[Federal Register Volume 79, Number 95 (Friday, May 16, 2014)]
[Notices]
[Pages 28598-28601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11397]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
Agency Information Collection Activities: Information Collection
Renewal; Submission for OMB Review; Capital Adequacy Standards
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Notice and request for comment.
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SUMMARY: The 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 (PRA).
In accordance with the requirements of the PRA, the OCC 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 OCC is soliciting comment concerning renewal of its information
collection titled, ``Capital Adequacy Standards.'' It is also giving
notice that it has submitted the collection to OMB for review.
DATES: Comments must be submitted on or before June 16, 2014.
ADDRESSES: Because paper mail in the Washington, DC area and at the OCC
is subject to delay, commenters are encouraged to submit comments by
email if possible. Comments may be sent to: Legislative and Regulatory
Activities Division, Office of the Comptroller of the Currency,
Attention: 1557-0318, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-
11, Washington, DC 20219. In addition, comments may be sent by fax to
(571) 465-4326 or by electronic mail to [email protected].
You may personally inspect and photocopy comments at the OCC, 400 7th
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) 649-6700. 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.
All comments received, including attachments and other supporting
materials, are part of the public record and subject to public
disclosure. Do not enclose any information in your comment or
supporting materials that you consider confidential or inappropriate
for public disclosure.
Additionally, please send a copy of your comments by mail to: OCC
Desk Officer, 1557-0318, U.S. Office of Management and Budget, 725 17th
Street NW., 10235, Washington, DC 20503, or by email to: oira
[email protected].
FOR FURTHER INFORMATION CONTACT: Johnny Vilela or Mary H. Gottlieb, OCC
Clearance Officers, (202) 649-5490, for persons who are deaf or hard of
hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities
Division, Office of the Comptroller of the Currency, 400 7th Street
SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219.
SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), Federal
agencies must obtain approval from OMB for each collection of
information they conduct or sponsor. ``Collection of information'' is
defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency
requests or requirements that members of the public submit reports,
keep records, or provide information to a third party.
In connection with issuance of the Basel III final rule,\1\ OMB
provided a six-month approval for this information collection. The OCC
is requesting that OMB extend approval of the collection for the
standard three years.
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\1\ 78 FR 62018 (October 11, 2013).
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Title: Capital Adequacy Standards.
OMB Control No.: 1557-0318.
Frequency of Response: On occasion.
Affected Public: Business or other for-profit.
Estimated Number of Respondents: 823.
Estimated Total Burden: 189,348.50 hours.
Section-by-Section-Analysis
Twelve CFR part 3 sets forth the OCC's minimum capital requirements
and overall capital adequacy standards for national banks and Federal
savings associations.
Section 3.3(c) allows for the recognition of netting across
multiple types of transactions or agreements if the institution obtains
a written legal opinion verifying the validity and enforceability of
the agreement under certain circumstances and maintains sufficient
written documentation of this legal review.
Section 3.22(h)(2)(iii)(A) permits the use of a conservative
estimate of the amount of an institution's investment in its own
capital or the capital of unconsolidated financial institutions held
through an index security with prior approval by the OCC.
Section 3.35(b)(3)(i)(A) requires, for a cleared transaction with a
qualified central counterparty (QCCP), that a client bank apply a risk
weight of two percent, provided that the collateral posted by the bank
to the QCCP is subject to certain arrangements and the client bank has
conducted a sufficient legal review (and maintains sufficient written
documentation of the legal review) to conclude with a well-
[[Page 28599]]
founded basis that the arrangements, in the event of a legal challenge,
would be found to be legal, valid, binding, and enforceable under the
law of the relevant jurisdictions.
Section 3.37(c)(4)(i)(E), regarding collateralized transactions,
requires that a bank have policies and procedures in place describing
how it determines the period of significant financial stress used to
calculate its own internal estimates for haircuts and be able to
provide empirical support for the period used.
