\ Public Law 111-203, 124 Stat. 1376, July 2010.
\2\ 12 U.S.C. 5365(i)(2)(A).
\3\ 2 U.S.C. 5301(12).
\4\ 12 U.S.C. 5365(i)(2)(C).
\5\ 12 U.S.C. 5365(i)(2)(B).
\6\ 77 FR 61238, October 9, 2012--Prior to issuance of the final
rule, the OCC published on January 24, 2012, a notice of proposed
rulemaking (NPR) implementing the section 165(i)(2) annual stress
test requirement (77 FR 3408).
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The OCC intends to use the data collected through these templates
proposal to assess the reasonableness of the stress test results of
covered institutions and to provide forward-looking information to the
OCC regarding a covered institution's capital adequacy. The OCC also
may use the results of the stress tests to determine whether additional
analytical techniques and exercises could be appropriate to identify,
measure, and monitor risks at the covered institution. The stress test
results are expected to support ongoing improvement in a covered
institution's stress testing practices with respect to its internal
assessments of capital adequacy and overall capital planning.
The Dodd-Frank Act stress testing requirements apply to all covered
institutions, but the OCC recognizes that many covered institutions
with consolidated total assets of $50 billion or more have been subject
to stress testing requirements under the Board's Comprehensive Capital
Analysis and Review (CCAR). The OCC also recognizes that these
institutions' stress tests will be applied to more complex portfolios
and therefore warrant a broader set of reports to adequately capture
the results of the company-run stress tests. These reports will
necessarily require more detail than would be appropriate for smaller,
less complex institutions. Therefore, the OCC has decided to specify
separate reporting templates for covered institutions with total
consolidated assets between $10 and $50 billion and for covered
institutions with total consolidated assets of $50 billion or more. In
cases where a covered institution with assets less than $50 billion is
affiliated with a banking organization with assets of $50 billion or
more, the OCC reserves the authority to require that covered
institution to use the reporting template for larger institutions with
total consolidated assets of $50 billion or more. The OCC may also, on
a case-by-case basis, require a covered institution with assets of $50
billion or more to report stress test results using a simpler format to
be specified by the OCC. The reporting templates for institutions with
assets of $50 billion or more are described below.
The OCC has worked closely with the Board and the Federal Deposit
Insurance Corporation (FDIC) to make the agencies' respective rules
implementing annual stress testing under the Dodd-Frank Act consistent
and comparable by requiring similar standards for scope of application,
scenarios, data collection and reporting forms. The OCC has worked to
minimize any potential duplication of effort related to the annual
stress test requirements. The OCC also recognizes that many covered
institutions with total consolidated assets of $50 billion or more are
required to submit reports using CCAR reporting form FR Y-14A.\7\
Therefore, the OCC based its reporting requirements closely on the
Board's form FR Y-14A for covered institutions with total consolidated
assets of $50 billion or more. The OCC recognizes the Board modified
the FR Y-14A and, to the extent practical, the OCC anticipates keeping
its reporting requirements consistent with the Board's FR Y-14A in
order to minimize burden on covered institutions.\8\ In order to fully
evaluate the stress test results submissions, the OCC may conduct
follow up discussions with or request responses to follow up questions
from respondents, as needed.
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\7\ http://www.federalreserve.gov/reportforms.
\8\ 77 FR 60695, October 4, 2012.
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Description of Reporting Templates for Institutions With $50 Billion or
More in Assets
The OCC DFAST-14A Summary Schedule includes data collection
worksheets necessary for the OCC to assess the company-run stress test
results for baseline, adverse and severely adverse scenarios as well as
any other scenario specified in accordance with regulations specified
by the OCC. The DFAST-14A Summary Schedule includes worksheets that
collect information on the following areas:
1. Income Statement;
2. Balance Sheet;
3. Capital Statement;
4. Retail Risk;
5. Securities: Available-for-Sale/Held to Maturity (AFS/HTM);
6. Trading;
7. Counterparty Credit Risk (CCR);
8. Operational Risk; and
9. Pre-Provision Net Revenue (PPNR).
Each covered institution reporting to the OCC using this form will be
required to submit to the OCC a separate DFAST-14A Summary Schedule for
each scenario provided to covered institutions in accordance with
regulations implementing Section 165(i)(2) as specified by the OCC.
