[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Notices]
[Pages 63626-63628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25289]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: Notice is hereby given of the final approval of a proposed
information collection by the Board of Governors of the Federal Reserve
System (Board) under OMB delegated authority, as per 5 CFR 1320.16 (OMB
Regulations on Controlling Paperwork Burdens on the Public). 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 instrument(s) are placed into OMB's
public docket files. The Federal Reserve may not conduct or sponsor,
and the respondent is not required to respond to, an information
collection that has been extended, revised, or implemented on or after
October 1, 1995, unless it displays a currently valid OMB control
number.
FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Acting Clearance
Officer--John Schmidt--Office of the Chief Data Officer, Board of
Governors of the Federal Reserve System, Washington, DC 20551 (202)
452-3829. Telecommunications Device for the Deaf (TDD) users may
contact (202) 263-4869, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
OMB Desk Officer--Shagufta Ahmed--Office of Information and
Regulatory Affairs, Office of Management and Budget, New Executive
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.
Final approval under OMB delegated authority of the extension for
three years, with revision, of the following report:
Report title: Annual Company-Run Stress Test information
collection.
Agency form number: FR Y-16.
OMB control number: 7100-0356.
Effective Date: March 31, 2015.
Frequency: Annually.
Reporters: Bank holding companies (BHCs), savings and loan holding
companies (SLHCs) \1\ with average total consolidated assets of greater
than $10 billion but less than $50 billion, and any affiliated or
unaffiliated state member bank (SMB) with average total consolidated
assets of more than $10 billion but less than $50 billion excluding SMB
subsidiaries of covered companies.\2\
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\1\ SLHCs are not subject to Dodd-Frank Act annual company-run
stress testing requirements until the calendar year after SLHCs
become subject to regulatory capital requirements. All SLHCs except
those substantially engaged in insurance underwriting or commercial
activities are subject to capital requirements beginning in 2015.
These ``covered SLHCs'' are required to report using the FR Y-16
beginning in March 2017 (stress test as-of date September 30, 2016).
\2\ ``Covered companies'' are defined as BHCs with at least $50
billion in total consolidated assets and nonbank systemically
important financial institutions, subject to annual supervisory
stress tests and semi-annual company-run stress tests.
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Estimated annual reporting hours: 38,623 hours.
Estimated average hours per response: 469 hours; 3,600 hours, one-
time implementation.
Number of respondents: BHCs, 46; SLHCs, 11; SMBs, 10; and one-time
implementation, 2.
General description of report: This information collection is
authorized pursuant to Section 165(i)(2) of the Dodd-Frank Act that
specifically authorizes the Board to issue regulations implementing the
annual stress testing requirements for its supervised institutions. 12
U.S.C. 5365(i)(2)(C). More generally, with respect to BHCs, Section
5(c) of the Bank Holding Company Act, 12 U.S.C. 1844(c), authorizes the
Board to require a BHC and any subsidiary ``to keep the Board informed
as to--(i) its financial condition, [and] systems for monitoring and
controlling financial and operating risks. . . .'' Section 9(6) of the
Federal Reserve Act, 12 U.S.C. 324, requires SMBs to make reports of
condition to their supervising Reserve Bank in such form and containing
such information as the Board may require. Finally, with respect to
SLHCs, under Section 312 of the Dodd-Frank Act, 12 U.S.C. 5412, the
Board succeeded to all powers and authorities of the OTS and its
Director, including the authority to require SLHCs to ``file . . . such
reports as may be required . . . in such form and for such periods as
the [agency] may prescribe.'' 12 U.S.C. 1467a(b)(2).
Obligation to Respond is Mandatory: Section 165(i)(2)(A) provides
that ``financial companies that have total consolidated assets [meeting
the asset thresholds] . . . and are regulated by a primary Federal
financial regulatory agency shall conduct annual stress tests.''
Section 165(i)(2)(B) provides that a company required to conduct annual
stress tests ``shall submit a report to the Board of Governors and to
its primary financial regulatory agency at such time, in such form, and
containing such information as the primary financial
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regulatory agency shall require.'' 12 U.S.C. 5365(i)(2)(B).
Confidentiality: As noted under Section 165(i)(2)(C)(iv), companies
conducting annual stress tests under these provisions are ``require[d]
. . . to publish a summary of the results of the required stress
tests.'' 12 U.S.C. 5365(i)(2)(C)(iv). Regarding the information
collected by the Board, however, as such information will be collected
as part of the Board's supervisory process, it may be accorded
confidential treatment under Exemption 8 of the Freedom of Information
Act (FOIA), 5 U.S.C. 552(b)(8). This information also is the type of
confidential commercial and financial information that may be withheld
under Exemption 4 of FOIA, 5 U.S.C. 552(b)(4). As required information,
it may be withheld under Exemption 4 only if public disclosure could
result in substantial competitive harm to the submitting institution,
under National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C.
