81_FR_67429 81 FR 67239 - Amendments to the Capital Plan and Stress Test Rules

81 FR 67239 - Amendments to the Capital Plan and Stress Test Rules

FEDERAL RESERVE SYSTEM

Federal Register Volume 81, Issue 190 (September 30, 2016)

Page Range67239-67260
FR Document2016-23629

The Board is inviting comment on a notice of proposed rulemaking to revise the capital plan and stress test rules for bank holding companies with $50 billion or more in total consolidated assets and U.S. intermediate holding companies of foreign banks. Under the proposal, large and noncomplex firms, defined below, would no longer be subject to the provisions of the Board's capital plan rule whereby the Board may object to a capital plan on the basis of qualitative deficiencies in the firm's capital planning process. In connection with this modification, large and noncomplex firms would no longer be subject to the qualitative assessment in Comprehensive Capital Analysis and Review (CCAR), but would remain subject to a quantitative assessment in CCAR. The qualitative assessment of the capital plans of large and noncomplex firms instead would be conducted outside of CCAR through the supervisory review process. For purposes of the proposal, a bank holding company or U.S. intermediate holding company with total consolidated assets of $50 billion or greater but less than $250 billion, on-balance sheet foreign exposure of less than $10 billion, and nonbank assets of less than $75 billion would be considered a large and noncomplex firm. The proposal would also modify reporting requirements for large and noncomplex firms to reduce burdens by raising materiality thresholds, reducing the scope of the data collection on these firms' stress test results, and reducing supporting documentation requirements. For all bank holding companies subject to the capital plan rule, the proposal would simplify the initial applicability provisions for the capital plan and stress test rules, reduce the amount of additional capital distributions that a bank holding company may make during a capital plan cycle without seeking the Board's prior approval, and extend the range of potential as-of dates for the trading and counterparty scenario component used in the stress test rules. The proposal would also amend the Parent Company Only Financial Statements for Large Holding Companies (FR Y-9LP) to include new line item 17 of PC-B Memoranda (Total nonbank assets of a holding company that is subject to the Federal Reserve Board's capital plan rule) for purposes of identifying the large and noncomplex firms. All other bank holding companies subject to the capital plan rule that are not large and noncomplex firms would remain subject to objection to their capital plan based on qualitative deficiencies under the rule. The proposal would not apply to bank holding companies with total consolidated assets of less than $50 billion or to any state member bank or savings and loan holding company.

Federal Register, Volume 81 Issue 190 (Friday, September 30, 2016)
[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Proposed Rules]
[Pages 67239-67260]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-23629]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 225 and 252

[Regulations Y and YY; Docket No. R-1548; RIN 7100 AE-59]


Amendments to the Capital Plan and Stress Test Rules

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

ACTION: Notice of proposed rulemaking with request for comment.

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SUMMARY: The Board is inviting comment on a notice of proposed 
rulemaking to revise the capital plan and stress test rules for bank 
holding companies with $50 billion or more in total consolidated assets 
and U.S. intermediate holding companies of foreign banks. Under the 
proposal, large and noncomplex firms, defined below, would no longer be 
subject to the provisions of the Board's capital plan rule whereby the 
Board may object to a capital plan on the basis of qualitative 
deficiencies in the firm's capital planning process. In connection with 
this modification, large and noncomplex firms would no longer be 
subject to the qualitative assessment in Comprehensive Capital Analysis 
and Review (CCAR), but would remain subject to a quantitative 
assessment in CCAR. The qualitative assessment of the capital plans of 
large and noncomplex firms instead would be conducted outside of CCAR 
through the supervisory review process. For purposes of the proposal, a 
bank holding company or U.S. intermediate holding company with total 
consolidated assets of $50 billion or greater but less than $250 
billion, on-balance sheet foreign exposure of less than $10 billion, 
and nonbank assets of less than $75 billion would be considered a large 
and noncomplex firm. The proposal would also modify reporting 
requirements for large and noncomplex firms to reduce burdens by 
raising materiality thresholds, reducing the scope of the data 
collection on these firms' stress test results, and reducing supporting 
documentation requirements. For all bank holding companies subject to 
the capital plan rule, the proposal would simplify the initial 
applicability provisions for the capital plan and stress test rules, 
reduce the amount of additional capital distributions that a bank 
holding company may make during a capital plan cycle without seeking 
the Board's prior approval, and extend the range of potential as-of 
dates for the trading and counterparty scenario component used in the 
stress test rules. The proposal would also amend the Parent Company 
Only Financial Statements for Large Holding Companies (FR Y-9LP) to 
include new line item 17 of PC-B Memoranda (Total nonbank assets of a 
holding company that is subject to the Federal Reserve Board's capital 
plan rule) for purposes of identifying the large and noncomplex firms. 
All other bank holding companies subject to the capital plan rule that 
are not large and noncomplex firms would remain subject to objection to 
their capital plan based on qualitative deficiencies under the rule.
    The proposal would not apply to bank holding companies with total 
consolidated assets of less than $50 billion or to any state member 
bank or savings and loan holding company.

DATES: Comments must be received by November 25, 2016.

ADDRESSES: You may submit comments, identified by Docket No. R-1548 and 
RIN 7100 AE-59 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.aspx.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

[[Page 67240]]

     Email: [email protected]. Include the 
docket number and RIN number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.

All public comments will be made available on the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.aspx 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 3515, 1801 K Street NW. (between 18th and 19th 
Streets NW.), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on 
weekdays. For security reasons, the Board requires that visitors make 
an appointment to inspect comments. You may do so by calling (202) 452-
3684. 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.

FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Associate Director, (202) 
263-4833, Richard Naylor, Associate Director, (202) 728-5854, Molly 
Mahar, Deputy Associate Director, (202) 973-7360, Constance Horsley, 
Assistant Director, (202) 452-5239, Mona Touma Elliot, Manager, (202) 
912-4688, Celeste Molleur, Manager (202) 452-2783, Elizabeth MacDonald, 
Manager, (202) 475-6316, Christine Graham, Senior Supervisory Financial 
Analyst, (202) 452-3005, Seth Ruhter, Senior Supervisory Financial 
Analyst, (202) 452-3997, Joseph Cox, Supervisory Financial Analyst, 
(202) 452-3216, Kevin Tran, Supervisory Financial Analyst, (202) 452-
2309, or Hillel Kipnis, Financial Analyst, (202) 452-2924, Division of 
Banking Supervision and Regulation; Laurie Schaffer, Associate General 
Counsel, (202) 452-2272, Benjamin McDonough, Special Counsel, (202) 
452-2036, Julie Anthony, Counsel, (202) 475-6682, Brian Chernoff, 
Senior Attorney, (202) 452-2952, or Amber Hay, Attorney, (202) 973-
6997, Legal Division, Board of Governors of the Federal Reserve System, 
20th Street and Constitution Avenue NW., Washington, DC 20551. Users of 
Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Description of Capital Plan and Stress Test Requirements

    Capital planning and stress testing are two key components of the 
Board's supervisory framework for large financial companies.\1\ Under 
Section 165 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act), the Board of Governors of the Federal 
Reserve System (Board) is directed to establish enhanced prudential 
standards for bank holding companies with total consolidated assets of 
$50 billion or more.\2\ As part of this requirement, the Board must 
conduct annual supervisory stress tests with respect to these bank 
holding companies and issue regulations requiring these bank holding 
companies to conduct semi-annual company-run stress tests.\3\ The Board 
adopted final rules to implement these requirements on October 12, 
2012.\4\
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    \1\ In addition to bank holding companies with total 
consolidated assets of $50 billion or more, the changes in this 
proposed rulemaking would also apply to any nonbank financial 
company supervised by the Board that becomes subject to the capital 
planning and stress test requirements pursuant to a rule or order of 
the Board and to U.S. intermediate holding companies of foreign 
banking organizations in accordance with the transition provisions 
under the capital plan rule and subpart O of the Board's Regulation 
YY (12 CFR part 252). Currently, no nonbank financial companies 
supervised by the Board are subject to the capital planning or 
stress test requirements. A U.S. intermediate holding company that 
was required to be established by July 1, 2016, and that was not 
previously subject to the Board's capital plan rule is required to 
submit its first capital plan in 2017 and will become subject to the 
Board's stress test rules beginning in 2018. References to ``bank 
holding companies'' or ``firms'' in this preamble should be read to 
include all of these companies, unless otherwise specified.
    \2\ 12 U.S.C. 5365.
    \3\ 12 U.S.C. 5365(i).
    \4\ 77 FR 62380 (October 12, 2012). See 12 CFR part 252, 
subparts E and F. On October 12, 2012, as required by section 165(i) 
of the Dodd-Frank Act, the Federal Reserve also adopted a final rule 
to impose company-run stress testing requirements for state member 
banks and savings and loan holding companies with assets of more 
than $10 billion and bank holding companies with assets of more than 
$10 billion but less than $50 billion, which is codified at subpart 
B of 12 CFR part 252. The Federal Reserve is not proposing to adjust 
the requirements in subpart B of 12 CFR part 252 at this time.
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    The Dodd-Frank Act also requires the enhanced prudential standards 
established by the Board to increase in stringency based on several 
factors, including the size and risk characteristics of the bank 
holding companies subject to the requirements.\5\ In prescribing more 
stringent prudential standards, including stress test requirements, the 
Board may differentiate among bank holding companies on an individual 
basis or by category, taking into consideration their capital 
structure, riskiness, complexity, financial activities (including the 
financial activities of their subsidiaries), size, and any other risk-
related factors that the Board deems appropriate.\6\
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    \5\ See 12 U.S.C. 5365(b).
    \6\ 12 U.S.C. 5363(a)(2)(A).
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B. Implementation of Capital Plan and Stress Test Requirements

    Consistent with the Dodd-Frank Act mandate, the Board conducts an 
annual assessment of the capital planning and post-stress capital 
adequacy of bank holding companies with total consolidated assets of 
$50 billion or more. All U.S. intermediate holding company subsidiaries 
of foreign banking organizations will be subject to the Board's capital 
plan rule beginning in 2017. The Board's capital planning and stress 
testing framework for these firms consists of two related programs: 
CCAR, which is conducted pursuant to the Board's capital plan rule,\7\ 
and the Dodd-Frank Act stress tests, which is conducted pursuant to the 
Board's stress test rules.\8\
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    \7\ 12 CFR 225.8.
    \8\ Subparts E and F of the Board's Regulation YY (12 CFR 252, 
subparts E and F).
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    In CCAR, the Board assesses the internal capital planning processes 
of bank holding companies and these companies' ability to maintain 
sufficient capital to continue their operations under expected and 
stressful conditions. Pursuant to the capital plan rule, each bank 
holding company must submit an annual capital plan to the Board that 
describes its capital planning processes and capital adequacy 
assessment. The capital plan must include (i) an assessment of the 
expected uses and sources of capital over the planning horizon; (ii) a 
detailed description of the bank holding company's processes for 
assessing capital adequacy; (iii) the bank holding company's capital 
policy; and (iv) a discussion of any expected changes to the bank 
holding company's business plan that could materially affect its 
capital adequacy.\9\ A bank holding company may be required to include 
other information and analysis relevant to its capital planning 
processes and internal capital adequacy assessment. The Federal Reserve 
reviews each capital plan submission and may object to a bank holding 
company's capital plan based on criteria identified in the rule.\10\ If 
the Federal Reserve objects to a bank holding company's capital plan, 
the bank holding company may not make any

[[Page 67241]]

capital distributions unless the Federal Reserve indicates in writing 
that it does not object to such distributions.\11\
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    \9\ See 12 CFR 225.8(e)(2).
    \10\ See 12 CFR 225.8(f).
    \11\ See 12 CFR 225.8(f)(2)(iv).
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    Pursuant to the Board's stress test rules, the Board conducts 
supervisory stress tests of bank holding companies with total 
consolidated assets of $50 billion or more, and these bank holding 
companies are required to conduct annual and mid-cycle company-run 
stress tests. In conducting the supervisory stress tests, the Board 
projects balance sheets, risk-weighted assets, net income, and 
resulting post-stress capital levels and regulatory capital ratios over 
a planning horizon under baseline, adverse, and severely adverse 
scenarios, incorporating capital action assumptions prescribed in the 
Board's stress test rules.\12\ Similarly, for the annual company-run 
stress tests, a bank holding company uses the same planning horizon, 
capital action assumptions, and baseline, adverse, and severely adverse 
scenarios used in the supervisory stress test.\13\
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    \12\ See 12 CFR 252.44.
    \13\ See 12 CFR 252.54. For the mid-cycle company-run stress 
tests, each bank holding company must develop and employ baseline, 
adverse, and severely adverse scenarios that are appropriate for its 
risk profile and operations. See 12 CFR 252.55(b).
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C. Review of Capital Plan and Stress Test Requirements

    The 2015 capital planning cycle marked the fifth anniversary of 
CCAR. In 2015, the Board initiated a series of meetings, including with 
a bank officials, debt and equity-side market analysts, public interest 
groups, and academics, to solicit their views on their overall 
evaluation of, and recommendations for, the CCAR program. The Board 
received a wide range of comments on the program. While meeting 
participants generally expressed the view that CCAR has been successful 
in strengthening the capital positions and improving the risk-
management capabilities of the bank holding companies subject to CCAR, 
some participants provided suggestions for improving or strengthening 
various aspects of the program.\14\ Notably, representatives from bank 
holding companies with less than $250 billion in total consolidated 
assets recommended that the Board modify CCAR to reduce burdens for 
these bank holding companies by establishing a separate capital 
planning program that would reduce the associated regulatory reporting 
requirements and extend reporting timelines.
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    \14\ In addition to the changes in this proposal, the Federal 
Reserve may propose further adjustments to CCAR in the future in 
response to these comments.
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    In December 2015, the Board released capital planning guidance in 
Supervision and Regulation (SR) Letters 15-18 and 15-19 to consolidate 
its existing expectations and clarify that the Board's expectations for 
capital planning differ depending on the size and complexity of the 
firm.\15\ The guidance provided that firms with $250 billion or more in 
total consolidated assets, firms with $10 billion or more in foreign 
exposures, and firms otherwise subject to the Large Institution 
Supervision Coordinating Committee (LISCC) supervisory framework 
(typically the largest, most internationally active bank holding 
companies) would be subject to heightened expectations in all aspects 
of capital planning, as compared to other large, but less complex 
firms. The guidance reflects an important objective of the Federal 
Reserve, which is to tailor supervisory expectations for firms with a 
lower systemic risk profile, while simultaneously protecting financial 
stability and improving the resiliency of and the availability of 
credit from the largest and most complex firms.\16\
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    \15\ Board of Governors of the Federal Reserve System, Division 
of Banking Supervision and Regulation, ``Federal Reserve Supervisory 
Assessment of Capital Planning and Positions for LISCC Firms and 
Large and Complex Firms,'' SR Letter 15-18 (December 18, 2015), 
available at www.federalreserve.gov/bankinforeg/srletters/sr1518.htm 
(``SR Letter 15-18''); Board of Governors of the Federal Reserve 
System, Division of Banking Supervision and Regulation, ``Federal 
Reserve Supervisory Assessment of Capital Planning and Positions for 
Large and Noncomplex Firms,'' SR Letter 15-19 (December 18, 2015), 
available at www.federalreserve.gov/bankinforeg/srletters/sr1519.htm 
(``SR Letter 15-19'').
    \16\ Daniel K. Tarullo (2015). ``Application of Enhanced 
Prudential Standards to Bank Holding Companies'' testimony delivered 
before the Committee on Banking, Housing and Urban Affairs, U.S. 
Senate, Washington, DC, March 19, available at: 
www.federalreserve.gov/newsevents/testimony/tarullo20150319a.htm.
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    While SR Letter 15-19 outlined tailored capital planning 
expectations for large and noncomplex firms, the high public profile of 
the CCAR qualitative review could create a risk that large and 
noncomplex firms will over-invest in stress testing and capital 
planning processes that are unnecessary to adequately capture the risks 
of these firms. In this proposal, the Board is proposing to further 
tailor its stress testing and capital planning requirements, as 
discussed below.