Worksheets: Income Statement
This income statement worksheet collects data for the quarter
preceding the planning horizon and for each quarter of the planning
horizon for the stress test on projected losses and revenues in the
following categories.
1. Loan losses;
2. Losses due to contingent commitments and liabilities;
[[Page 66665]]
3. Other Than Temporary Impairments (OTTI) on assets held to
maturity and available for sale;
4. Trading account losses;
5. Allowance for loan and lease losses;
6. Pre-provision net revenue; and
7. Repurchase reserve/liability for representations and warranties.
This schedule provides information used to assess losses that covered
institutions can sustain in adverse and severely adverse stress
scenarios.
Worksheets: Balance Sheet
The balance sheet worksheet collects data for the quarter preceding
the planning horizon and for each quarter of the planning horizon for
the stress test on projected equity capital, as well as on assets and
liabilities in the following categories.
1. HTM Securities;
2. AFS Securities;
3. Loans;
4. Trading Assets;
5. Intangibles;
6. Deposits; and
7. Trading Liabilities.
The OCC intends to use this worksheet to assess the projected changes
in assets and liabilities that a covered institution can sustain in an
adverse and severely adverse stress scenario. This worksheet will also
be used to assess the revenue and loss projections identified in the
income statement worksheet.
Worksheets: Capital
The capital worksheet collects data for the quarter preceding the
planning horizon and for each quarter of the planning horizon for the
stress test on the following areas.
1. Changes to Equity Capital;
2. Changes to Regulatory Capital; and
3. Capital Actions.
The OCC intends to use this worksheet to assess the impact on capital
of the projected losses and projected changes in assets that the
covered institution can sustain in a stressed scenario. In addition to
reviewing the worksheet in the context of the balance sheet and income
statement projections, the OCC also intends to use this worksheet to
assess the adequacy of the capital plans and capital planning processes
for each covered institution.
Worksheets: Retail Projections
The retail projections worksheets collect data for each quarter of
the planning horizon for the stress test on projected balances and
losses for major retail portfolios: residential real estate, credit
card, automobile, student loans, small business loans, and other
consumer. For residential real estate, the worksheets collect data for
first lien mortgages, home equity lines of credit, and home equity
loans. For all major retail portfolios, the worksheets contain separate
segments for domestic and international loans for various product
types. Within each broad product-type segment, the reporting for the
portfolio is divided into a number of sub-segments that embody unique
risk characteristics. This modular product-type design of the retail
worksheet allows for a targeted data collection that encompasses only
the material portfolios in a given product area for a particular
covered institution. A covered institution would be required to
complete only the segments and sub-segments material for that
institution. This design is intended to limit burden while maximizing
the supervisory information produced from the collection.
Worksheets: Securities
Several securities worksheets collect data related to AFS and HTM
securities. The worksheets collect data and information such as:
projected OTTI by asset class for each quarter of the forecast time
horizon; methodologies and assumptions used to generate the OTTI
projections for each asset class; projected stressed fair market value
(FMV) for each asset class as well as qualitative information on the
methodologies and assumptions used to generate the stressed market
value; and actual FMV including the source (vendor or proprietary) and
key assumptions used in determining market values (if using a
proprietary model).
Worksheets: Trading and Counterparty Risk
The trading and counterparty risk worksheets collect projected
losses associated with a specified global market risk scenario for
covered institutions with large trading operations. The OCC provides a
set of risk factors relevant to the trading and counterparty positions
so that respondent covered institutions project trading and
counterparty components in the adverse and severely adverse scenarios.
Completion of the trading and counterparty risk worksheets would be
required only for those institutions subject to the market shock
provided by the OCC.
Worksheets: Operational Risk
The operational risk worksheets collect data on covered
institutions' projections of operational losses for each quarter of the
planning horizon for the stress test. Operational losses are defined as
losses arising from inadequate or failed internal processes, people,
and systems or from external events including legal losses. Some
examples of operational loss events are losses related to improper
business practices (including class action lawsuits), execution errors,
and fraud. Additional detail may be requested in order for the OCC to
evaluate the transformation of the covered institutions' historical
loss experience into operational loss projections. Additional detail
also may be requested on any budgeting processes used to project
operational losses.