Cir. 1974).
Abstract: The annual FR Y-16 report collects quantitative
projections of income, losses, assets, liabilities, and capital across
three scenarios provided by the Board (baseline, adverse, and severely
adverse) and qualitative supporting information on the methodologies
and processes used to develop these internal projections.
Current Actions: On July 15, 2014 the Federal Reserve published a
notice in the Federal Register (79 FR 41276) requesting public comment
for 60 days on the extension, with revision, of the FR Y-16. The
Federal Reserve proposed the following revisions and clarifications to
the FR Y-16 report for the report submission due annually beginning on
March 31, 2015: (1) Add common equity tier 1 capital as a data item,
(2) add common equity tier 1 risk based capital ratio as a data item,
and (3) modify the reporting instructions to clarify a number of items.
The comment period for this notice expired on September 15, 2014. The
Federal received one comment letter addressing the proposed revisions
of this information collection. The comment is summarized and addressed
below.
Summary of Public Comment
The Federal Reserve received one comment letter on the proposed
revisions to the FR Y-16 from a modeling service provider. The
commenter questioned the introduction of the new regulatory capital,
risk-weighted asset, and regulatory capital ratio calculations in the
FR Y-16 for the March 2015 report; asserting that $10-50 billion
companies will lack relevant data for the proposed new capital items
and definitions in advance of when these items are required to be
reported in the Consolidated Report of Condition and Income (Call
Report: OMB No. 7100-0036) and the Consolidated Financial Statements
for Holding Companies (FR Y-9C: OMB No. 7100-0128), which will lead to
inaccurate and misleading company projections.
Detailed Discussion of Public Comment
A. Proposed Revisions
On July 2, 2013, the Federal Reserve approved revised risk-based
and leverage capital requirements for banking organizations that
implement the Basel III regulatory capital reforms and certain changes
required by the Dodd-Frank Act (revised capital framework).\3\ The
revised capital framework introduces the new common equity tier 1
capital component and a new common equity tier 1 risk-based capital
ratio, revises the definition of regulatory capital items, and changes
the calculation of risk-weighted assets. All banking organizations that
are not subject to the advanced approaches rule must begin to comply
with the revised capital framework beginning on January 1, 2015.\4\
Under the Federal Reserve's final stress test rule,\5\ banking
organizations would be required to reflect the new capital rules,
including the new common equity tier 1 capital component and ratio, in
their company-run stress test planning horizon as the revised capital
framework becomes applicable. However, on September 30, 2013, the
Federal Reserve provided BHCs and SMBs with total consolidated assets
of more than $10 billion but less than $50 billion (other than state
member banks that are subsidiaries of BHCs with total consolidated
assets of $50 billion or more) with a one-year transition period to
incorporate the revised capital framework into their company-run stress
tests (interim final stress test rule).\6\ Therefore, the FR Y-16 did
not require companies to include the effects of the revised capital
framework for the initial 2014 stress test cycle.
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\3\ See Regulatory Capital Rules: Regulatory Capital,
Implementation of Basel III, Capital Adequacy, Transition
Provisions, Prompt Corrective Action, Standardized Approach for
Risk-weighted Assets, Market Discipline and Disclosure Requirements,
Advanced Approaches Risk-Based Capital Rule, and Market Risk Capital
Rule (July 2, 2013), available at: http://www.federalreserve.gov/newsevents/press/bcreg/20130702a.htm.
\4\ A banking organization is subject to the advanced approaches
rule if it has consolidated assets greater than or equal to $250
billion, if it has total consolidated on-balance sheet foreign
exposures of at least $10 billion, or if it elects to apply the
advanced approaches rule.
\5\ See final rule on annual company-run stress test
requirements for banking organizations with total consolidated
assets over $10 billion other than covered companies 77 FR 62378
(October 12, 2012) (codified at 12 CFR part, 252 subpart H).
\6\ See 78 FR 59791 (September 30, 2013).
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The Federal Reserve proposed to revise the FR Y-16 by adding a
common equity tier 1 capital data item to the Balance Sheet Schedule
for each scenario and a common equity tier 1 risk-based capital ratio
data item to the Summary Schedule and the Balance Sheet Schedule for
each scenario in order to reflect the requirements of the revised
capital framework over the stress test planning horizon. These
revisions would be effective for the 2015 stress test cycle (with
reporting in March 2015). In addition, the Federal Reserve proposed to
clarify the FR Y-16 instructions to emphasize that companies should
transition to the revised capital framework requirements in its
company-run stress test projections in the quarter in which the
requirements become effective. Specifically, companies would be
required to transition to the revised capital framework and begin
including the common equity tier 1 capital data item and common equity
tier 1 risk-based capital ratio data item in projected quarter two (1st
quarter 2015) through projected quarter nine (4th quarter 2016) for
each supervisory scenario for the 2015 stress test cycle to be reported
by March 31, 2015.