II. Proposed Revisions to the Capital Plan and Stress Test Rules

A. Overview

    This proposal would revise the standards that the Board uses to 
review capital plans for bank holding companies that have total 
consolidated assets of at least $50 billion but less than $250 billion, 
on-balance sheet foreign exposure of less than $10 billion, and nonbank 
assets of less than $75 billion (each, a large and noncomplex firm). 
Specifically, these large and noncomplex firms under the proposal would 
no longer be subject to the provisions of the Board's capital plan rule 
whereby the Board may object to a firm's capital plan based on 
unresolved supervisory issues or concerns with the assumptions, 
analysis, and methodologies in the firm's capital plan (qualitative 
objection criteria, as described further in section II.D of this 
preamble below). In connection with this change, large and noncomplex 
firms would remain subject to a quantitative assessment in CCAR and 
would no longer be subject to the qualitative assessment in CCAR. The 
proposal would also amend the Parent Company Only Financial Statements 
for Large Holding Companies (FR Y-9LP) to include a new line item for 
purposes of identifying the large and noncomplex firms. All other bank 
holding companies subject to the capital plan rule (a LISCC firm, if 
the bank holding company is subject to the LISCC supervisory framework, 
\17\ or large and complex firm, if the bank holding company otherwise 
has total consolidated assets of $250 billion or more, on-balance sheet 
foreign exposure of $10 billion or more, or nonbank assets of $75 
billion or more) would remain subject to objection to their capital 
plan based on qualitative deficiencies under the rule.
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    \17\ Based on the current population of bank holding companies, 
all LISCC firms have total consolidated assets of $250 billion or 
more, on-balance sheet foreign exposure of $10 billion or more, or 
nonbank assets of $75 billion or more.
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    The proposal would also modify associated regulatory reporting 
requirements for large and noncomplex firms to collect less detailed 
information on these firms' stress test results and raise the 
materiality threshold for reporting on specific portfolios. Under the 
proposal, large and noncomplex firms would no longer be subject to the 
qualitative assessment in CCAR beginning with the 2017 CCAR cycle, and 
a large and noncomplex firm would be able to implement the modified 
reporting requirements either immediately or after a six-month delay.
    In addition, the proposal would simplify the timing of the initial 
applicability of the capital plan and stress test rules for all bank 
holding companies that cross the $50 billion asset threshold to become 
subject to these rules. These revisions are

[[Page 67242]]

intended to reduce compliance burdens associated with the capital plan 
and stress test rules.
    The proposal would also revise the de minimis exception threshold 
for capital distributions under the capital plan rule. As noted, as 
part of CCAR, the Federal Reserve evaluates the planned capital 
distributions, such as dividends or repurchases of common stock, that 
were included in a capital plan. Under the capital plan rule, a bank 
holding company may make the capital distributions that were included 
in the capital plan, provided that the Federal Reserve does not object 
to the plan.\18\ Generally, a bank holding company must obtain the 
Federal Reserve's prior approval before making additional capital 
distributions above the dollar amount described in its capital 
plan.\19\ However, a bank holding company that is well capitalized, as 
defined in 12 CFR 225.2(r), may make additional capital distributions 
above such dollar amount without seeking the Board's prior approval if 
certain other requirements are met. These include the requirement that 
the total distribution amount not exceed 1.00 percent of the bank 
holding company's tier 1 capital for the year-period following the 
Federal Reserve's action on the bank holding company's capital plan 
(the de minimis exception).\20\
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    \18\ See 12 CFR 225.8.
    \19\ See 12 CFR 225.8(g)(1).
    \20\ See 12 CFR 225.8(g)(2).
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    The proposal would amend the de minimis exception in two ways for 
all bank holding companies subject to the capital plan rule. First, the 
proposal would establish a one-quarter ``blackout period'' while the 
Federal Reserve is conducting CCAR (the second quarter of a calendar 
year), during which bank holding companies would not be able to submit 
a notice to use the de minimis exception. Second, the proposal would 
lower the de minimis limitation from 1.00 percent to 0.25 percent of a 
bank holding company's tier 1 capital, beginning April 1, 2017.
    The proposal includes an additional blackout period for additional 
capital distribution requests that require prior approval from the 
Federal Reserve. This additional blackout period would also apply 
during the calendar quarter in which the Federal Reserve conducts the 
CCAR exercise. The proposed blackout periods for both the de minimis 
exception and prior approval requests are expected to be effective 
during the second quarter of 2017, in which the Federal Reserve will be 
conducting CCAR 2017.
    The last proposed change to the capital plan rule relates to the 
trading and counterparty component of the stress test. Under the 
Board's stress test rules, the Board may require a bank holding company 
with significant trading activity to include a trading and counterparty 
component (global market shock) in its adverse and severely adverse 
scenarios for its company-run stress tests.\21\ Currently, the Board 
must select a date between January 1 and March 1 of the calendar year 
of the current stress test cycle for the ``as-of'' date for the data 
used as part of the global market shock components of the bank holding 
company's adverse and severely adverse scenarios.\22\ For the reasons 
described in section III.B of this preamble, the proposal would extend 
the range of dates from which the Board may select the as-of date for 
the global market shock to October 1 of the calendar year preceding the 
year of the stress test cycle to March 1 of the calendar year of the 
stress test cycle.
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    \21\ See 12 CFR 252.14(b)(2).
    \22\ Id.
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    As described in section III.C of this preamble, the proposal would 
also remove transition provisions in the capital plan and stress test 
rules that are no longer operative.

B. Identifying Large and Noncomplex Firms

    Under the proposal, a bank holding company would be considered 
large and noncomplex if, as of December 31 of the calendar year prior 
to the capital plan cycle, it has average total consolidated assets of 
$50 billion or greater but less than $250 billion,\23\ total on-balance 
sheet foreign exposure of less than $10 billion,\24\ and average total 
nonbank assets of less than $75 billion.
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    \23\ The proposal would not amend the existing methodology for 
determining average total consolidated assets under the capital plan 
rule. Under the rule, average total consolidated assets equals the 
amount of total assets reported on the bank holding company's 
Consolidated Financial Statements for Holding Companies (FR Y-9C), 
measured as an average over the preceding four quarters. If a bank 
holding company has not filed the FR Y-9C for each of the four most 
recent consecutive quarters, its total consolidated assets are 
measured as the average of its total consolidated assets, as 
reported on the FR Y-9C, for the most recent quarter or consecutive 
quarters, as applicable. See 12 CFR 225.8(b)(2).
    \24\ Consolidated total on-balance sheet foreign exposure would 
be based on a calculation of a bank holding company's total foreign 
countries cross-border claims on an ultimate-risk basis, plus total 
foreign countries claims on local residents on an ultimate-risk 
basis, plus total foreign countries fair value of foreign exchange 
and derivative products, calculated at the most recent year-end in 
accordance with the Federal Financial Institutions Examination 
Council (FFIEC) 009 Country Exposure Report.
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    The proposed thresholds of $250 billion in average total 
consolidated assets and $10 billion in foreign exposure identify the 
largest and most internationally active bank holding companies, whose 
failure or distress could pose significant risks to U.S. financial 
stability. The proposed thresholds of $250 billion in total 
consolidated assets and $10 billion in foreign exposure identify the 
largest and most internationally active bank holding companies, the 
failure or distress of which could pose significant risks to U.S. 
financial stability. These thresholds would be consistent with 
thresholds used in the Board's capital and liquidity requirements to 
identify companies that may present elevated risk because of their size 
and the amount of their cross-border exposure.\25\
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    \25\ See, e.g., 12 CFR 217.100(b), 12 CFR 249.1(b).
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    In addition to thresholds based on a bank holding company's average 
total consolidated assets and total on-balance sheet foreign exposure, 
the Board is proposing an additional threshold to identify a bank 
holding company as large and noncomplex based on the amount of its 
total nonbank assets. The proposed nonbank asset threshold of $75 
billion would separate out bank holding companies that are 
significantly engaged in activities outside the business of banking, 
which have the potential to generate additional systemic risk and 
therefore warrant heightened capital planning standards. The proposed 
threshold would also facilitate heightened supervisory oversight with 
respect to the capital planning practices for a bank holding company 
that engages in activities through legal entities that are not subject 
to direct regulation and supervision applicable to a regulated banking 
entity, which may involve a broader range of risks and more complex 
structure requiring more sophisticated risk management.
    As discussed in more detail below, under the proposal, a LISCC or 
large and complex firm would remain subject to the qualitative 
objection criteria, the CCAR qualitative review process, and the 
current more detailed reporting requirements. The qualitative objection 
criteria, CCAR qualitative review process, and more detailed reporting 
requirements would continue to provide for greater supervisory 
oversight to ensure that these LISCC firms and large and complex firms 
are effectively identifying and managing risks that may arise in 
connection with their greater size, international activity, or 
nonbanking operations. For bank holding companies with significant 
nonbanking activities in particular, the

[[Page 67243]]

CCAR qualitative assessment supplements the existing regulatory capital 
framework by incorporating a comprehensive review of a bank holding 
company's processes to identify, aggregate, and measure risks from all 
of its activities, including nonbanking activities. The added scrutiny 
of the qualitative CCAR review helps to ensure that such LISCC firms 
and large and complex firms are effectively identifying and managing 
their combined risks on a consolidated basis.
    In developing the proposal, the Federal Reserve considered a range 
of nonbank asset thresholds between $50 billion and $125 billion. The 
proposed $75 billion threshold was chosen based on historical failures 
and bankruptcies of large financial firms and the risk profile of the 
current population of bank holding companies.
    At the low end of the range, a $50 billion nonbank asset threshold 
would be analogous to the total asset threshold used in section 165 of 
the Dodd-Frank Act for applying enhanced prudential standards to a bank 
holding company.\26\ However, based on the current population of bank 
holding companies, a $50 billion nonbank asset threshold appeared to be 
too low, as many bank holding companies at this level conduct primarily 
traditional bank-like activities (such as mortgage lending) through 
nonbank subsidiaries. At the high end of the range, the Board 
considered a nonbank asset threshold of $125 billion, which would scope 
in bank holding companies with at least a majority of their assets as 
nonbank assets, indicating a potentially greater complexity of 
structure or activities and therefore greater risk.\27\ Based on the 
current population of firms, a nonbank asset threshold of $125 billion 
would include the most complex U.S. bank holding companies with the 
largest derivatives trading and capital markets activities, but may 
exclude some bank holding companies with risk profiles that are 
significantly concentrated in riskier activities, particularly U.S. 
intermediate holding companies of foreign banking organizations that 
engage in significant capital markets activities. In particular, a 
threshold of $125 billion in nonbank assets would exclude companies 
that engage in equities trading, prime brokerage, and investment 
banking activities, and therefore have risk profiles that are more 
similar to those of the most complex U.S. financial firms than to the 
risk profiles of the smaller, less complex bank holding companies.
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    \26\ 12 U.S.C. 5365.
    \27\ A firm with total consolidated assets of $250 billion or 
more would have been included by the total consolidated assets 
threshold, so $125 billion or more in nonbank assets would 
constitute at least 50 percent of the assets of a bank holding 
company with total consolidated assets less than $250 billion.
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    The potential complexity and interconnectedness of a bank holding 
company with significant nonbank assets heightens the need for such a 
bank holding company to be subject to an intensive annual review of its 
capital planning processes and risk management based on its 
idiosyncratic risk profile, through the CCAR qualitative assessment and 
qualitative objection criteria (as defined below).The proposed nonbank 
asset threshold of $75 billion would be slightly below the midpoint of 
the $50-to-$125 billion range of potential nonbank asset thresholds 
considered. Based on the current population of bank holding companies, 
this proposed threshold would include large firms with complex capital 
markets activities, but would not include firms with less complex 
structures or activities. This result would be consistent with the 
proposal's objective of focusing supervisory resources and more 
detailed reporting requirements on firms with elevated risk profiles.
    The Board invites comment on whether the proposed thresholds 
identify firms for which the proposed relief would be most appropriate 
in light of the goals and purposes of the CCAR exercises.
    Question 1: What other standards, such as revenue related to 
nonbanking activities, should the Board consider to identify large and 
noncomplex firms?

C. Measurement and Reporting of Average Total Nonbank Assets

1. Measurement for CCAR 2017
    In order to determine whether a bank holding company meets the $75 
billion average total nonbank asset threshold for CCAR 2017, average 
total nonbank assets under the proposal would equal (i) total combined 
nonbank assets of nonbank subsidiaries, as reported on line 15a of 
Schedule PC-B of the Parent Company Only Financial Statements for Large 
Holding Companies (FR Y-9LP) as of December 31, 2016; plus (ii) the 
total amount of equity investments in nonbank subsidiaries and 
associated companies as reported on line 2a of Schedule PC-A of the FR 
Y-9LP as of December 31, 2016, (except that any investments reflected 
in (i) may be eliminated); plus (iii) assets of each Edge and Agreement 
Corporation, as reported on the Consolidated Report of Condition and 
Income for Edge and Agreement Corporations (FR 2886b) as of December 
31, 2016, to the extent such corporation is designated as 
``Nonbanking'' in the box on the front page of the FR 2886b; minus (v) 
assets of each federal savings association, federal savings bank, or 
thrift subsidiary, as reported on the Call Report as of December 31, 
2016.
    Question 2: What, if any, additional burdens would the proposed 
measurement of nonbank assets create for firms for the December 31, 
2016, measurement date? What steps should the Board take to address any 
such burdens (for example, should the Board permit firms to net 
intercompany exposures among all nonbank subsidiaries for purposes of 
the December 31, 2016, report)?
2. Measurement for Capital Plan Cycles After 2017
    For purposes of capital plan cycles after 2017, the $75 billion 
average total nonbank asset threshold would be the average of the total 
nonbank assets of a holding company, calculated in accordance with the 
instructions to the FR Y-9LP, for the four most recent consecutive 
quarters or, if the bank holding company has not filed the FR Y-9LP for 
each of the four most recent consecutive quarters, for the most recent 
quarter or consecutive quarters, as applicable.
    The proposal would amend the FR Y-9LP to include new line item 17 
of PC-B Memoranda (Total nonbank assets of a holding company that is 
subject to the capital plan rule) for purposes of identifying large and 
noncomplex firms. Under the proposal, a bank holding company with total 
consolidated assets of $50 billion or more would be required to report 
on the FR Y-9LP the average dollar amount of its total nonbank assets 
of consolidated nonbank subsidiaries, whether held directly or 
indirectly or held through lower-tier holding companies, and its direct 
investments in unconsolidated nonbank subsidiaries, associated nonbank 
companies, and those nonbank corporate joint ventures over which the 
bank holding company exercises significant influence (collectively, 
``nonbank companies'').\28\
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    \28\ For purposes of the FR Y-9LP, (i) a subsidiary is a company 
in which the reporting bank holding company directly or indirectly 
owns more than 50 percent of the outstanding voting stock; (ii) an 
associated company is a corporation in which the reporting bank 
holding company, directly or indirectly, owns 20 to 50 percent of 
the outstanding voting stock and over which the reporting bank 
holding company exercises significant influence; and (iii) a 
corporate joint venture is a corporation owned and operated by a 
group of companies, no one of which has a majority interest, as a 
separate and specific business or project for the mutual benefit of 
that group of companies.