Completion of the operational risk worksheets would be required
only for those institutions subject to advanced approaches risk-based
capital rules.
Worksheets: PPNR
For the PPNR worksheets, covered institutions must provide
projections for the three major components of PPNR (net interest
income, non-interest income, and non-interest expense) for each quarter
of the planning horizon. Collection of these data in this format is
based on the assumption that the revenues generated by different
business lines are affected differently by different stress scenarios,
and such a view facilitates a more robust analysis of the resulting
projections.
Description of OCC DFAST-14A Counterparty Credit Risk Template
The CCR template collects, on various worksheets, data to identify
credit valuation adjustment (CVA), exposures, and CVA sensitivities for
the covered institution's top counterparties along a number of
dimensions, including current CVA, stressed CVA, net current exposure,
and gross current exposure. Covered institutions also must submit
aggregate CVA, exposures, and CVA sensitivities by ratings categories.
The Notes to the CCR Schedule worksheet allows covered institutions to
voluntarily submit additional information to provide clarity to the
portfolio. Covered institutions are required to report results for one
scenario and two specifications to capture Expected Exposure profiles.
Completion of the CCR template would be required only for those
institutions subject to the market shock provided by the OCC.
Description of OCC DFAST-14A Basel III and Dodd-Frank Template
The Basel III and Dodd-Frank template collects projections of Tier
1 Common Equity, Tier 1 Capital, Risk-
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Weighted Assets (RWA), and Leverage Exposures (along with granular
components of those elements) under the baseline scenario for each year
through 2017. Banks are required to complete the schedule based on the
methodologies outlined in the U.S. banking agencies NPRs: Basel III
NPR, Advanced Approaches NPR, and final market risk capital rule (see
OCC Joint Release NR 2012-88 dated June 12, 2012). Covered institutions
also are required to include data on the projected impact of any
significant actions planned in response to Basel III and the Dodd-Frank
Act (for example, asset sales, asset wind-downs, and data collection
and modeling enhancements). The OCC expects to align this template and
its instructions with the rules implementing the Basel III framework in
the U.S. when those rules are final.
Description of OCC DFAST-14A Regulatory Capital Instruments Template
The regulatory capital instruments schedule collects historical
data and projections of covered institutions' balances of the funded
instruments that are included in regulatory capital. The schedule
collects data by instrument type, in addition to projections for
issuances and redemptions that contribute to changes in balances under
the covered institution baseline scenario.
Description of OCC DFAST-14A Operational Risk Template
The operational risk schedule collects data on covered
institutions' historical and current operational losses. This schedule
is only required from covered institutions subject to the advanced
approaches risk-based capital rules. The first worksheet gathers data
on covered institutions' operational risk capital by unit-of-measure
(undiversified basis) from Q4 of the previous year to Q3 of the
reporting year. The second worksheet gather data on the total dollar
value of a covered institutions' legal reserve balance as of September
30.
Description of OCC DFAST-14A Scenario Template
To conduct the stress test required under this rule, a covered
institution may need to project additional economic and financial
variables to estimate losses or revenues for some or all of its
portfolios. In such a case, the covered institution is required to
complete a worksheet for each scenario where such additional variables
are used to conduct the stress test. Each scenario worksheet collects
the variable name (matching that reported on the Scenario Variable
Definitions worksheet), the actual value of the variable during the Q3
of the reporting year, and the projected value of the variable for nine
future quarters.
Description of OCC DFAST-14A Contact Information Template
The contact information template includes a directory worksheet for
reporting points of contact for each of the templates described above:
summary, counterparty credit risk, Basel III and Dodd-Frank,
operational risk, regulatory capital instruments, and scenario.