The commenter indicated that requiring the use of the revised
capital framework over the planning horizon in the March 2015 FR Y-16
report will introduce volatility and ambiguity of a respondent's
processes and results. Specifically, by requiring the reporting of the
common equity tier 1 capital component and ratio beginning with
projected quarter two (1st quarter 2015) of the planning horizon before
these items are reported in the Call Report and the FR Y-9C will cause
the companies to rely on pro forma estimates that will lead to
inaccurate and misleading projections.\7\ In addition, the commenter
asserted that because the changes to the Call Report and FR Y-9C risk-
weighted asset schedules are in a proposed status, there will be
difficulties for companies to produce accurate estimates without
further guidance on the transition to the revised capital framework for
this FR Y-
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16 line item.\8\ Lastly, the commenter indicated that the required
public disclosure of the regulatory capital ratios over the planning
horizon under different capital rules will cause confusion among bank
shareholders and the general public.\9\
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\7\ The reporting submission date for the March 2015 Call Report
is 30 calendar days after March 31, while the submission date for
the March 2015 FR Y-9C is 40 calendar days after March 31.
\8\ See 79 FR 35634 (June 23, 2014) and 79 FR 45808 (August 6,
2014).
\9\ Per the Board's final stress test rule, $10-50 billion
companies are required to publicly disclose the beginning value,
ending value, and minimum value of each regulatory capital ratio
over the planning horizon.
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The Federal Reserve believes that the proposed additional items to
the FR Y-16 would not place an undue burden on $10-50 billion
institutions as they have already been given additional time to
incorporate the revised capital framework into their company-run stress
tests. The interim final stress test rule on September 30, 2013
specifically provided $10-50 billion banking organizations with a one-
year transition period to incorporate the revised capital framework
into their company-run stress tests. The one-year transition period
decreased the operational complexity and risk of error for these
companies for the initial 2014 stress test cycle by allowing them to
focus on implementing stress testing processes without reflecting the
revised capital rules over the planning horizon. The one-year
transition also allowed companies additional time to evaluate the
revised capital framework's effect on their regulatory capital items
reported in the Call Report and FR Y-9C. Further, the Call Report and
FR Y-9C regulatory capital schedules were revised effective March 2014
to reflect the revised capital framework for regulatory capital items
for advanced approaches institutions; all other institutions, including
$10-50 billion institutions, are required to report the same revised
regulatory capital schedule for March 31, 2015. In addition, the FR Y-
16 reporting form and instructions has been updated to reference the
applicable Call Report and FR Y-9C report items that should be reported
over the planning horizon, including the new items that were created to
capture the revised capital framework. The Federal Reserve will adjust
the FR Y-16 schedules to be consistent with the final FR Y-9C and Call
Report risk-weighted asset schedule changes once they are published.
These adjustments are necessary to align the subcomponents of
standardized risk-weighted assets with total standardized risk-weighted
assets and will likely alleviate confusion about calculating projected
total risk-weighted assets over the planning horizon. Lastly, the
public disclosure by companies of the stress test results using the new
capital rules applicable in the projected quarters of the planning
horizon is required by the Board's final stress test rule and the
Federal Reserve believes that this public disclosure will be
informative to the public.
In summary, the Federal Reserve will implement the FR Y-16 data
items for the March 2015 report to reflect the revised capital
framework as proposed. Specifically, the Federal Reserve will add the
common equity tier 1 capital data item to the Balance Sheet Schedule
for each scenario and a common equity tier 1 risk-based capital ratio
data item to the Summary Schedule and the Balance Sheet Schedule for
each scenario. The Office of the Comptroller of the Currency and
Federal Deposit Insurance Corporation plan to make similar changes to
their $10-50 billion company Dodd-Frank Act stress test reporting forms
(OCC DFAST 10-50 report: OMB No. 1557-0311 and FDIC DFAST 10-50 report
OMB No. 3064-0189) to reflect the revised capital framework for the
March 2015 report.
B. Technical Changes/Other Items
In response to a few technical, non-substantive comments received,
some additional minor changes will be made in the final reporting form
and instructions. These changes include clarified reporting
instructions for the disallowed deferred tax asset and unrealized gains
(losses) on available-for-sale (AFS) securities line items and updated
descriptions of the total capital and total risk-based capital line
items.
Board of Governors of the Federal Reserve System, October 20,
2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-25289 Filed 10-23-14; 8:45 am]
BILLING CODE 6210-01-P