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[[Page 67244]]

    Nonbank companies, for purposes of this measure, would exclude (i) 
all national banks, state member banks, state nonmember insured banks 
(including insured industrial banks), federal savings associations, 
federal savings banks, and thrift institutions (collectively, 
``depository institutions'') and (ii) except for an Edge or Agreement 
Corporation designated as ``Nonbanking'' in the box on the front page 
of the Consolidated Report of Condition and Income for Edge and 
Agreement Corporations (FR 2886b), any subsidiary of a depository 
institution (``depository institution subsidiary'').
    For purposes of this measure, a reporting bank holding company 
should eliminate all intercompany assets and operating revenue among 
the nonbank companies, but should include assets and operating revenue 
with the reporting bank holding company; any depository institution; 
any depository institution subsidiary. For a reporting bank holding 
company that is a subsidiary of a foreign banking organization, the 
reporting bank holding company should include assets and operating 
revenue with any branch or agency of the foreign banking organization 
or any non-U.S. subsidiary, non-U.S. associated company, or non-U.S. 
corporate joint venture of the foreign banking organization that is not 
held through the reporting bank holding company, should be included. 
For example, a reporting bank holding company should eliminate the 
loans made by one nonbank company to a second nonbank company, but 
should not eliminate loans made by one nonbank company to the reporting 
bank holding company; depository institution; depository institution 
subsidiary; or for a reporting bank holding company that is a 
subsidiary of a foreign banking organization, any branch or agency of 
the foreign banking organization or any non-U.S. subsidiary, non-U.S. 
associated company, or non-U.S. corporate joint venture of the foreign 
banking organization that is not held through the reporting bank 
holding company.
    The proposed line item would require a firm to report nonbank 
assets based on an average over the quarter, as calculated on either a 
daily, weekly, or monthly basis. Using an average would further the 
integrity of the nonbank assets measure by ensuring that it is not 
unduly influenced by end-of-quarter fluctuations in nonbank assets; 
however, requiring a daily or weekly average may impose undue burden on 
firms to perform this calculation. The Board is therefore seeking 
comment as to whether a daily, weekly, or monthly average would be most 
appropriate for this calculation. This new line item is expected to be 
effective for the reporting period as of March 31, 2017.
    Question 3: What are the costs and benefits of using a daily, 
weekly, or monthly average for purposes of calculating nonbank assets?
    Question 4: What other measures for identifying large and 
noncomplex firms should the Board consider? For instance, should the 
Board consider evaluating the percent of revenues from nonbank 
activities to total revenue, in addition to the asset measure?

D. Elimination of CCAR Qualitative Assessment and Objection for Large 
and Noncomplex Firms

    Capital planning is a core aspect of financial and risk management 
for all bank holding companies that helps ensure the financial strength 
and resilience of a firm. Strong forward-looking capital planning 
processes ensure that a bank holding company with total consolidated 
assets of $50 billion or more has sufficient capital to absorb losses 
and continue to lend to creditworthy businesses and consumers, 
including during times of stress. The Board expects all bank holding 
companies with total consolidated assets of $50 billion or more to 
maintain sound capital planning processes on an ongoing basis.
    The Board has different expectations for sound capital planning and 
capital adequacy depending on the size, scope of operations, activity, 
and systemic risk profile of a firm. Consistent with those different 
expectations, under the proposal, large and noncomplex firms would no 
longer be subject to the provisions of the Board's capital plan rule 
whereby the Board may object to a capital plan on the basis of 
deficiencies in the firm's capital planning process or unresolved 
supervisory issues, that is, large and noncomplex firms would no longer 
be subject to the CCAR qualitative assessment.
    In the current CCAR process, the Federal Reserve conducts a 
qualitative assessment of the strength of each bank holding company's 
internal capital planning process and a quantitative assessment of each 
bank holding company's capital adequacy in the calendar quarter in 
which the bank holding company submits a capital plan. In the 
qualitative assessment, the Federal Reserve evaluates the extent to 
which the analysis underlying each bank holding company's capital plan 
comprehensively captures and addresses potential risks stemming from 
company-wide activities. In addition, the Federal Reserve evaluates the 
reasonableness of a bank holding company's capital plan, the 
assumptions and analysis underlying the plan, and the robustness of the 
bank holding company's capital planning process. Under the capital plan 
rule, the Board may object to a bank holding company's capital plan if 
the Board determines that (1) the bank holding company has material 
unresolved supervisory issues, including but not limited to issues 
associated with its capital adequacy process; (2) the assumptions and 
analysis underlying the bank holding company's capital plan, or the 
bank holding company's methodologies for reviewing its capital adequacy 
process, are not reasonable or appropriate; \29\ or (3) the bank 
holding company's capital planning process or proposed capital 
distributions otherwise constitute an unsafe or unsound practice, or 
would violate any law, regulation, Board order, directive, or condition 
imposed by, or written agreement with, the Board or the appropriate 
Federal Reserve Bank (together, qualitative objection criteria).\30\ 
The Board may also object to a bank holding company's capital plan if 
the bank holding company has not demonstrated an ability to maintain 
capital above each minimum regulatory capital ratio on a pro forma 
basis under expected and stressful conditions throughout the planning 
horizon (that is, based on a quantitative assessment).\31\ In the past 
CCAR exercises, the Board has publicly announced its decision to object 
to a bank holding company's capital plan, along with the basis for the 
decision.\32\
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    \29\ As discussed in section II.E of this preamble below, the 
proposal would revise this criterion to permit objection where the 
Board determines that the assumptions and analysis underlying the 
bank holding company's capital plan, or the bank holding company's 
methodologies and practices that support its capital planning 
process, are not reasonable or appropriate.
    \30\ See 12 CFR 225.8(f)(2)(ii)(A), (B), and (D).
    \31\ See 12 CFR 225.8(f)(2)(ii)(C).
    \32\ See 12 CFR 225.8(f)(v).
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    In the feedback meetings that the Board held on CCAR, participants 
from large and noncomplex firms expressed the view that the CCAR 
qualitative assessment was unduly burdensome because, in their view, it 
required the development of large amounts of documentation and 
sophisticated stress test models to the same degree as the largest 
firms in order to avoid a public objection to their capital plan. 
Consistent with this feedback, further tailoring of regulatory 
requirements for large and noncomplex firms would avoid creating a 
risk, based on the high

[[Page 67245]]

public profile of the CCAR qualitative review, that large and 
noncomplex firms will over-invest in stress testing and capital 
planning processes that are unnecessary to adequately capture the risks 
of these firms.
    In general, large and noncomplex firms present less systemic risk 
than LISCC firms and large and complex firms. Furthermore, large and 
noncomplex firms are generally engaged in traditional banking 
activities and have a more limited geographical scope than LISCC firms 
and large and complex firms; accordingly, there is less variation in 
key risks across these firms relative to key risks of LISCC firms and 
large and complex firms. The strength of each large and noncomplex 
firm's capital planning process may be assessed through normal 
supervisory reviews supplemented with targeted, horizontal reviews of 
aspects of capital planning. Consequently, the Federal Reserve proposes 
to conduct its supervisory assessment of a large and noncomplex firm's 
risk-management and capital planning practices through the regular 
supervisory process and targeted, horizontal assessments of particular 
aspects of capital planning, rather than the intensive CCAR qualitative 
horizontal assessment. Further, the Board would not object to the 
capital plans of large and noncomplex firms due to qualitative 
deficiencies in their capital planning process, but rather would 
incorporate an assessment of these practices into regular, ongoing 
supervision.
    As compared to CCAR, the proposed review process for large and 
noncomplex firms is expected to be more limited in scope, include 
targeted horizontal evaluations of specific areas of the capital 
planning process, and focus on the standards set forth in the capital 
plan rule and SR Letter 15-19. Before the start of the supervisory 
review process, the Federal Reserve would send a supervisory 
communication to each large and noncomplex firm describing the scope of 
the year's review. The review would likely occur in the quarter 
following the CCAR qualitative assessment for LISCC firms and large and 
complex firms.
    Under the proposal, the Board would continue to perform the annual 
quantitative assessment of capital plans of the large and noncomplex 
firms and publicly announce a decision to object or not object to a 
firm's capital plan on this basis. The quantitative assessment ensures 
that firms maintain sufficient capital to continue operations 
throughout times of economic and financial market stress. While an 
individual large and noncomplex firm is likely to have a lower systemic 
risk profile than a LISCC firm or large and complex firm, its 
activities or distress still could pose some degree of risk to 
financial stability. Moreover, large and noncomplex firms collectively 
represent over $2 trillion in total assets and nearly $1.3 trillion in 
loans and leases as of June 30, 2016. A common weakness or insufficient 
capitalization across a group of large and noncomplex firms could still 
represent a significant threat to the U.S. economy and to specific 
regions where the firms' operations or activities are concentrated. 
Accordingly, the proposal would maintain the current quantitative 
analysis framework for these firms and the possible basis for objection 
to a firm's capital plan based on the results of the quantitative 
assessment, in order to appropriately ensure the capital adequacy of 
all bank holding companies subject to the capital plan rule.
    As under the current capital plan rule, nothing in the proposal 
would limit the authority of the Federal Reserve to issue a capital 
directive, such as a directive to reduce capital distributions, or take 
any other supervisory enforcement action, including an action to 
address unsafe or unsound practices or conditions or violations of law, 
such as an unsafe and unsound capital planning process.\33\
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    \33\ See 12 CFR 225.8(b)(4).
---------------------------------------------------------------------------

E. Continued Application of CCAR for LISCC Firms and Large and Complex 
Firms

    For LISCC firms and large and complex firms, the proposal would 
maintain the current comprehensive assessment of capital planning 
processes in the CCAR qualitative assessment. The comprehensive 
assessment of capital planning processes in the CCAR qualitative 
assessment produces significant safety and soundness benefits for LISCC 
firms and large and complex firms and financial stability benefits for 
the financial system as a whole. As the Board noted when it adopted the 
capital plan rule in 2011, the analytical techniques and other 
requirements set forth in the capital plan rule enable a firm to 
identify, measure, and monitor its risks and promote the stability of 
the U.S. financial system.\34\
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    \34\ 76 FR 74631, 74632 (December 1, 2011).
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    Expectations for LISCC firms and large and complex firms are 
elevated relative to large and noncomplex firms because material 
distress or failure of a LISCC firm or large and complex firm is more 
likely to pose a threat to U.S. financial stability as compared to a 
large and noncomplex firm, heightening the need to ensure the 
resiliency of these firms. Furthermore, LISCC firms and large and 
complex firms engage in more diverse activities and have a larger 
overall size and geographical scope than large and noncomplex firms. 
This larger size and greater diversity leads to greater variation in 
the material risks at these firms, which may not be fully captured by a 
standardized supervisory stress scenario.
    The intensive, comprehensive assessment provided by the CCAR 
qualitative process enables the Federal Reserve to assess whether a 
LISCC firm or large and complex firm has sufficient capital and strong 
capital planning processes in light of the scope and diversity of its 
activities, including risks that are idiosyncratic to each firm. The 
systemic footprint of these firms and the damage that their failure 
could pose to the financial system makes it critical that a 
comprehensive assessment occur on an annual basis, to ensure that the 
capital planning processes of LISCC firms and large and complex firms 
are sufficiently dynamic to reflect changes in economic or financial 
conditions, as well as changes to the risk profile of the firm.
    The public nature of the CCAR process and disclosure of the results 
of the Federal Reserve's qualitative assessment helps to ensure that 
LISCC firms and large and complex firms maintain focus on ensuring that 
their practices are consistent with the Federal Reserve's capital 
planning expectations articulated in SR Letter 15-18.\35\ Additionally, 
the public profile of the CCAR qualitative assessment improves 
incentives for firms to ensure the strength of their capital planning 
processes. The additional scrutiny and market discipline provided by 
the CCAR process is all the more important in light of the systemic 
risk presented by LISCC firms and large and complex firms.
---------------------------------------------------------------------------

    \35\ See SR Letter 15-18.
---------------------------------------------------------------------------

    The proposal includes a modification to the capital plan rule's 
qualitative objection criteria for LISCC firms and large and complex 
firms to better align with the Federal Reserve's focus during the CCAR 
supervisory assessment. Specifically, the proposal provides that the 
Board may object to a the capital plan of a LISCC firm or large and 
complex firm if, among other factors, the methodologies and practices 
that support the bank holding company's capital planning process are 
not reasonable or appropriate (emphasis added). The current rule 
instead provides a basis for objection if the bank holding company's 
methodologies for

[[Page 67246]]

reviewing its capital adequacy process, are not reasonable or 
appropriate (emphasis added). This modification is intended to clarify 
the current scope of the CCAR qualitative review and the areas of the 
focus in the review of the capital plan of a LISCC firm or a large and 
complex firm.

F. Implementation of Modified Reporting Requirements

    The Capital Assessments and Stress Testing Report (FR Y-14 series 
of reports; OMB No. 7100-0341) collects data used to support 
supervisory stress testing models and continuous monitoring efforts for 
bank holding companies with total consolidated assets of $50 billion or 
more. The FR Y-14 consists of three reports: The semi-annual FR Y-14A, 
the quarterly FR Y-14Q, and monthly FR Y-14M. Each report contains 
multiple schedules, several of which are reported only by bank holding 
companies that meet specified materiality thresholds.
    In discussions on CCAR, several large and noncomplex firms 
recommended that the Board revise the FR Y-14 series of reports to 
reduce reporting burdens for these firms. For instance, these large and 
noncomplex firms suggested that the Board raise the materiality 
threshold for the FR Y-14 reports and reduce the detail required in the 
supporting documentation requirements. Additionally, these firms 
indicated that in some cases where a portfolio met the criteria to be 
considered immaterial, the firm voluntarily reported data on the 
portfolio due to the Federal Reserve's practice of applying a 75th 
percentile loss rate to immaterial portfolios in the supervisory stress 
test. The proposal would reduce burdens associated with reporting the 
FR Y-14 schedules for large and noncomplex firms in three ways: By 
raising the materiality threshold, reducing the supporting 
documentation requirements, removing several sub-schedules from the FR 
Y-14A Summary Schedule, and using the median loss rate for immaterial 
portfolios.
    The proposal would increase the materiality thresholds for filing 
schedules on the FR Y-14Q report and the FR Y-14M report for large and 
noncomplex firms. The FR Y-14 instructions currently define material 
portfolios as those with asset balances greater than $5 billion or 
asset balances greater than five percent of tier 1 capital on average 
for the four quarters preceding the reporting quarter.\36\ The proposal 
would revise the FR Y-14's definition of a ``material portfolio'' for 
large and noncomplex firms to mean a portfolio with asset balances 
greater than either (1) $5 billion or (2) 10 percent of tier 1 capital, 
both measured as an average for the four quarters preceding the 
reporting quarter.\37\ As a result of this change, respondents would be 
able to exclude certain portfolios from reporting and in some cases may 
not be required to report certain schedules at all. In modeling losses 
on these portfolios for large and noncomplex firms, the Federal Reserve 
intends to apply the median, rather than 75th percentile, loss rate 
from supervisory projections based on the firms that reported data, so 
as not to discourage firms from using the increased threshold for 
materiality.
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    \36\ Respondents have the option to complete the data schedules 
for immaterial portfolios.
    \37\ The four quarter average percent of tier 1 capital is 
calculated as the sum of the firm's preceding four quarters of 
balances subject to the particular materiality threshold divided by 
the sum of the firm's proceeding four quarters of tier 1 capital.
---------------------------------------------------------------------------

    The proposal also would reduce the supporting documentation a large 
and noncomplex firm would be required to be submit with its capital 
plan. Appendix A of the FR Y-14A report outlines qualitative 
information that a bank holding company should submit in support of its 
projections, including descriptions of the methodologies used to 
develop the internal projections of capital across scenarios and other 
analyses that support the bank holding company's comprehensive capital 
plans. The proposal would revise the instructions to Appendix A of the 
FR Y-14A to remove the requirement that a large and noncomplex firm 
include in its capital plan submission certain documentation regarding 
its models, including any model inventory mapping document, methodology 
documentation, model technical documents, and model validation 
documentation. Large and noncomplex firms would still be required to be 
able to produce these materials upon request by the Federal Reserve, 
and all or a subset of these firms may be required to provide this 
documentation depending on the focus of the supervisory review of large 
and noncomplex firm capital plans. Removing the requirement that a 
large and noncomplex firm submit this information in connection with 
its capital plan should reduce the resources needed to prepare the plan 
for submission and alleviate concerns of an adverse supervisory finding 
that a capital plan is incomplete based on the failure to provide 
documentation.
    Under the proposal, large and noncomplex firms would no longer be 
required to complete several elements of the FR Y-14A Schedule A 
(Summary), including the Securities OTTI methodology sub-schedule, 
Securities Market Value source sub-schedule, Securities OTTI by 
security sub-schedule, the Retail repurchase sub-schedule, the Trading 
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\38\ The revised instructions for the FR Y-14A Summary 
schedule reporting form are available on the Board's public Web site. 
Removing these elements should reduce burdens associated with 
collecting and validating this data, responding to follow-up inquiries, 
and implementing and maintaining technical systems. Under the proposal, 
a large and noncomplex firm may adopt these changes for the FR Y-14A 
report as of December 31, 2016, or as of June 30, 2017. The Federal 
Reserve continues to review the details required to be reported in the 
FR Y-14 series of reports, and may propose additional changes in the 
future to further reduce burdens associated with these reporting 
requirements.
---------------------------------------------------------------------------