Description of Supporting Documentation
Covered institutions must submit clear documentation of the
projections included in the worksheets to support efficient and timely
review of annual stress test results by the OCC. The supporting
documentation should be submitted electronically and is not expected to
be reported in the workbooks used for required data reporting. This
supporting documentation must clearly describe the methodology used to
produce the stress test projections, and must include how the
macroeconomic factors were translated into a covered institution's
projections, as well as technical details of any underlying statistical
methods used. Where company-specific assumptions are made that differ
from the broad macroeconomic assumptions incorporated in stress
scenarios provided by the OCC, the documentation must also describe
such assumptions and how those assumptions relate to reported
projections. Where historical relationships are relied upon, the
covered institutions must describe the historical data and provide the
basis for the expectation that these relationships would be maintained
in each scenario, particularly under adverse and severely adverse
conditions.
Comment Summary
In the Federal Register of August 16, 2012 (77 FR 49488), OCC
published a 60-day notice requesting public comment on the templates
and the collection of information. OCC received three comments on the
notice. Two of the comments received were from banking organizations
and one was from an industry group.
The commenters generally expressed support for stress testing and
for the OCC's efforts to ensure appropriate risk management processes.
In addition, two commenters acknowledged the OCC's efforts to
coordinate with the other agencies and avoid duplication of efforts.
However, the commenters also advocated that several changes be made to
the templates. Two commenters urged the OCC to more closely align the
data collection templates to those of the other agencies, with one
commenter suggesting that the Board, FDIC, and OCC develop one common
set of data templates to reduce cost and burden on banking
organizations.
One commenter requested that the OCC provide more clarity about how
the OCC will use the data collected and provide more detailed
instructions, while a second requested that the OCC include a formal
process for addressing questions seeking clarification of the reporting
templates. Another commenter urged the OCC to permit banks which
comprise nearly all material activities of the parent holding company
to incorporate by reference into the bank's OCC stress test submission
the results of the holding company's CCAR tests.
After carefully considering the comments received, the OCC aligned
its reporting forms with those of the Federal Reserve to the extent
practicable. For example, the Basel III Capital template will only
collect results related to the baseline scenario on an annual basis
rather than quarterly results under the adverse and severely adverse
scenarios. However, some elements required by the Federal Reserve are
only applicable at the bank holding company level and the Federal
Reserve required some elements to fulfill its other obligations related
to covered companies' stress tests. The OCC will continue to consider
the practicability of a single set of reporting forms or the use of
cross-references.
The OCC does not believe it is appropriate for covered institutions
to simply reference holding company stress test results, even where the
covered institution or institutions comprise the bulk of holding
company activities. This is consistent with the treatment under the
OCC's final rule implementing section 165(i)(2), which requires such
covered institutions to conduct annual stress tests.\9\ The OCC notes
that under that rule, a covered institution that is a subsidiary of a
holding company subject to the Board's annual stress testing rule
generally may use the stress testing systems and processes of the
holding company where appropriate, which will reduce
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the burden associated with separate reporting.
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\9\ 77 FR 61238 (October 9, 2012); see also 77 FR 3408 (January
24, 2012) (Notice of proposed rulemaking).
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Finally, the OCC believes that established OCC processes for
responding to queries from supervised entities will be adequate to
address any questions related to use of these reporting templates, and
that no additional formal processes are necessary.
Burden Estimates
OCC estimates the burden of this collection of information as
follows:
Estimated Number of Respondents: 22.
Estimated Total Annual Burden: 10,436 hours.
The OCC recognizes the Board has estimated 79,200 hours for bank
holding companies to prepare their systems for submitting data for the
FR Y-14.\10\ The OCC believes that these systems will also be used to
submit data for the reporting templates described in this notice.
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\10\ 77 FR 60695 (October 4, 2012).
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Comments continue to be invited on:
(a) Whether the collection of information is necessary for the
proper performance of the functions of the OCC, including whether the
information has practical utility; (b) The accuracy of the OCC's
estimate of the burden of the collection of information; (c) Ways to
enhance the quality, utility, and clarity of the information to be
collected; (d) Ways to minimize the burden of the 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.
Dated: November 2, 2012.
Michele Meyer,
Assistant Director, Legislative and Regulatory Activities Division.
[FR Doc. 2012-27171 Filed 11-5-12; 8:45 am]
BILLING CODE 4810-33-P