Section 3.41(b)(3), which sets forth operational requirements for
securitization exposures, allows a national bank or Federal savings
association to recognize for risk-based capital purposes, in the case
of synthetic securitizations, a credit risk mitigant to hedge
underlying exposures if certain conditions are met, including a
requirement that the national bank or Federal savings association
obtain a well-reasoned opinion from legal counsel that confirms the
enforceability of the credit risk mitigant in all relevant
jurisdictions.
Section 3.41(c)(2)(i) requires that a national bank or Federal
savings association demonstrate its comprehensive understanding of a
securitization exposure by conducting an analysis of the risk
characteristics of each securitization exposure prior to its
acquisition, taking into account a number of specified considerations
and documenting the analysis within three business days after the
acquisition.
If a national bank or Federal savings association provides non-
contractual support to a securitization, Sec. 3.42(e)(2), regarding
risk-weighted assets for securitization exposures, requires that a
national bank or Federal savings association to publicly disclose that
is has provided implicit support to a securitization and the risk-based
capital impact to the bank of providing such implicit support.
Section 3.62 sets forth disclosure requirements related to the
capital requirements of a national bank or Federal savings association.
Section 3.61 provides that these requirements apply only to a national
bank or Federal savings association with total consolidated assets of
$50 billion or more that is not a consolidated subsidiary of an entity
that is itself subject to Basel III disclosures. For national banks and
Federal savings associations subject to the disclosure requirements,
section 3.62(a) requires quarterly disclosure of information in the
applicable tables in section 3.63 and, if a significant change occurs,
such that the most recent reported amounts are no longer reflective of
the institution's capital adequacy and risk profile, section 3.62(a)
requires the national bank or Federal savings association to disclose
as soon as practicable thereafter, a brief discussion of the change and
its likely impact. Section 3.62(a) permits annual disclosure of
qualitative information that typically does not change each quarter,
provided that any significant changes are disclosed in the interim.
Section 3.62(b) requires that a national bank or Federal savings
association have a formal disclosure policy approved by the board of
directors that addresses its approach for determining the disclosures
it makes. The policy must address the associated internal controls and
disclosure controls and procedures. Section 3.62(c) permits a national
bank or Federal savings association to disclose more general
information about certain subjects if the national bank or Federal
savings association concludes that the specific commercial or financial
information required to be disclosed under Sec. 3.62 is exempt from
disclosure under the Freedom of Information Act (5 U.S.C. 552), and
national bank or Federal savings association provides the reason the
specific items of information have not been disclosed.
Section 3.63 sets forth the specific disclosure requirements for a
non-advanced approaches national bank or Federal savings association
with total consolidated assets of $50 billion or more that is not a
consolidated subsidiary of an entity that is itself subject to Basel
III disclosure requirements. Section 3.63(a) requires those
institutions to make the disclosures in Tables 1 through 10 to Sec.
3.63 and in Sec. 3.63(b) for each of the last three years beginning on
the effective date of the rule. Section 3.63(b) requires quarterly
disclosure of an institution's common equity tier 1 capital, additional
tier 1 capital, tier 2 capital, tier 1 and total capital ratios,
including the regulatory capital elements and all the regulatory
adjustments and deductions needed to calculate the numerator of such
ratios; total risk-weighted assets, including the different regulatory
adjustments and deductions needed to calculate total risk-weighted
assets; regulatory capital ratios during any transition periods,
including a description of all the regulatory capital elements and all
regulatory adjustments and deductions needed to calculate the numerator
and denominator of each capital ratio during any transition period; and
a reconciliation of regulatory capital elements as they relate to its
balance sheet in any audited consolidated financial statements. Tables
1 through 10 to Sec. 3.63 set forth qualitative and/or quantitative
requirements for scope of application, capital structure, capital
adequacy, capital conservation buffer, credit risk, counterparty credit
risk-related exposures, credit risk mitigation, securitizations,
equities not subject to Subpart F (Market Risk requirements) of the
rule, and interest rate risk for non-trading activities.