    \38\ A large and noncomplex firm would be required to report 
line item 138 of the income statement, as that line item is 
currently derived from the retail repurchase sub-schedule.
---------------------------------------------------------------------------

G. Simplify Initial Application of Capital Plan and Stress Test Rules 
and Regulatory Reporting Requirements

    The proposal would simplify the applicability provisions for the 
capital plan and stress test rules that apply to bank holding companies 
with $50 billion or more in total consolidated assets (subparts E and F 
of the Board's Regulation YY, hereafter subparts E and F) and provide 
additional time before the application of these requirements for bank 
holding companies that cross the $50 billion asset threshold close to 
the April 5 capital plan submission and stress test date. Under the 
current rules, a bank holding company that crosses the $50 billion 
asset threshold on or before December 31 of a calendar year must submit 
a capital plan by April 5 of the following year. Under the proposal, 
the cutoff date for the capital plan rule would be moved to September 
30, so that a firm that crosses the $50 billion asset threshold in the 
fourth quarter of a calendar year would not have to submit a capital 
plan until April 5 of the second year after it crosses the threshold.
    The proposal would also align the cutoff date for initial 
application of the stress test rules in subparts E and F with the 
proposed September 30 cutoff date for the initial application of the 
capital plan rule. A bank holding company

[[Page 67247]]

would become subject to these stress test rules in subparts E and F in 
the year following the first year in which the bank holding company 
submitted a capital plan. Under the current stress test rules, a bank 
holding company that crosses the $50 billion asset threshold before 
March 31 of a given year becomes subject to the stress test rules under 
subparts E and F beginning in the following year, and accordingly, may 
have only nine months before its first stress test under these 
subparts. Under the proposal, a firm would have at least a year before 
it would be subject to its initial stress tests under subparts E and F. 
This revision would simplify the application of the capital plan and 
stress test rules and allow for a more orderly onboarding process for 
new FR Y-14 filers, which will improve the quality of data used in the 
supervisory stress tests.\39\
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    \39\ Providing this extension would also have the effect of 
allowing firms that cross the $50 billion in the fourth quarter of a 
given year as much as a year and a half before they are required to 
submit their first capital plan, and two and a half years before 
they are subject to the stress tests under subparts E and F. This 
extended period would allow for the significant investments firms 
must make to meet these requirements and account for the fact that 
these firms would continue to be subject to prudential supervision 
during the transition period.
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    The proposal would also provide an extended onboarding period for 
regulatory reporting requirements to a bank holding company after it 
first crosses the $50 billion asset threshold. Currently, a bank 
holding company that crosses the $50 billion asset threshold must 
prepare FR Y-14M reports as of the end of the month in which it crosses 
the threshold, and must submit its first FR Y-14M within 90 days after 
the end of the month (at which time, data for the three intervening 
months is due). The proposal would require a bank holding company to 
begin preparing its initial FR Y-14M as of the end of the third month 
after the bank holding company first meets the $50 billion asset 
threshold (rather than as of the month in which the bank holding 
company crosses the threshold) and must submit its first FR Y-14M 
within 90 days after the end of that month (at which time, data for the 
three intervening months would be due). For example, a bank holding 
company that crosses the $50 billion asset threshold as of September 
30, 2016, would be required to prepare its initial FR Y-14M report as 
of December 2016, and file its FR Y-14M reports for December 2016, 
January 2017, and February 2017 in March 2017. A bank holding company 
would continue to prepare its FR Y-14Q report as of the end of the 
first quarter after it initially crosses the threshold. The additional 
onboarding time should facilitate communications between the Federal 
Reserve and a bank holding company and better prepare the bank holding 
company to comply with FR Y-14 reporting requirements. Generally, a 
bank holding company does not begin the onboarding process, including 
dialogue with the data aggregators who collect the FR Y-14M data, until 
after the Federal Reserve confirms that the bank holding company has 
exceeded the asset threshold. Accordingly, providing for an extended 
onboarding period should help bank holding companies become better 
prepared to comply with the FR Y-14 reporting requirements when they 
take effect, which will improve data quality for initial reporting 
periods and reduce burdens and costs for reporting bank holding 
companies.

III. Other Amendments to the Capital Plan and Stress Test Rules

A. Lowering the de minimis Exception Threshold for All Bank Holding 
Companies

    As noted, a bank holding company subject to the capital plan rule 
must request prior approval for a capital distribution that has not 
explicitly been approved by the Board. However, in the event that a 
bank holding company received a notice of non-objection to its capital 
plan, the bank holding company may make a capital distribution that 
exceeds the amount described in the capital plan if: (1) The bank 
holding company remains well capitalized after the distribution,\40\ 
(2) the bank holding company's performance and capital levels following 
the distribution are consistent with its projections under the expected 
conditions in the bank holding company's capital plan, (3) the bank 
holding company provides 15 days' notice prior to execution and the 
Board does not object within that time period; and (4) the aggregate 
dollar amount of all capital distributions during the capital planning 
cycle (the period beginning on July 1 of a calendar year and ending on 
June 30 of the following year) would not exceed the total amount 
described in the bank holding company's capital plan by more than 1.00 
percent of the bank holding company's tier 1 capital as reported in the 
bank holding company's first quarter FR Y-9C.\41\
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    \40\ As defined by 12 CFR 225.2(r).
    \41\ See 12 CFR 225.8(g)(2).
---------------------------------------------------------------------------

    The purpose of this de minimis exception is to provide flexibility 
for well-capitalized bank holding companies to distribute small, 
additional amounts of capital without the need for a complete re-
assessment of the bank holding company's capital plan. Prior to the 
2015 capital planning cycle, requests to make distributions under the 
de minimis exception were generally small and typically related to 
unanticipated events that improved a bank holding company's capital 
levels (such as tax rebates or litigation settlements). Over time, the 
Board has observed a pattern of certain bank holding companies using 
the de minimis exception to increase their common stock repurchases by 
the maximum amount allowed under the exception. This pattern risks 
treating the de minimis exception as an automatic add-on to approved 
common stock distributions under a bank holding company's capital plan 
rather than for its intended use for unanticipated events. Based on 
planned net common stock distributions (i.e., planned common stock 
dividends and repurchases less planned common stock issuances) for the 
CCAR 2016 approval period, the current level of the de minimis 
threshold would imply that bank holding companies could increase their 
net common stock capital distributions by 32 percent on average (median 
of 13 percent).\42\
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    \42\ Net common stock distributions is calculated as planned 
common stock dividends and repurchases less planned common stock 
issuances. This analysis excludes firms that had no or negative net 
planned common stock distributions in their 2016 capital plans.
---------------------------------------------------------------------------

    The proposal would reduce the de minimis exception from 1.00 
percent to 0.25 percent of a bank holding company's tier 1 capital in 
order to ensure that a de minimis distribution would represent a 
smaller percentage of the bank holding company's approved capital 
distributions and tier 1 capital. Based on data from CCAR 2016, a 0.25 
percent de minimis threshold would enable bank holding companies to 
increase their planned net common stock distributions by 8 percent on 
average (median of 3 percent).
    The expected aggregate capital impact of this proposed change to 
the de minimis exception threshold can be evaluated on both a 
prospective and historical basis. On a prospective basis, a comparison 
can be made between the total de minimis capital distributions that 
could be made across all bank holding companies subject to CCAR 
(assuming all applicable conditions were met) under the proposal and 
under the current rule, by taking the difference between 1.00 percent 
and 0.25 percent of tier 1 capital across all firms. Based on data as 
of the first quarter of 2016, this difference equals $9.8 billion, 
equivalent to 0.10 percent of the total

[[Page 67248]]

risk-weighted assets of bank holding companies subject to CCAR in 
2016.\43\ On a historical basis, if a 0.25 percent de minimis 
limitation had applied during the CCAR 2015 cycle rather than a 1.00 
percent limitation, $2.3 billion of distributions actually made during 
the CCAR 2015 period would not have been permitted without prior 
approval, equivalent to 0.02 percent of total risk-weighted assets of 
bank holding companies subject to CCAR in 2015.
---------------------------------------------------------------------------

    \43\ Total risk-weighted assets across bank holding companies 
subject to CCAR in 2016 equaled $9.6 trillion.
---------------------------------------------------------------------------

    A smaller de minimis limitation would not prohibit these additional 
distributions. Instead, it would require the bank holding company to 
include the distributions in its next annual capital plan.
    In addition, with the proposed revision to the de minimis rule, 
bank holding companies would still be able to seek approval to make 
capital distributions not included in their capital plans, consistent 
with section 225.8(g) of the capital plan rule. Any bank holding 
company making such a request must provide adequate information 
regarding any changes to its risk profile, financial condition, and 
corporate structure since the previous CCAR exercise. In many cases, 
the Federal Reserve expects to request additional information from bank 
holding companies that request approval for additional capital 
distributions, which will likely include revised stress test results 
using updated data and scenarios. One exception is where a bank holding 
company replaces the foregone capital with capital of equal or higher 
quality prior to or concurrently with the incremental distribution.
    One important factor in the Board's decision on a capital 
distribution request is the size and complexity of the bank holding 
company making the request. All else equal, a capital distribution 
request from a LISCC or large and complex firm would likely require 
stronger justification than a request from a large and noncomplex firm. 
For instance, a request from a LISCC or large and complex firm directly 
related to an unforeseeable event at the time of the last capital plan 
submission that has a positive expected impact on current or future 
capital ratios would likely require more supporting evidence (for 
instance, updated stress test results) than a similar request from a 
large and noncomplex firm. This difference reflects the Federal 
Reserve's elevated expectations for capital planning at LISCC and large 
and complex firms, where any revision to a firm's capital plan to 
increase capital distributions following the CCAR qualitative 
assessment requires strong evidence and support.

B. Blackout Period for the de minimis Exception and Requests for 
Approval To Make Additional Distributions Not Included in a Bank 
Holding Company's Capital Plan

    In addition to proposing a change in the allowable size of the de 
minimis exception, the proposal would establish a one-quarter 
``blackout period'' while the Board is conducting CCAR (the second 
quarter of a calendar year) during which bank holding companies would 
not be able to submit a notice to use the de minimis exception or 
submit a request for prior approval for additional capital 
distributions that do not qualify for the de minimis exception. In the 
absence of this modification, the Federal Reserve's analysis in CCAR 
may not in all cases represent a comprehensive evaluation of the bank 
holding company's capital adequacy and the appropriateness of the bank 
holding company's planned capital actions in CCAR. Under the proposal, 
a bank holding company seeking to make capital distributions in the 
second quarter in excess of the amount described in the capital plan 
for which a non-objection was issued pursuant to the de minimis 
exception or prior approval process, when the CCAR exercise is 
underway, would be required submit a notice to use the de minimis 
exception by March 15 or submit a request for prior approval for 
incremental capital distributions that do not qualify for the de 
minimis exception by March 1 and reflect the additional distributions 
in its capital plan. The proposed blackout periods are expected to be 
effective for CCAR 2017.

C. Revisions to the Time Period From Which the Market Shock ``as-of'' 
Date May Be Selected

    Under the Board's stress test rules, the Board may require a bank 
holding company with significant trading activity to include a trading 
and counterparty component (``global market shock'') in its adverse and 
severely adverse scenarios for its company-run stress tests. Currently, 
the Board must select a date between January 1 and March 1 of the 
calendar year of the stress test cycle. However, in order to provide 
bank holding companies with as much time as possible to conduct their 
company-run stress tests and prepare their capital plans, the Board has 
typically specified the as-of date for the global market shock as early 
as possible in January. As such, the Board has a narrow window to 
select the as-of date for the market shock, effectively sometime very 
early in January. The narrow window creates the possibility for bank 
holding companies to artificially reduce the risk of their portfolios 
around the time of the market shock date. In addition, limiting the as-
of date for the market shock to the first weeks of the calendar year 
does not account for seasonality in trading activity--for example, 
trading activity typically slows towards the end of the calendar year 
and gradually picks up in the new calendar year.
    The proposal would allow the Board to select any date between 
October 1 of the prior year and March 1 of the year of the stress test 
cycle for the as-of date of the global market shock. Bank holding 
companies subject to the trading and counterparty component would be 
notified within two weeks of the selected as-of date for the global 
market shock, to enable the bank holding company to preserve trading 
and counterparty exposure data from the as-of date. This change would 
help ensure that the stress tests capture representative trading 
exposure for bank holding companies with significant trading activity, 
for example, by avoiding effects caused by unusual trading conditions 
around year-end. Moreover, the change would provide additional time for 
both bank holding companies and supervisors to implement the global 
market shock scenario in a well-controlled manner. Under the proposal, 
this change would take effect for the 2018 stress test cycle.

D. Removal of Obsolete Provisions

    In 2014, the Federal Reserve adjusted the capital planning and 
stress test cycles from an October 1 as-of date to a January 1 as-of 
date. The capital plan and stress test rules currently include several 
provisions reflecting the previous October 1 as-of date, as well as 
obsolete transition provisions for foreign banking organizations that 
previously relied on SR Letter 01-01,\44\ and for the application of 
the supplementary leverage ratio. The proposal would remove these 
provisions, as they are no longer operative.
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    \44\ SR Letter 01-01 (January 5, 2001), available at 
www.federalreserve.gov/boarddocs/srletters/2001/sr0101.htm.
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IV. Administrative Law Matters

A. Paperwork Reduction Act

    In accordance with section 3512 of the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3521) (PRA), the Board

[[Page 67249]]

may not conduct or sponsor, and a 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 OMB control 
numbers are 7100-0128, 7100-0341, and 7100-0342 for this information 
collection. The Board reviewed the proposed rule under the authority 
delegated to the Board by OMB.
    The proposed rule contains requirements subject to the PRA. The 
reporting requirements are found in sections 12 CFR 225.8.
    Comments are invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the Federal Reserve's functions, including 
whether the information has practical utility;
    b. The accuracy or the estimate 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;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comment will become a matter of public record. Comments on 
aspects of this notice that may affect reporting, recordkeeping, or 
disclosure requirements and burden estimates should be sent to: 
Secretary, Board of Governors of the Federal Reserve System, 20th and C 
Streets NW., Washington, DC 20551. A copy of the comments may also be 
submitted to the OMB desk officer by mail to U.S. Office of Management 
and Budget, 725 17th Street NW., #10235, Washington, DC 20503 or by 
facsimile to 202-3955806, Attention, Agency Desk Officer.
    Proposed Revisions, With Extension for Three Years, of the 
Following Information Collections:
    (1) Title of Information Collection: Parent Company Only Financial 
Statements for Large Holding Companies.
    Agency Form Number: FR Y-9C; FR Y-9LP; FR Y-9SP; FR Y-9ES; FR Y-
9CS.
    OMB Control Number: 7100-0128.
    Frequency of Response: Quarterly, semi-annually, and annually.
    Affected Public: Businesses or other for-profit.
    Respondents: Bank holding companies (BHCs), savings and loan 
holding companies (SLHCs), securities holding companies (SHCs), and 
U.S. intermediate holding companies (IHCs), (collectively, ``holding 
companies'').
    Abstract: The FR Y-9LP serves as standardized financial statements 
for large parent holding companies. The FR Y-9 family of reporting 
forms continues to be the primary source of financial data on holding 
companies that examiners rely on in the intervals between on-site 
inspections. Financial data from these reporting forms are used to 
detect emerging financial problems, to review performance and conduct 
pre-inspection analysis, to monitor and evaluate capital adequacy, to 
evaluate holding company mergers and acquisitions, and to analyze a 
holding company's overall financial condition to ensure the safety and 
soundness of its operations.
    Current Actions: The proposal would amend the FR Y-9LP to include 
new line item 17 of PC-B Memoranda (Total nonbank assets of a holding 
company subject to the Federal Reserve Board's capital plan rule) for 
purposes of identifying large and noncomplex firms subject to the 
capital plan rule. Under the proposal, a top-tier holding company that 
is subject to the Board's capital plan rule would be required to report 
on the FR Y-9LP the average dollar amount for the calendar quarter (as 
calculated on either a daily, weekly, or monthly basis during the 
calendar quarter) of its total nonbank assets of consolidated nonbank 
subsidiaries, whether held directly or indirectly or held through 
lower-tier holding companies, and its direct investments in 
unconsolidated nonbank subsidiaries, associated nonbank companies, and 
those nonbank corporate joint ventures over which the bank holding 
company exercises significant influence (collectively, ``nonbank 
companies'').\45\ As noted in section II.C.2 of this preamble, the 
Board seeks comment as to whether a daily, weekly, or monthly average 
would be most appropriate for this calculation. This proposed amendment 
would be effective as of March 31, 2017.
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    \45\ For purposes of the FR Y-9LP, (i) a subsidiary is a company 
in which the reporting bank holding company directly or indirectly 
owns more than 50 percent of the outstanding voting stock; (ii) an 
associated company is a corporation in which the reporting bank 
holding company, directly or indirectly, owns 20 to 50 percent of 
the outstanding voting stock and over which the reporting bank 
holding company exercises significant influence; and (iii) a 
corporate joint venture is a corporation owned and operated by a 
group of companies, no one of which has a majority interest, as a 
separate and specific business or project for the mutual benefit of 
that group of companies.
---------------------------------------------------------------------------