Section 3.121 requires a national bank or Federal savings
association subject to the advanced approaches risk-based capital
requirements to adopt a written implementation plan to address how it
will comply with the advanced capital adequacy framework's
qualification requirements and also develop and maintain a
comprehensive and sound planning and governance process to oversee the
implementation efforts described in the plan. Section 3.122 further
requires these institutions to: develop processes for assessing capital
adequacy in relation to an organization's risk profile; establish and
maintain internal risk rating and segmentation systems for wholesale
and retail risk exposures, including comprehensive risk parameter
quantification processes and processes for annual reviews and analyses
of reference data to determine their relevance; document its process
for identifying, measuring, monitoring, controlling, and internally
reporting operational risk; verify the accurate and timely reporting of
risk-based capital requirements; and monitor, validate, and refine its
advanced systems.
Section 3.123 sets forth ongoing qualification requirements that
require an institution to notify the OCC of any material change to an
advance system and to establish and submit to the OCC a plan for
returning to compliance with the qualification requirements.
Section 3.124 requires a national bank of Federal savings
association to submit to the OCC, within 90 days of consummating a
merger or acquisition, an implementation plan for using its advanced
systems for the merged or acquired company.
Section 3.132(b)(2)(iii)(A) addresses counterparty credit risk of
repo-style transactions, eligible margin loans, and over-the-counter
(OTC) derivative contracts, and internal estimates for haircuts. With
the prior written approval of the OCC, an institution may calculate
haircuts (Hs and Hfx) using its own internal
estimates of the volatilities of market prices and foreign exchange
rates. The section requires national banks and Federal savings
associations to satisfy certain minimum quantitative standards in order
to receive OCC
[[Page 28600]]
approval to use its own internal estimates.
Section 3.132(b)(3) covers counterparty credit risk of repo-style
transactions, eligible margin loans, OTC derivative contracts, and
simple Value-at-Risk (VaR) methodology. With the prior written approval
of the OCC, a national bank or Federal savings association may estimate
exposure at default (EAD) for a netting set using a VaR model that
meets certain requirements.
Section 3.132(d)(1) permits the use of the internal models
methodology (IMM) to determine EAD for counterparty credit risk for
derivative contracts with prior written approval from the OCC. Section
3.132(d)(1)(iii) permits the use of the internal models methodology for
derivative contracts, eligible margin loans, and repo-style
transactions subject to a qualifying cross-product netting agreement
with prior written approval from the OCC.
Section 3.132(d)(2)(iv) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative
contracts, and risk-weighted assets using IMM. Under the IMM, an
institution uses an internal model to estimate the expected exposure
(EE) for a netting set and then calculates EAD based on that EE. An
institution must calculate two EEs and two EADs (one stressed and one
unstressed) for each netting as outlined in this section. A national
bank or Federal savings association may use a conservative measure of
EAD subject to prior written approval of the OCC.
Section 3.132(d)(3)(vi) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative
contracts. To obtain OCC approval to calculate the distributions of
exposures upon which the EAD calculation is based, a national bank or
Federal savings association must demonstrate to the satisfaction of the
OCC that it has been using for at least one year an internal model that
broadly meets the minimum standards, with which the institution must
maintain compliance. The institution must have procedures to identify,
monitor, and control wrong-way risk throughout the life of an exposure
and they must include stress testing and scenario analysis.
Section 3.132(d)(3)(viii) addresses counterparty credit risk of
repo-style transactions, eligible margin loans, and OTC derivative
contracts. When estimating model parameters based on a stress period, a
national bank or Federal savings association must use at least three
years of historical data that include a period of stress to the credit
default spreads of the institution's counterparties. The institution
must review the data set and update the data as necessary, particularly
for any material changes in its counterparties. The institution must
demonstrate at least quarterly that the stress period coincides with
increased credit default swap (CDS) or other credit spreads of the
institution's counterparties. The institution must have procedures to
evaluate the effectiveness of its stress calibration that include a
process for using benchmark portfolios that are vulnerable to the same
risk factors as the institution's portfolio. The OCC may require the
institution to modify its stress calibration to better reflect actual
historic losses of the portfolio.