    Nonbank companies, for purposes of this measure, would exclude (i) 
all national banks, state member banks, state nonmember insured banks 
(including insured industrial banks), federal savings associations, 
federal savings banks, thrift institutions (collectively for purposes 
of this proposed item 17, ``depository institutions'') and (ii) except 
for an Edge or Agreement Corporation designated as ``Nonbanking'' in 
the box on the front page of the Consolidated Report of Condition and 
Income for Edge and Agreement Corporations (FR 2886b), any subsidiary 
of a depository institution (for purposes of this proposed item 17, 
``depository institution subsidiary'').
    All intercompany assets and operating revenue among the nonbank 
companies should be eliminated, but assets and operating revenue with 
the reporting holding company; any depository institution; any 
depository institution subsidiary; and for a reporting holding company 
that is a subsidiary of a foreign banking organization, any branch or 
agency of the foreign banking organization or any non-U.S. subsidiary, 
non-U.S. associated company, or non-U.S. corporate joint venture of the 
foreign banking organization that is not held through the reporting 
holding company, should be included. For example, eliminate the loans 
made by one nonbank company to a second nonbank company, but do not 
eliminate loans made by one nonbank company to the parent holding 
company; depository institution; depository institution subsidiary; or 
for a reporting holding company that is a subsidiary of a foreign 
banking organization, any branch or agency of the foreign banking 
organization or any non-U.S. subsidiary, non-U.S. associated company, 
or non-U.S. corporate joint venture of the foreign banking organization 
that is not held through the reporting holding company.
    While the FR Y-9LP collects another measure of nonbank assets (line 
item 15 of PC-B Memoranda (Total combined nonbank assets of nonbank 
subsidiaries)), the proposed nonbank assets measure differs in several 
important ways. Specifically, proposed line item 17 excludes assets of 
an insured industrial bank, federal savings association, federal 
savings bank, or thrift institution and includes assets of an Edge or 
Agreement Corporation designated as ``Nonbanking'' in the box on the 
front page of the Consolidated Report of Condition and Income for Edge 
and Agreement Corporations (FR 2886b). It also includes the value of an 
investment in an unconsolidated

[[Page 67250]]

nonbank company that is held directly by the holding company. While 
these elements may be sourced from other reporting forms, the new line 
item is necessary to reflect the elimination of intercompany 
transactions among these nonbank companies, as described above.
    Number of Respondents: Proposed revision would apply to top-tier 
holding companies subject to the Board's capital plan rule (BHCs and 
IHCs with total consolidated assets of $50 billion or more), for a 
total of 38 of the existing 792 FR Y-9LP respondents. FR Y-9C (non-
Advanced Approaches holding companies or other respondents): 654; FR Y-
9C (Advanced Approaches holding companies or other respondents): 13; FR 
Y-9SP: 4,122; FR Y-9ES: 88; FR Y-9CS: 236.
    Estimated Average Hours per Response: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 50.17 hours; FR Y-
9C (Advanced Approaches holding companies or other respondents): 52.42 
hours; FR Y-9LP: 5.25 hours; FR Y-9SP: 5.4 hours; FR Y-9ES: 0.5 hours; 
FR Y-9CS: 0.5 hours.
    Current Estimated Annual Burden Hours: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 131,245 hours; FR 
Y-9C (Advanced Approaches holding companies or other respondents): 
2,674 hours; FR Y-9LP: 16,632 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR 
Y-9CS: 472.
    Proposed Revisions only change in Estimated Annual Burden Hours: FR 
Y-9LP: 76 hours (0.5 hours per quarter for the 38 impacted FR Y-9LP 
respondents).
    Proposed Total Estimated Annual Burden Hours: FR Y-9C (non-Advanced 
Approaches holding companies or other respondents): 131,245 hours; FR 
Y-9C (Advanced Approaches holding companies or other respondents): 
2,674 hours; FR Y-9LP: 16,651 hours; FR Y-9SP: 44,518; FR Y-9ES: 44; FR 
Y-9CS: 472.
    (2) Title of Information Collection: Capital Assessments and Stress 
Testing information collection.
    Agency Form Number: FR Y-14A/Q/M.
    OMB Control Number: 7100-0341.
    Frequency of Response: Annually, semi-annually, quarterly, and 
monthly.
    Affected Public: Businesses or other for-profit.
    Respondents: The respondent panel consists of any top-tier bank 
holding company (BHC) or intermediate holding company (IHC) that has 
$50 billion or more in total consolidated assets, as determined based 
on: (i) The average of the firm's total consolidated assets in the four 
most recent quarters as reported quarterly on the firm's Consolidated 
Financial Statements for Bank Holding Companies (FR Y-9C) (OMB No. 
7100-0128); or (ii) the average of the firm's total consolidated assets 
in the most recent consecutive quarters as reported quarterly on the 
firm's FR Y-9Cs, if the firm has not filed an FR Y-9C for each of the 
most recent four quarters. Reporting is required as of the first day of 
the quarter immediately following the quarter in which it meets this 
asset threshold, unless otherwise directed by the Board.
    Abstract: The data collected through the FR Y-14A/Q/M schedules 
provide the Board with the additional information and perspective 
needed to help ensure that large BHCs and IHCs 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 CCAR exercise is also complemented 
by other Board supervisory efforts aimed at enhancing the continued 
viability of large firms, including continuous monitoring of firms' 
planning and management of liquidity and funding resources and 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 
Board may conduct follow-up discussions with or request responses to 
follow up questions from respondents, as needed.
    The Capital Assessments and Stress Testing information collection 
consists of the FR Y-14A, Q, and M reports. The semi-annual FR Y-14A 
collects 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.\46\ The quarterly FR Y-14Q collects granular 
data on various asset classes, including loans, securities, and trading 
assets, and pre-provision net revenue (PPNR) for the reporting period. 
The monthly FR Y-14M comprises three retail portfolio- and loan-level 
collections, and one detailed address matching collection to supplement 
two of the portfolio and loan-level collections.
---------------------------------------------------------------------------

    \46\ A BHC that must re-submit its capital plan generally also 
must provide a revised FR Y-14A in connection with its resubmission.
---------------------------------------------------------------------------

    Current Actions: The Capital Assessments and Stress Testing Report 
(FR Y-14 series of reports; OMB No. 7100-0341) collects data used to 
support supervisory stress testing models and continuous monitoring 
efforts for bank holding companies with total consolidated assets of 
$50 billion or more. The FR Y-14 consists of three reports, the semi-
annual FR Y-14A, the quarterly FR Y-14Q, and monthly FR Y-14M. Each 
report contains multiple schedules, several of which are reported only 
by bank holding companies that meet specified materiality thresholds. 
In discussions on CCAR, several large and noncomplex firms recommended 
that the Board revise the FR Y-14 series of reports to reduce the 
reporting burden on these firms. For instance, these large and 
noncomplex firms suggested that the Board raise the materiality 
threshold for the FR Y-14 reports and reduce the detail required in the 
supporting documentation requirements. The proposal would reduce 
burdens associated with reporting the FR Y-14 schedules for large and 
noncomplex firms by raising the materiality threshold, reducing 
supporting documentation requirements, removing several sub-schedules 
from the FR Y-14A Summary Schedule, and using the median loss rate for 
immaterial portfolios.
    The proposal would increase the materiality thresholds for filing 
schedules on the FR Y-14Q report and the FR Y-14M report for large and 
noncomplex firms. The FR Y-14 instructions currently define material 
portfolios as those with asset balances greater than $5 billion or 
asset balances greater than five percent of tier 1 capital, both 
measured as an average for the four quarters preceding the reporting 
quarter.\47\ The proposal would revise the FR Y-14's definition of a 
``material portfolio'' for large and noncomplex firms to mean a 
portfolio with asset balances greater than either (1) $5 billion or (2) 
10 percent of tier 1 capital on average for the four quarters preceding 
the reporting quarter.\48\ As a result of this change, respondents 
would be able to exclude certain portfolios from reporting and in some 
cases may

[[Page 67251]]

not be required to report certain schedules at all.
---------------------------------------------------------------------------

    \47\ Respondents have the option to complete the data schedules 
for immaterial portfolios.
    \48\ The four quarter average percent of tier 1 capital is 
calculated as the sum of the firm's preceding four quarters of 
balances subject to the particular materiality threshold divided by 
the sum of the firm's proceeding four quarters of tier 1 capital.
---------------------------------------------------------------------------

    In addition, the proposal would reduce the supporting documentation 
a large and noncomplex firm would be required to be submit with its 
capital plan. Appendix A of the FR Y-14A report outlines qualitative 
information that a bank holding company should submit in support of its 
projections, including descriptions of the methodologies used to 
develop the internal projections of capital across scenarios and other 
analyses that support the bank holding company's comprehensive capital 
plans. The proposal would revise the instructions to Appendix A of the 
FR Y-14A to remove the requirement that a large and noncomplex firm 
include in its capital plan submission certain documentation regarding 
its models, including any model inventory mapping document, methodology 
documentation, model technical documents, and model validation 
documentation. Large and noncomplex firms would still be required to be 
able to produce these materials upon request by the Federal Reserve, 
and all or a subset of these firms may be required to provide this 
documentation depending on the focus of the supervisory review of large 
and noncomplex firm capital plans. Removing the requirement that a 
large and noncomplex firm submit this information in connection with 
its capital plan should reduce the resources needed to prepare the plan 
for submission and alleviate concerns of an adverse supervisory finding 
that a capital plan is incomplete based on the failure to provide 
documentation.
    Under the proposal, large and noncomplex firms would no longer be 
required to complete several elements of the FR Y-14A Schedule A 
(Summary), including the Securities OTTI methodology sub-schedule, 
Securities Market Value source sub-schedule, Securities OTTI by 
security sub-schedule, the Retail repurchase sub-schedule, the Trading 
sub-schedule, Counterparty sub-schedule, and Advanced RWA sub-
schedule.\49\ The revised instructions for the FR Y-14A Summary 
schedule reporting form are available on the Board's public Web site. 
Removing these elements should reduce burdens associated with 
collecting and validating this data, responding to follow-up inquiries, 
and implementing and maintaining technical systems. Under the proposal, 
a large and noncomplex firm may adopt these changes for the FR Y-14A 
report as of December 31, 2016, or as of June 30, 2017. The Federal 
Reserve continues to review the details required to be reported in the 
FR Y-14 series of reports, and may propose additional changes in the 
future to further reduce burdens associated with these reporting 
requirements.
---------------------------------------------------------------------------

    \49\ A large and noncomplex firm would be required to report 
line item 138 of the income statement, as that line item is 
currently derived from the retail repurchase sub-schedule.
---------------------------------------------------------------------------

    These changes are expected to decrease burden for the information 
collection by 56,454 hours. This includes a decrease in the average 
hours per response for the FR Y-14A due to the elimination of the 
requirement for large and noncomplex firms to file four Summary sub-
schedules and a reduction in the supporting documentation requirements, 
resulting in a decrease of 6,346 hours. The modification to the 
materiality threshold for the FR Y-14Q and FR Y-14M reports would be 
anticipated to reduce the number of firms filing certain schedules on 
the FR Y-14Q and FR Y-14M reports. Specifically, this would result in a 
decrease of 1,088 hours on the FR Y-14Q report and 49,020 hours for the 
FR Y-14M report.
    Number of Respondents: 38.
    Estimated Average Hours per Response: FR Y-14A: Summary, 987 hours; 
Macro scenario, 31 hours; Operational Risk, 12 hours; Regulatory 
capital transitions, 23 hours; Regulatory capital instruments, 20 
hours; Retail repurchase, 20 hours; and Business plan changes, 10 
hours. FR Y-14Q: Securities risk, 13 hours; Retail risk, 16 hours; 
PPNR, 711 hours; Wholesale, 152 hours; Trading, 1,926 hours; Regulatory 
capital transitions, 23 hours; Regulatory capital instruments, 52 
hours; Operational risk, 50 hours; MSR Valuation, 24 hours; 
Supplemental, 4 hours; Retail FVO/HFS, 16 hours; CCR, 508 hours; and 
Balances, 16 hours. FR Y-14M: 1st lien mortgage, 515 hours; Home 
equity, 515 hours; and Credit card, 510 hours. FR Y-14 On-Going 
automation revisions, 480 hours; and implementation, 7,200 hours. FR Y-
14 Attestation: Implementation, 4,800 hours; and on-going revisions, 
2,560 hours.
    Current Estimated Annual Burden Hours: FR Y-14A: Summary, 75,012 
hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours; 
Regulatory capital transitions, 874 hours; Regulatory capital 
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business 
plan changes, 380 hours. FR Y-14Q: Securities risk, 2,432 hours; Retail 
risk, 1,976 hours, Pre-provision net revenue (PPNR), 108,072 hours; 
Wholesale, 23,104 hours; Trading, 46,224 hours; Regulatory capital 
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours; 
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR) 
Valuation, 1,632 hours; Supplemental, 608 hours; and Retail Fair Value 
Option/Held for Sale (Retail FVO/HFS), 1,728 hours; Counterparty, 
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage, 
228,660 hours; Home equity, 197,760 hours; and Credit card, 153,000 
hours. FR Y-14 On-going automation revisions, 18,720 hours; and 
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours; 
and on-going revisions, 23,040 hours.
    Proposed Revisions Only Change in Estimated Annual Burden Hours: FR 
Y-14A: -6,346 Hours, FR Y-14Q: -1,088 FR Y-14M: -49,020 Hours.
    Proposed Total Estimated Annual Burden Hours: FR Y-14A: Summary, 
68,780 hours; Macro scenario, 2,356 hours; Operational Risk, 456 hours; 
Regulatory capital transitions, 760 hours; Regulatory capital 
instruments, 760 hours; Retail repurchase, 1,520 hours; and Business 
plan changes, 380. FR Y-14Q: Securities risk, 2,280 hours; Retail risk, 
1,824 hours, Pre-provision net revenue (PPNR), 108,072 hours; 
Wholesale, 22,952 hours; Trading, 46,224 hours; Regulatory capital 
transitions, 3,496 hours; Regulatory capital instruments, 7,904 hours; 
Operational risk, 7,600 hours; Mortgage Servicing Rights (MSR) 
Valuation, 1,288 hours; Supplemental, 608 hours; and Retail Fair Value 
Option/Held for Sale (Retail FVO/HFS), 1,440 hours; Counterparty, 
12,192 hours; and Balances, 2,432 hours. FR Y-14M: 1st lien mortgage, 
228,660 hours; Home equity, 191,580 hours; and Credit card, 110,160 
hours. FR Y-14 On-going automation revisions, 18,720 hours; and 
implementation, 0 hours. FR Y-14 Attestation: Implementation, 0 hours; 
and on-going revisions, 23,040 hours.
    (3) Title of Information Collection: Recordkeeping and Reporting 
Requirements Associated with Regulation Y (Capital Plans).
    Agency Form Number: Reg Y-13.
    OMB Control Number: 7100-0342.
    Frequency of Response: Annually.
    Affected Public: Businesses or other for-profit.
    Respondents: BHCs and IHCs.
    Abstract: Regulation Y (12 CFR part 225) requires large bank 
holding companies (BHCs) to submit capital plans to the Federal Reserve 
on an annual basis and to require such BHCs to request prior approval 
from the Federal Reserve under certain circumstances before making a 
capital distribution.
    Current Actions: The proposed rule contains requirements subject to 
the

[[Page 67252]]

PRA. The collection of information revised by this final rule is found 
in section 225.8 of Regulation Y (12 CFR part 225). Under section 
225.8(f)(2) of the proposal, large and noncomplex firms would no longer 
be subject to the provisions of the Board's capital plan rule whereby 
the Board can object to a capital plan on the basis of qualitative 
deficiencies in the firm's capital planning process. In feedback 
meetings that the Board held on CCAR, participants from large and 
noncomplex firms expressed the view that the provision of the rule 
permitting the Board to object to a capital plan on the basis of 
qualitative deficiencies, in their view, required a large and 
noncomplex firm to develop a large amount of documentation and stress 
test models to the same degree as the largest firms in order to avoid 
risk of a public objection to its capital plan. Accordingly, this 
revision to section 225.8(f)(2) is expected to reduce the recordkeeping 
requirements for large and noncomplex firms by approximately 25 
percent, or 3,000 hours for large and noncomplex firms.
    The proposed rule defines a large and noncomplex bank holding 
company as a bank holding company with average total consolidated 
assets of $50 billion or more but less than $250 billion, consolidated 
total on-balance sheet foreign exposure of less than $10 billion, and 
average total nonbank assets of less than $75 billion. While the total 
consolidated assets and on-balance sheet foreign exposure measures are 
calculated for purposes of other regulatory requirements, the proposed 
average total nonbank assets threshold is not otherwise calculated for 
purposes of a regulatory requirement.
    For the first calculation date (December 31, 2016), firms will be 
required to calculate nonbank assets by aggregating items reported on 
other reporting forms. Specifically, nonbank assets would be calculated 
as (A) total combined nonbank assets of nonbank subsidiaries, as 
reported on line 15a of Schedule PC-B of the Parent Company Only 
Financial Statements for Large Holding Companies (FR Y-9LP) as of 
December 31, 2016; plus (B) the total amount of equity investments in 
nonbank subsidiaries and associated companies as reported on line 2a of 
Schedule PC-A of the FR Y-9LP as of December 31, 2016; plus (C) assets 
of each Edge and Agreement Corporation, as reported on the Consolidated 
Report of Condition and Income for Edge and Agreement Corporations (FR 
2886b) as of December 31, 2016, to the extent such corporation is 
designated as ``Nonbanking'' in the box on the front page of the FR 
2886b; minus (D) assets of a federal savings association, federal 
savings bank, or thrift subsidiary, as reported on the Report of 
Condition and Income (Call Report) as of December 31, 2016. Performing 
this calculation is expected to require 1 hour per firm.
    As noted above, for calculation dates following the initial 
calculation date, the Federal Reserve is adding a new line item to the 
FR Y-9LP (Parent Company Only Financial Statements for Large Holding 
Companies) to collect average total nonbank assets; however, for the 
December 31, 2016 calculation date, a firm will be required to 
calculate the line item based on existing line items. The burden 
associated with this line item will be reflected in that collection.
    Number of Respondents: 38.
    Estimated Average Hours per Response: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 11,920 hours; annual capital planning 
reporting (225.8(e)(1)(ii)), 80 hours; annual capital planning 
recordkeeping (225.8(e)(1)(iii)), 100 hours; data collections reporting 
((225.8(e)(3)(i)-(vi)), 1,005 hours; data collections reporting 
(225.8(e)(4)), 100 hours; review of capital plans by the Federal 
Reserve reporting (225.8(f)(3)(i)), 16 hours; prior approval request 
requirements reporting (225.8(g)(1), (3), & (4)), 100 hours; prior 
approval request requirements exceptions (225.8(g)(3)(iii)(A)), 16 
hours; prior approval request requirements reports (225.8(g)(6)), 16 
hours.
    Current Estimated Annual Burden Hours: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 452,960 hours; annual capital planning 
reporting (225.8(e)(1)(ii)), 2,240 hours; annual capital planning 
recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data collections 
reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data collections 
reporting (225.8(e)(4)), 1,000 hours; review of capital plans by the 
Federal Reserve reporting (225.8(f)(3)(i)), 32 hours; prior approval 
request requirements reporting (225.8(g)(1), (3), & (4)), 2,600 hours; 
prior approval request requirements exceptions (225.8(g)(3)(iii)(A)), 
32 hours; prior approval request requirements reports (225.8(g)(6)), 32 
hours.
    Proposed Revisions Only Change in Estimated Average Hours per 
Response: For large and noncomplex firms: Annual capital planning 
recordkeeping (225.8(e)(1)(i)), 8,920 hours.
    Proposed Revisions Only Change in Estimated Annual Burden Hours: 
Annual capital planning reporting (225.8(e)(1)(ii)): -54,000 hours.
    Proposed Total Estimated Annual Burden Hours: Annual capital 
planning recordkeeping (225.8(e)(1)(i)) (LISCC and large and complex 
firms), 238,400 hours; Annual capital planning recordkeeping 
(225.8(e)(1)(i) (large and noncomplex firms), 160,560 hours; annual 
capital planning reporting (225.8(e)(1)(ii)), 2,240 hours; annual 
capital planning recordkeeping (225.8(e)(1)(iii)), 2,800 hours; data 
collections reporting ((225.8(e)(3)(i)-(vi)), 38,190 hours; data 
collections reporting (225.8(e)(4)), 1,000 hours; review of capital 
plans by the Federal Reserve reporting (225.8(f)(3)(i)), 32 hours; 
prior approval request requirements reporting (225.8(g)(1), (3), & 
(4)), 2,600 hours; prior approval request requirements exceptions 
(225.8(g)(3)(iii)(A)), 32 hours; prior approval request requirements 
reports (225.8(g)(6)), 32 hours.

B. Regulatory Flexibility Act

    The Board is providing an initial regulatory flexibility analysis 
with respect to this proposed rule. The Regulatory Flexibility Act, 5 
U.S.C. 601 et seq., generally requires that an agency prepare and make 
available an initial regulatory flexibility analysis in connection with 
a notice of proposed rulemaking.
    Under regulations issued by the Small Business Administration 
(``SBA''), a small entity includes a depository institution, bank 
holding company, or savings and loan holding company with total assets 
of $550 million or less (a small banking organization).\50\ As of June 
30, 2016, there were approximately 594 small state member banks, 3,203 
small bank holding companies and 162 small savings and loan holding 
companies. The proposed rule would apply only to bank holding companies 
with total consolidated asset of $50 billion or more. Companies that 
would be subject to the proposed rule therefore substantially exceed 
the $550 million total asset threshold at which a company is considered 
a small company under SBA regulations. Therefore, there are no 
significant alternatives to the proposed rule that would have less 
economic impact on small banking organizations. As discussed above, the 
projected reporting, recordkeeping, and other compliance requirements 
of the rule are expected to be small. The Board does not believe that 
the rule duplicates, overlaps, or conflicts with any other Federal 
rules. In light of the foregoing, the Board does not believe that the 
final rule would have a significant economic

[[Page 67253]]

impact on a substantial number of small entities.
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    \50\ See 13 CFR 121.201. Effective July 14, 2014, the Small 
Business Administration revised the size standards for banking 
organizations to $550 million in assets from $500 million in assets. 
79 FR 33647 (June 12, 2014).
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    The Board welcomes comment on all aspects of its analysis. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.

C. Solicitation of Comments of Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The Board has sought to present the proposed rule in a 
simple and straightforward manner, and invites comment on the use of 
plain language.
    For example:
     Have we organized the material to suit your needs? If not, 
how could the rule be more clearly stated?
     Are the requirements in the rule clearly stated? If not, 
how could the rule be more clearly stated?
     Do the regulations contain technical language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes would make the regulation easier to 
understand?
     Would more, but shorter, sections be better? If so, which 
sections should be changed?
     What else could we do to make the regulation easier to 
understand?

List of Subjects

12 CFR Part 225

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Holding companies, Reporting and recordkeeping requirements, 
Securities, Stress testing.

12 CFR Part 252

    Administrative practice and procedure, Banks, Banking, Capital 
planning, Federal Reserve System, Holding companies, Reporting and 
recordkeeping requirements, Securities, Stress testing.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, the Board 
of Governors of the Federal Reserve System proposes to amend 12 CFR 
chapter II as follows:

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
1. The authority citation for part 225 continues to read as follows:

    Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1, 
1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906, 
3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.

Subpart A--General Provisions

0
2. Section 225.8 is revised to read as follows:


Sec.  225.8  Capital planning.

    (a) Purpose. This section establishes capital planning and prior 
notice and approval requirements for capital distributions by certain 
bank holding companies.
    (b) Scope and reservation of authority--(1) Applicability. Except 
as provided in paragraph (c) of this section, this section applies to:
    (i) Any top-tier bank holding company domiciled in the United 
States with average total consolidated assets of $50 billion or more 
($50 billion asset threshold);
    (ii) Any other bank holding company domiciled in the United States 
that is made subject to this section, in whole or in part, by order of 
the Board;
    (iii) Any U.S. intermediate holding company subject to this section 
pursuant to 12 CFR 252.153; and
    (iv) Any nonbank financial company supervised by the Board that is 
made subject to this section pursuant to a rule or order of the Board.
    (2) Average total consolidated assets. For purposes of this 
section, average total consolidated assets means the average of the 
total consolidated assets as reported by a bank holding company on its 
Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) 
for the four most recent consecutive quarters. If the bank holding 
company has not filed the FR Y-9C for each of the four most recent 
consecutive quarters, average total consolidated assets means the 
average of the company's total consolidated assets, as reported on the 
company's FR Y-9C, for the most recent quarter or consecutive quarters, 
as applicable. Average total consolidated assets are measured on the 
as-of date of the most recent FR Y-9C used in the calculation of the 
average.
    (3) Ongoing applicability. A bank holding company (including any 
successor bank holding company) that is subject to any requirement in 
this section shall remain subject to such requirements unless and until 
its total consolidated assets fall below $50 billion for each of four 
consecutive quarters, as reported on the FR Y-9C and effective on the 
as-of date of the fourth consecutive FR Y-9C.
    (4) Reservation of authority. Nothing in this section shall limit 
the authority of the Federal Reserve to issue a capital directive or 
take any other supervisory or enforcement action, including an action 
to address unsafe or unsound practices or conditions or violations of 
law.
    (5) Rule of construction. Unless the context otherwise requires, 
any reference to bank holding company in this section shall include a 
U.S. intermediate holding company and shall include a nonbank financial 
company supervised by the Board to the extent this section is made 
applicable pursuant to a rule or order of the Board.
    (c) Transitional arrangements. (1) Transition periods for certain 
bank holding companies. (i) A bank holding company that meets the $50 
billion asset threshold (as measured under paragraph (b) of this 
section) on or before September 30 of a calendar year must comply with 
the requirements of this section beginning on January 1 of the next 
calendar year, unless that time is extended by the Board in writing.
    (ii) A bank holding company that meets the $50 billion asset 
threshold after September 30 of a calendar year must comply with the 
requirements of this section beginning on January 1 of the second 
calendar year after the bank holding company meets the $50 billion 
asset threshold, unless that time is extended by the Board in writing.
    (iii) The Board or the appropriate Reserve Bank with the 
concurrence of the Board, may require a bank holding company described 
in paragraph (c)(1)(i) or (ii) of this section to comply with any or 
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of 
this section if the Board or appropriate Reserve Bank with concurrence 
of the Board, determines that the requirement is appropriate on a 
different date based on the company's risk profile, scope of operation, 
or financial condition and provides prior notice to the company of the 
determination.
    (2) Transition periods for subsidiaries of certain foreign banking 
organizations. (i) U.S. intermediate holding companies. (A) A U.S. 
intermediate holding company required to be established or designated 
pursuant to 12 CFR 252.153 on or before September 30 of a calendar year 
must comply with the requirements of this section beginning on January 
1 of the next calendar year, unless that time is extended by the Board 
in writing.

[[Page 67254]]

    (B) A U.S. intermediate holding company required to be established 
or designated pursuant to 12 CFR 252.153 after September 30 of a 
calendar year must comply with the requirements of this section 
beginning on January 1 of the second calendar year after the U.S. 
intermediate holding company is required to be established, unless that 
time is extended by the Board in writing.
    (C) The Board or the appropriate Reserve Bank with the concurrence 
of the Board, may require a U.S. intermediate holding company described 
in paragraph (c)(2)(i)(A) or (B) of this section to comply with any or 
all of the requirements in paragraphs (e)(1), (e)(3), (f), or (g) of 
this section if the Board or appropriate Reserve Bank with concurrence 
of the Board, determines that the requirement is appropriate on a 
different date based on the company's risk profile, scope of operation, 
or financial condition and provides prior notice to the company of the 
determination.
    (ii) Bank holding company subsidiaries of U.S. intermediate holding 
companies required to be established by July 1, 2016. (A) 
Notwithstanding any other requirement in this section, a bank holding 
company that is a subsidiary of a U.S. intermediate holding company 
(or, with the mutual consent of the company and Board, another bank 
holding company domiciled in the United States) shall remain subject to 
paragraph (e) of this section until December 31, 2017, and shall remain 
subject to the requirements of paragraphs (f) and (g) of this section 
until the Board issues an objection or non-objection to the capital 
plan of the relevant U.S. intermediate holding company.
    (B) After the time periods set forth in paragraph (c)(2)(ii)(A) of 
this section, this section will cease to apply to a bank holding 
company that is a subsidiary of a U.S. intermediate holding company, 
unless otherwise determined by the Board in writing.
    (d) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Advanced approaches means the risk-weighted assets calculation 
methodologies at 12 CFR part 217, subpart E, as applicable, and any 
successor regulation.
    (2) Average total nonbank assets means:
    (i) For purposes of the capital plan cycle beginning January 1, 
2017:
    (A) Total combined nonbank assets of nonbank subsidiaries, as 
reported on line 15a of Schedule PC-B of the Parent Company Only 
Financial Statements for Large Holding Companies (FR Y-9LP) as of 
December 31, 2016; plus
    (B) The total amount of equity investments in nonbank subsidiaries 
and associated companies as reported on line 2a of Schedule PC-A of the 
FR Y-9LP as of December 31, 2016 (except that any investments reflected 
in (A) may be eliminated); plus
    (C) Assets of each Edge and Agreement Corporation, as reported on 
the Consolidated Report of Condition and Income for Edge and Agreement 
Corporations (FR 2886b) as of December 31, 2016, to the extent such 
corporation is designated as ``Nonbanking'' in the box on the front 
page of the FR 2886b; minus
    (D) Assets of each federal savings association, federal savings 
bank, or thrift subsidiary, as reported on the Report of Condition and 
Income (Call Report) as of December 31, 2016.
    (ii) For purposes of any capital plan cycles beginning on or after 
January 1, 2018, the average of the total nonbank assets of a holding 
company subject to the Federal Reserve Board's capital plan rule, 
calculated in accordance with the instructions to the FR Y-9LP, for the 
four most recent consecutive quarters or, if the bank holding company 
has not filed the FR Y-9LP for each of the four most recent consecutive 
quarters, for the most recent quarter or consecutive quarters, as 
applicable.
    (3) BHC stress scenario means a scenario designed by a bank holding 
company that stresses the specific vulnerabilities of the bank holding 
company's risk profile and operations, including those related to the 
company's capital adequacy and financial condition.
    (4) Capital action means any issuance or redemption of a debt or 
equity capital instrument, any capital distribution, and any similar 
action that the Federal Reserve determines could impact a bank holding 
company's consolidated capital.
    (5) Capital distribution means a redemption or repurchase of any 
debt or equity capital instrument, a payment of common or preferred 
stock dividends, a payment that may be temporarily or permanently 
suspended by the issuer on any instrument that is eligible for 
inclusion in the numerator of any minimum regulatory capital ratio, and 
any similar transaction that the Federal Reserve determines to be in 
substance a distribution of capital.
    (6) Capital plan means a written presentation of a bank holding 
company's capital planning strategies and capital adequacy process that 
includes the mandatory elements set forth in paragraph (e)(2) of this 
section.
    (7) Capital plan cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
    (8) Capital policy means a bank holding company's written 
assessment of the principles and guidelines used for capital planning, 
capital issuance, capital usage and distributions, including internal 
capital goals; the quantitative or qualitative guidelines for capital 
distributions; the strategies for addressing potential capital 
shortfalls; and the internal governance procedures around capital 
policy principles and guidelines.
    (9) Large and noncomplex bank holding company means any bank 
holding company subject to this section that has, as of December 31 of 
the calendar year prior to the capital plan cycle:
    (i) Average total consolidated assets of less than $250 billion;
    (ii) Consolidated total on-balance sheet foreign exposure at the 
most recent year-end equal to less than $10 billion (where total on-
balance sheet foreign exposure equals total foreign countries cross-
border claims on an ultimate-risk basis, plus total foreign countries 
claims on local residents on an ultimate-risk basis, plus total foreign 
countries fair value of foreign exchange and derivative products, 
calculated in accordance with the Federal Financial Institutions 
Examination Council (FFIEC) 009 Country Exposure Report); and
    (iii) Average total nonbank assets of less than $75 billion.
    (10) Minimum regulatory capital ratio means any minimum regulatory 
capital ratio that the Federal Reserve may require of a bank holding 
company, by regulation or order, including the bank holding company's 
tier 1 and supplementary leverage ratios as calculated under 12 CFR 
part 217, including the deductions required under 12 CFR 248.12, as 
applicable, and the bank holding company's common equity tier 1, tier 
1, and total risk-based capital ratios as calculated under 12 CFR part 
217, including the deductions required under 12 CFR 248.12 and the 
transition provisions at 12 CFR 217.1(f)(4) and 217.300; except that 
the bank holding company shall not use the advanced approaches to 
calculate its regulatory capital ratios.
    (11) Nonbank financial company supervised by the Board means a 
company that the Financial Stability Oversight Council has determined 
under section 113 of the Dodd-Frank Act (12 U.S.C. 5323) shall be 
supervised by the Board and for which such determination is still in 
effect.