Section 3.132(d)(3)(ix), regarding counterparty credit risk of
repo-style transactions, eligible margin loans, and OTC derivative
contracts, requires that an institution must subject its internal model
to an initial validation and annual model review process that includes
consideration of whether the inputs and risk factors, as well as the
model outputs, are appropriate. The section requires national banks and
Federal savings associations to have a backtesting program for its
model that includes a process by which unacceptable model performance
will be determined and remedied.
Section 3.132(d)(3)(x), regarding counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative
contracts, provides that an national bank or Federal savings
association must have policies for the measurement, management, and
control of collateral and margin amounts.
Section 3.132(d)(3)(xi), concerning counterparty credit risk of
repo-style transactions, eligible margin loans, and OTC derivative
contracts, states that an institution must have a comprehensive stress
testing program that captures all credit exposures to counterparties,
and incorporates stress testing of principal market risk factors and
creditworthiness of counterparties.
Section 3.141 relates to operational criteria for recognizing the
transfer of risk in connection with a securitization. Section
3.141(b)(3) requires a national bank or Federal savings association to
obtain a well-reasoned legal opinion confirming the enforceability of
the credit risk mitigant in all relevant jurisdictions in order to
recognize the transference of risk in connection with a synthetic
securitization. An institution must demonstrate its comprehensive
understanding of a securitization exposure under Sec. 3.141(c)(2) for
each securitization exposure by conducting an analysis of the risk
characteristics of a securitization exposure prior to acquiring the
exposure and document such analysis within three business days after
acquiring the exposure. Sections 3.141(c)(2)(i) and (ii) require that
institutions, on an on-going basis (at least quarterly), evaluate,
review, and update as appropriate the analysis required under this
section for each securitization exposure.
Section 3.142(h)(2), regarding the capital treatment for
securitization exposures, requires a national bank or Federal savings
association to disclose publicly if it has provided implicit support to
a securitization and the regulatory capital impact to the institution
of providing such implicit support.
Section 3.153(b), outlining the Internal Models Approach (IMA) for
calculating risk-weighted assets for equity exposures, specifies that a
national bank or Federal savings association must receive prior written
approval from the OCC before it can use IMA.
Section 3.172 specifies that each advanced approaches national bank
or Federal savings association that has completed the parallel run
process must publicly disclose its total and tier 1 risk-based capital
ratios and their components.
Section 3.173 addresses disclosures by an advanced approaches
national bank or Federal savings association that is not a consolidated
subsidiary of an entity that is subject to the Basel III disclosure
requirements. An advanced approaches institution that is subject to the
disclosure requirements must make the disclosures described in Tables 1
through 12. The institution must make these disclosures publicly
available for each of the last three years (that is, twelve quarters)
or such shorter period beginning on the effective date of this subpart
E.
The tables to section 3.173 require qualitative and quantitative
public disclosures for capital structure, capital adequacy, capital
conservation and countercyclical buffers, credit risk, securitization,
operational risk, equities not subject to the market risk capital
requirements, and interest rate risk for non-trading activities.
On February 28, 2014, the OCC issued a notice for 60 days of
comment concerning renewal of this collection. 79 FR 11501. No comments
were received. Comments continue to be invited on:
(a) Whether the collections of information are necessary for the
proper performance of the OCC's functions, including whether the
information has practical utility;
[[Page 28601]]
(b) The accuracy of the OCC's estimates of the burden of the
information collections, including the validity of the methodology and
assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
(d) Ways to minimize the burden of information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology.
Dated: May 12, 2014.
Stuart E. Feldstein,
Legislative and Regulatory Activities Division.
[FR Doc. 2014-11397 Filed 5-15-14; 8:45 am]
BILLING CODE 4810-33-P