[[Page 67255]]

    (12) Planning horizon means the period of at least nine consecutive 
quarters, beginning with the quarter preceding the quarter in which the 
bank holding company submits its capital plan, over which the relevant 
projections extend.
    (13) Tier 1 capital has the same meaning as under 12 CFR part 217.
    (14) U.S. intermediate holding company means the top-tier U.S. 
company that is required to be established pursuant to 12 CFR 252.153.
    (e) General requirements. (1) Annual capital planning. (i) A bank 
holding company must develop and maintain a capital plan.
    (ii) A bank holding company must submit its complete capital plan 
to the Board and the appropriate Reserve Bank by April 5 of each 
calendar year, or such later date as directed by the Board or by the 
appropriate Reserve Bank with concurrence of the Board.
    (iii) The bank holding company's board of directors or a designated 
committee thereof must at least annually and prior to submission of the 
capital plan under paragraph (e)(1)(ii) of this section:
    (A) Review the robustness of the bank holding company's process for 
assessing capital adequacy,
    (B) Ensure that any deficiencies in the bank holding company's 
process for assessing capital adequacy are appropriately remedied; and
    (C) Approve the bank holding company's capital plan.
    (2) Mandatory elements of capital plan. A capital plan must contain 
at least the following elements:
    (i) An assessment of the expected uses and sources of capital over 
the planning horizon that reflects the bank holding company's size, 
complexity, risk profile, and scope of operations, assuming both 
expected and stressful conditions, including:
    (A) Estimates of projected revenues, losses, reserves, and pro 
forma capital levels, including any minimum regulatory capital ratios 
(for example, leverage, tier 1 risk-based, and total risk-based capital 
ratios) and any additional capital measures deemed relevant by the bank 
holding company, over the planning horizon under expected conditions 
and under a range of scenarios, including any scenarios provided by the 
Federal Reserve and at least one BHC stress scenario;
    (B) A discussion of the results of any stress test required by law 
or regulation, and an explanation of how the capital plan takes these 
results into account; and
    (C) A description of all planned capital actions over the planning 
horizon.
    (ii) A detailed description of the bank holding company's process 
for assessing capital adequacy, including:
    (A) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain capital commensurate with 
its risks, maintain capital above the minimum regulatory capital 
ratios, and serve as a source of strength to its subsidiary depository 
institutions;
    (B) A discussion of how the bank holding company will, under 
expected and stressful conditions, maintain sufficient capital to 
continue its operations by maintaining ready access to funding, meeting 
its obligations to creditors and other counterparties, and continuing 
to serve as a credit intermediary;
    (iii) The bank holding company's capital policy; and
    (iv) A discussion of any expected changes to the bank holding 
company's business plan that are likely to have a material impact on 
the bank holding company's capital adequacy or liquidity.
    (3) Data collection. Upon the request of the Board or appropriate 
Reserve Bank, the bank holding company shall provide the Federal 
Reserve with information regarding:
    (i) The bank holding company's financial condition, including its 
capital;
    (ii) The bank holding company's structure;
    (iii) Amount and risk characteristics of the bank holding company's 
on- and off-balance sheet exposures, including exposures within the 
bank holding company's trading account, other trading-related exposures 
(such as counterparty-credit risk exposures) or other items sensitive 
to changes in market factors, including, as appropriate, information 
about the sensitivity of positions to changes in market rates and 
prices;
    (iv) The bank holding company's relevant policies and procedures, 
including risk management policies and procedures;
    (v) The bank holding company's liquidity profile and management;
    (vi) The loss, revenue, and expense estimation models used by the 
bank holding company for stress scenario analysis, including supporting 
documentation regarding each model's development and validation; and
    (vii) Any other relevant qualitative or quantitative information 
requested by the Board or by the appropriate Reserve Bank to facilitate 
review of the bank holding company's capital plan under this section.
    (4) Re-submission of a capital plan. (i) A bank holding company 
must update and re-submit its capital plan to the appropriate Reserve 
Bank within 30 calendar days of the occurrence of one of the following 
events:
    (A) The bank holding company determines there has been or will be a 
material change in the bank holding company's risk profile, financial 
condition, or corporate structure since the bank holding company last 
submitted the capital plan to the Board and the appropriate Reserve 
Bank under this section; or
    (B) The Board or the appropriate Reserve Bank with concurrence of 
the Board, directs the bank holding company in writing to revise and 
resubmit its capital plan for any of the following reasons:
    (1) The capital plan is incomplete or the capital plan, or the bank 
holding company's internal capital adequacy process, contains material 
weaknesses;
    (2) There has been, or will likely be, a material change in the 
bank holding company's risk profile (including a material change in its 
business strategy or any risk exposure), financial condition, or 
corporate structure;
    (3) The BHC stress scenario(s) are not appropriate for the bank 
holding company's business model and portfolios, or changes in 
financial markets or the macro-economic outlook that could have a 
material impact on a bank holding company's risk profile and financial 
condition require the use of updated scenarios; or
    (4) The capital plan or the condition of the bank holding company 
raise any of the issues described in paragraph (f)(2)(ii) of this 
section.
    (ii) A bank holding company may resubmit its capital plan to the 
Federal Reserve if the Board or the appropriate Reserve Bank objects to 
the capital plan.
    (iii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, may extend the 30-day period in paragraph (e)(4)(i) of this 
section for up to an additional 60 calendar days, or such longer period 
as the Board or the appropriate Reserve Bank, with concurrence of the 
Board, determines, in its discretion, appropriate.
    (iv) Any updated capital plan must satisfy all the requirements of 
this section; however, a bank holding company may continue to rely on 
information submitted as part of a previously submitted capital plan to 
the extent that the information remains accurate and appropriate.
    (5) Confidential treatment of information submitted. The

[[Page 67256]]

confidentiality of information submitted to the Board under this 
section and related materials shall be determined in accordance with 
applicable exemptions under the Freedom of Information Act (5 U.S.C. 
552(b)) and the Board's Rules Regarding Availability of Information (12 
CFR part 261).
    (f) Review of capital plans by the Federal Reserve; publication of 
summary results. (1) Considerations and inputs. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will consider 
the following factors in reviewing a bank holding company's capital 
plan:
    (A) The comprehensiveness of the capital plan, including the extent 
to which the analysis underlying the capital plan captures and 
addresses potential risks stemming from activities across the firm and 
the company's capital policy;
    (B) The reasonableness of the bank holding company's capital plan, 
the assumptions and analysis underlying the capital plan, and the 
robustness of its capital adequacy process; and
    (C) The bank holding company's ability to maintain capital above 
each minimum regulatory capital ratio on a pro forma basis under 
expected and stressful conditions throughout the planning horizon, 
including but not limited to any scenarios required under paragraphs 
(e)(2)(i)(A) and (e)(2)(ii) of this section.
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, will also consider the following information in reviewing a 
bank holding company's capital plan:
    (A) Relevant supervisory information about the bank holding company 
and its subsidiaries;
    (B) The bank holding company's regulatory and financial reports, as 
well as supporting data that would allow for an analysis of the bank 
holding company's loss, revenue, and reserve projections;
    (C) As applicable, the Federal Reserve's own pro forma estimates of 
the firm's potential losses, revenues, reserves, and resulting capital 
adequacy under expected and stressful conditions, including but not 
limited to any scenarios required under paragraphs (e)(2)(i)(A) and 
(e)(2)(ii) of this section, as well as the results of any stress tests 
conducted by the bank holding company or the Federal Reserve; and
    (D) Other information requested or required by the Board or the 
appropriate Reserve Bank, as well as any other information relevant, or 
related, to the bank holding company's capital adequacy.
    (2) Federal Reserve action on a capital plan. (i) Timing of action. 
The Board or the appropriate Reserve Bank with concurrence of the 
Board, will object, in whole or in part, to the capital plan or provide 
the bank holding company with a notice of non-objection to the capital 
plan:
    (A) By June 30 of the calendar year in which a capital plan was 
submitted pursuant to paragraph (e)(1)(ii) of this section; and
    (B) For a capital plan resubmitted pursuant to paragraph (e)(4) of 
this section, within 75 calendar days after the date on which a capital 
plan is resubmitted, unless the Board provides notice to the company 
that it is extending the time period.
    (ii) Objection. (A) Large and noncomplex bank holding companies. 
The Board, or the appropriate Reserve Bank with concurrence of the 
Board, may object to a capital plan submitted by a large and noncomplex 
bank holding company if it determines that the bank holding company has 
not demonstrated an ability to maintain capital above each minimum 
regulatory capital ratio on a pro forma basis under expected and 
stressful conditions throughout the planning horizon.
    (B) Bank holding companies that are not large and noncomplex bank 
holding companies. The Board or the appropriate Reserve Bank with 
concurrence of the Board, may object to a capital plan submitted by a 
bank holding company that is not a large and noncomplex bank holding 
company if it determines that:
    (1) The bank holding company has not demonstrated an ability to 
maintain capital above each minimum regulatory capital ratio on a pro 
forma basis under expected and stressful conditions throughout the 
planning horizon;
    (2) The bank holding company has material unresolved supervisory 
issues, including but not limited to issues associated with its capital 
adequacy process;
    (3) The assumptions and analysis underlying the bank holding 
company's capital plan, or the bank holding company's methodologies and 
practices that support its capital planning process, are not reasonable 
or appropriate; or
    (4) The bank holding company's capital planning process or proposed 
capital distributions otherwise constitute an unsafe or unsound 
practice, or would violate any law, regulation, Board order, directive, 
or condition imposed by, or written agreement with, the Board or the 
appropriate Reserve Bank. In determining whether a capital plan or any 
proposed capital distribution would constitute an unsafe or unsound 
practice, the Board or the appropriate Reserve Bank would consider 
whether the bank holding company is and would remain in sound financial 
condition after giving effect to the capital plan and all proposed 
capital distributions.
    (iii) Notification of decision. The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to object to a capital plan.
    (iv) General distribution limitation. If the Board or the 
appropriate Reserve Bank objects to a capital plan and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board, issues a non-objection to the bank holding company's capital 
plan, the bank holding company may not make any capital distribution, 
other than capital distributions arising from the issuance of a 
regulatory capital instrument eligible for inclusion in the numerator 
of a minimum regulatory capital ratio or capital distributions with 
respect to which the Board or the appropriate Reserve Bank has 
indicated in writing its non-objection.
    (v) Publication of summary results. The Board may disclose publicly 
its decision to object or not object to a bank holding company's 
capital plan under this section, along with a summary of the Board's 
analyses of that company. Any disclosure under this paragraph will 
occur by June 30 of the calendar year in which a capital plan was 
submitted pursuant to paragraph (e)(1)(ii) of this section, unless the 
Board determines that a later disclosure date is appropriate.
    (3) Request for reconsideration or hearing. (i) General. Within 15 
calendar days of receipt of a notice of objection to a capital plan by 
the Board or the appropriate Reserve Bank:
    (A) A bank holding company may submit a written request to the 
Board requesting reconsideration of the objection, including an 
explanation of why reconsideration should be granted. Within 15 
calendar days of receipt of the bank holding company's request, the 
Board will notify the company of its decision to affirm or withdraw the 
objection to the bank holding company's capital plan or a specific 
capital distribution; or
    (B) As an alternative to paragraph (f)(3)(i)(A) of this section, a 
bank holding company may request an informal hearing on the objection.
    (ii) Request for an informal hearing. (A) A request for an informal 
hearing shall be in writing and shall be submitted within 15 calendar 
days of a notice of an objection. The Board may,

[[Page 67257]]

in its sole discretion, order an informal hearing if the Board finds 
that a hearing is appropriate or necessary to resolve disputes 
regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided that 
the Board may extend this period upon notice to the requesting party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board issues a non-objection to the bank holding company's capital 
plan, the bank holding company may not make any capital distribution, 
other than those capital distributions with respect to which the Board 
or the appropriate Reserve Bank has indicated in writing its non-
objection.
    (4) Application of this section to other bank holding companies. 
The Board may apply this section, in whole or in part, to any other 
bank holding company by order based on the institution's size, level of 
complexity, risk profile, scope of operations, or financial condition.
    (g) Approval requirements for certain capital actions. (1) 
Circumstances requiring approval. Notwithstanding a notice of non-
objection under paragraph (f)(2)(i) of this section, a bank holding 
company may not make a capital distribution (excluding any capital 
distribution arising from the issuance of a regulatory capital 
instrument eligible for inclusion in the numerator of a minimum 
regulatory capital ratio) under the following circumstances, unless it 
receives prior approval from the Board or appropriate Reserve Bank 
pursuant to paragraph (g)(5) of this section:
    (i) After giving effect to the capital distribution, the bank 
holding company would not meet a minimum regulatory capital ratio;
    (ii) The Board or the appropriate Reserve Bank with concurrence of 
the Board, notifies the company in writing that the Federal Reserve has 
determined that the capital distribution would result in a material 
adverse change to the organization's capital or liquidity structure or 
that the company's earnings were materially underperforming 
projections;
    (iii) Except as provided in paragraph (g)(2) of this section, the 
dollar amount of the capital distribution will exceed the amount 
described in the capital plan for which a non-objection was issued 
under this section, as measured on an aggregate basis beginning in the 
third quarter of the planning horizon through the quarter at issue; or
    (iv) The capital distribution would occur after the occurrence of 
an event requiring resubmission under paragraphs (e)(4)(i)(A) or (B) of 
this section and before the Federal Reserve has acted on the 
resubmitted capital plan.
    (2) Exception for well capitalized bank holding companies. (i) A 
bank holding company may make a capital distribution for which the 
dollar amount exceeds the amount described in the capital plan for 
which a non-objection was issued under paragraph (f)(2)(i) of this 
section if the following conditions are satisfied:
    (A) The bank holding company is, and after the capital distribution 
would remain, well capitalized as defined in Sec.  225.2(r) of 
Regulation Y (12 CFR 225.2(r));
    (B) The bank holding company's performance and capital levels are, 
and after the capital distribution would remain, consistent with its 
projections under expected conditions as set forth in its capital plan 
under paragraph (f)(2)(i) of this section;
    (C) Until March 31, 2017, the annual aggregate dollar amount of all 
capital distributions in the period beginning on July 1 of a calendar 
year and ending on June 30 of the following calendar year would not 
exceed the total amounts described in the company's capital plan for 
which the bank holding company received a notice of non-objection by 
more than 1.00 percent multiplied by the bank holding company's tier 1 
capital, as reported to the Federal Reserve on the bank holding 
company's most recent first-quarter FR Y-9C;
    (D) Beginning April 1, 2017, the annual aggregate dollar amount of 
all capital distributions in the period beginning on July 1 of a 
calendar year and ending on June 30 of the following calendar year 
would not exceed the total amounts described in the company's capital 
plan for which the bank holding company received a notice of non-
objection by more than 0.25 percent multiplied by the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C;
    (E) Between July 1 of a calendar year and March 15 of the following 
calendar year, the bank holding company provides the appropriate 
Reserve Bank with notice 15 calendar days prior to a capital 
distribution that includes the elements described in paragraph (g)(4) 
of this section; and
    (F) The Board or the appropriate Reserve Bank with concurrence of 
the Board, does not object to the transaction proposed in the notice. 
In determining whether to object to the proposed transaction, the Board 
or the appropriate Reserve Bank shall apply the criteria described in 
paragraph (g)(5)(ii) of this section.
    (ii) The exception in this paragraph (g)(2) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it is ineligible for this exception.
    (3) Net distribution limitation. (i) General. Notwithstanding a 
notice of non-objection under paragraph (f)(2)(i) of this section, a 
bank holding company must reduce its capital distributions in 
accordance with paragraph (g)(3)(ii) of this section if the bank 
holding company raises a smaller dollar amount of capital of a given 
category of regulatory capital instruments than it had included in its 
capital plan, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter.
    (ii) Reduction of distributions. (A) Common equity tier 1 capital. 
If the bank holding company raises a smaller dollar amount of common 
equity tier 1 capital (as defined in 12 CFR 217.2), the bank holding 
company must reduce its capital distributions relating to common equity 
tier 1 capital such that the dollar amount of the bank holding 
company's capital distributions, net of the dollar amount of its 
capital raises, (``net distributions'') relating to common equity tier 
1 capital is no greater than the dollar amount of net distributions 
relating to common equity tier 1 capital included in its capital plan, 
as measured on an aggregate basis beginning in the third quarter of the 
planning horizon through the end of the current quarter.
    (B) Additional tier 1 capital. If the bank holding company raises a 
smaller dollar amount of additional tier 1 capital (as defined in 12 
CFR 217.2), the bank holding company must reduce its capital 
distributions relating to additional tier 1 capital (other than 
scheduled payments on additional tier 1 capital instruments) such that 
the dollar amount of the bank holding company's net distributions 
relating to additional tier 1 capital is no greater than the dollar 
amount of net distributions relating to additional tier 1 capital 
included in its capital plan, as measured on an aggregate basis 
beginning in the third quarter of the planning horizon through the end 
of the current quarter.

[[Page 67258]]

    (C) Tier 2 capital. If the bank holding company raises a smaller 
dollar amount of tier 2 capital (as defined in 12 CFR 217.2), the bank 
holding company must reduce its capital distributions relating to tier 
2 capital (other than scheduled payments on tier 2 capital instruments) 
such that the dollar amount of the bank holding company's net 
distributions relating to tier 2 capital is no greater than the dollar 
amount of net distributions relating to tier 2 capital included in its 
capital plan, as measured on an aggregate basis beginning in the third 
quarter of the planning horizon through the end of the current quarter.
    (iii) Exceptions. Paragraphs (g)(3)(i) and (g)(3)(ii) of this 
section shall not apply:
    (A) To the extent that the Board or appropriate Reserve Bank 
indicates in writing its non-objection pursuant to paragraph (g)(5) of 
this section, following a request for non-objection from the bank 
holding company that includes all of the information required to be 
submitted under paragraph (g)(4) of this section;
    (B) To capital distributions arising from the issuance of a 
regulatory capital instrument eligible for inclusion in the numerator 
of a minimum regulatory capital ratio that the bank holding company had 
not included in its capital plan;
    (C) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to 
employee-directed capital issuances related to an employee stock 
ownership plan;
    (D) To the extent that the bank holding company raised a smaller 
dollar amount of capital in the category of regulatory capital 
instruments described in paragraph (g)(3)(i) of this section due to a 
planned merger or acquisition that is no longer expected to be 
consummated or for which the consideration paid is lower than the 
projected price in the capital plan;
    (E) Until March 31, 2017, to the extent that the dollar amount by 
which the bank holding company's net distributions exceed the dollar 
amount of net distributions included in its capital plan in the 
category of regulatory capital instruments described in paragraph 
(g)(3)(i) of this section, as measured on an aggregate basis beginning 
in the third quarter of the planning horizon through the end of the 
current quarter, is less than 1.00 percent of the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C; between July 
1 of a calendar year and March 15 of the following calendar year, the 
bank holding company provides the appropriate Reserve Bank with notice 
15 calendar days prior to any capital distribution in that category of 
regulatory capital instruments that includes the elements described in 
paragraph (g)(4) of this section; and the Board or the appropriate 
Reserve Bank with concurrence of the Board, does not object to the 
transaction proposed in the notice. In determining whether to object to 
the proposed transaction, the Board or the appropriate Reserve Bank 
shall apply the criteria described in paragraph (g)(5)(ii) of this 
section; or
    (F) Beginning April 1, 2017, to the extent that the dollar amount 
by which the bank holding company's net distributions exceed the dollar 
amount of net distributions included in its capital plan in the 
category of regulatory capital instruments described in paragraph 
(g)(3)(i) of this section, as measured on an aggregate basis beginning 
in the third quarter of the planning horizon through the end of the 
current quarter, is less than 0.25 percent of the bank holding 
company's tier 1 capital, as reported to the Federal Reserve on the 
bank holding company's most recent first-quarter FR Y-9C; between July 
1 of a calendar year and March 15 of the following calendar year, the 
bank holding company provides the appropriate Reserve Bank with notice 
15 calendar days prior to any capital distribution in that category of 
regulatory capital instruments that includes the elements described in 
paragraph (g)(4) of this section; and the Board or the appropriate 
Reserve Bank with concurrence of the Board, does not object to the 
transaction proposed in the notice. In determining whether to object to 
the proposed transaction, the Board or the appropriate Reserve Bank 
shall apply the criteria described in paragraph (g)(5)(ii) of this 
section.
    (iv) The exceptions in paragraph (g)(3)(iii) shall not apply if the 
Board or the appropriate Reserve Bank notifies the bank holding company 
in writing that it is ineligible for this exception.
    (4) Contents of request. (i) A request for a capital distribution 
under this section shall be filed between July 1 of a calendar year and 
March 1 of the following calendar year with the appropriate Reserve 
Bank and the Board and shall contain the following information:
    (A) The bank holding company's current capital plan or an 
attestation that there have been no changes to the capital plan since 
it was last submitted to the Federal Reserve;
    (B) The purpose of the transaction;
    (C) A description of the capital distribution, including for 
redemptions or repurchases of securities, the gross consideration to be 
paid and the terms and sources of funding for the transaction, and for 
dividends, the amount of the dividend(s); and
    (D) Any additional information requested by the Board or the 
appropriate Reserve Bank (which may include, among other things, an 
assessment of the bank holding company's capital adequacy under a 
revised stress scenario provided by the Federal Reserve, a revised 
capital plan, and supporting data).
    (ii) Any request submitted with respect to a capital distribution 
described in paragraph (g)(1)(i) of this section shall also include a 
plan for restoring the bank holding company's capital to an amount 
above a minimum level within 30 calendar days and a rationale for why 
the capital distribution would be appropriate.
    (5) Approval of certain capital distributions. (i) The Board or the 
appropriate Reserve Bank with concurrence of the Board, will act on a 
request under this paragraph (g)(5) within 30 calendar days after the 
receipt of all the information required under paragraph (g)(4) of this 
section.
    (ii) In acting on a request under this paragraph, the Board or 
appropriate Reserve Bank will apply the considerations and principles 
in paragraph (f) of this section. In addition, the Board or the 
appropriate Reserve Bank may disapprove the transaction if the bank 
holding company does not provide all of the information required to be 
submitted under paragraph (g)(4) of this section.
    (6) Disapproval and hearing. (i) The Board or the appropriate 
Reserve Bank will notify the bank holding company in writing of the 
reasons for a decision to disapprove any proposed capital distribution. 
Within 15 calendar days after receipt of a disapproval by the Board, 
the bank holding company may submit a written request for a hearing.
    (A) The Board may, in its sole discretion, order an informal 
hearing if the Board finds that a hearing is appropriate or necessary 
to resolve disputes regarding material issues of fact.
    (B) An informal hearing shall be held within 30 calendar days of a 
request, if granted, provided that the Board may extend this period 
upon notice to the requesting party.
    (C) Written notice of the final decision of the Board shall be 
given to the bank holding company within 60 calendar days of the 
conclusion of any informal hearing ordered by the Board, provided

[[Page 67259]]

that the Board may extend this period upon notice to the requesting 
party.
    (D) While the Board's final decision is pending and until such time 
as the Board or the appropriate Reserve Bank with concurrence of the 
Board, approves the capital distribution at issue, the bank holding 
company may not make such capital distribution.

PART 252--ENHANCED PRUDENTIAL STANDARDS (REGULATION YY)

0
3. The authority citation for part 252 continues to read as follows:

    Authority:  12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1, 
1844(b), 1844(c), 5361, 5365, 5366.

0
4. Section 252.42 is amended by revising paragraph (p) to read as 
follows:


Sec.  252.42  Definitions.

* * * * *
    (p) Stress test cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
* * * * *
0
5. Section 252.43 is amended by
0
a. Revising paragraph (b); and
0
b. Removing paragraph (c).
    The revision reads as follows:


Sec.  252.43  Applicability.

* * * * *
    (b) Transitional arrangements. (1) A bank holding company that 
becomes a covered company on or before September 30 of a calendar year 
must comply with the requirements of this subpart beginning on January 
1 of the second calendar year after the bank holding company becomes a 
covered company, unless that time is extended by the Board in writing.
    (2) A bank holding company that becomes a covered company after 
September 30 of a calendar year must comply with the requirements of 
this subpart beginning on January 1 of the third calendar year after 
the bank holding company becomes a covered company, unless that time is 
extended by the Board in writing.
0
6. Section 252.44 is amended by revising paragraph (b) to read as 
follows:


Sec.  252.44  Annual analysis conducted by the Board.

* * * * *
    (b) Economic and financial scenarios related to the Board's 
analysis. The Board will conduct its analysis under this section using 
a minimum of three different scenarios, including a baseline scenario, 
adverse scenario, and severely adverse scenario. The Board will notify 
covered companies of the scenarios that the Board will apply to conduct 
the analysis for each stress test cycle by no later than February 15 of 
each year, except with respect to trading or any other components of 
the scenarios and any additional scenarios that the Board will apply to 
conduct the analysis, which will be communicated by no later than March 
1 of that year.
0
7. Section 252.46 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  252.46  Review of the Board's analysis; publication of summary 
results.

* * * * *
    (b) Publication of results by the Board. (1) The Board will 
publicly disclose a summary of the results of the Board's analyses of a 
covered company by June 30 of the calendar year in which the stress 
test was conducted pursuant to 12 CFR 252.44.
* * * * *
0
8. Section 252.52 is amended by revising paragraphs (k) and (r) to read 
as follows:


Sec.  252.52  Definitions.

* * * * *
    (k) Planning horizon means the period of at least nine consecutive 
quarters, beginning on the first day of a stress test cycle over which 
the relevant projections extend.
* * * * *
    (r) Stress test cycle means the period beginning on January 1 of a 
calendar year and ending on December 31 of that year.
* * * * *
0
9. Section 252.53 is amended by revising paragraph (b) to read as 
follows:


Sec.  252.53  Applicability.

* * * * *
    (b) Transitional arrangements. (1) A bank holding company that 
becomes a covered company on or before September 30 of a calendar year 
must comply with the requirements of this subpart beginning on January 
1 of the second calendar year after the bank holding company becomes a 
covered company, unless that time is extended by the Board in writing.
    (2) A bank holding company that becomes a covered company after 
September 30 of a calendar year must comply with the requirements of 
this subpart beginning on January 1 of the third calendar year after 
the bank holding company becomes a covered company, unless that time is 
extended by the Board in writing.
0
10. Section 252.54 is amended by revising paragraphs (a), (b)(1), 
(b)(2)(i), (b)(4)(i), and (b)(4)(iii) to read as follows:


Sec.  252.54  Annual stress test.

    (a) In general. A covered company must conduct an annual stress 
test. The stress test must be conducted by April 5 of each calendar 
year based on data as of December 31 of the preceding calendar year, 
unless the time or the as-of date is extended by the Board in writing.
    (b) Scenarios provided by the Board. (1) In general. In conducting 
a stress test under this section, a covered company must, at a minimum, 
use the scenarios provided by the Board. Except as provided in 
paragraphs (b)(2) and (3) of this section, the Board will provide a 
description of the scenarios to each covered company no later than 
February 15 of the calendar year in which the stress test is performed 
pursuant to this section.
    (2) Additional components. (i) The Board may require a covered 
company with significant trading activity, as determined by the Board 
and specified in the Capital Assessments and Stress Testing report (FR 
Y-14), to include a trading and counterparty component in its adverse 
and severely adverse scenarios in the stress test required by this 
section:
    (A) For the stress test cycle beginning on January 1, 2017, the 
data used in this component must be as of a date selected by the Board 
between January 1, 2017 and March 1, 2017, and the Board will 
communicate the as-of date and a description of the component to the 
company no later than March 1, 2017; and
    (B) For the stress test cycle beginning on January 1, 2018, and for 
each stress test cycle beginning thereafter, the data used in this 
component must be as of a date selected by the Board between October 1 
of the previous calendar year and March 1 of the calendar year in which 
the stress test is performed pursuant to this section, and the Board 
will communicate the as-of date and a description of the component to 
the company no later than March 1 of the calendar year in which the 
stress test is performed pursuant to this section.
* * * * *
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a covered company to include one or more 
additional components in its adverse and severely adverse scenarios 
under paragraph (b)(2) of this section or to use one or more additional 
scenarios under paragraph (b)(3) of this section, the Board will notify 
the company in writing. The Board will provide such notification no 
later than December 31 of the preceding calendar year. The notification 
will

[[Page 67260]]

include a general description of the additional component(s) or 
additional scenario(s) and the basis for requiring the company to 
include the additional component(s) or additional scenario(s).
* * * * *
    (iii) Description of component. The Board will respond in writing 
within 14 calendar days of receipt of the company's request. The Board 
will provide the covered company with a description of any additional 
component(s) or additional scenario(s) by March 1 of the calendar year 
in which the stress test is performed pursuant to this section.
0
11. Section 252.55 is amended by revising paragraphs (a), (b)(4)(i), 
and (b)(4)(iii) to read as follows:


Sec.  252.55  Mid-cycle stress test.

    (a) Mid-cycle stress test requirement. In addition to the stress 
test required under Sec.  252.54, a covered company must conduct a mid-
cycle stress test. The stress test must be conducted by September 30 of 
each calendar year based on data as of June 30 of that calendar year, 
unless the time or the as-of date is extended by the Board in writing.
    (b) * * *
    (4) Notice and response--(i) Notification of additional component. 
If the Board requires a covered company to include one or more 
additional components in its adverse and severely adverse scenarios 
under paragraph (b)(2) of this section or one or more additional 
scenarios under paragraph (b)(3) of this section, the Board will notify 
the company in writing. The Board will provide such notification no 
later than June 30. The notification will include a general description 
of the additional component(s) or additional scenario(s) and the basis 
for requiring the company to include the additional component(s) or 
additional scenario(s).
* * * * *
    (iii) Description of component. The Board will provide the covered 
company with a description of any additional component(s) or additional 
scenario(s) by September 1 of the calendar year prior to the year in 
which the stress test is performed pursuant to this section.
0
12. Section 252.57 is amended by revising paragraph (a) to read as 
follows:


Sec.  252.57  Reports of stress test results.

    (a) Reports to the Board of stress test results. (1) A covered 
company must report the results of the stress test required under Sec.  
252.54 to the Board in the manner and form prescribed by the Board. 
Such results must be submitted by April 5 of the calendar year in which 
the stress test is performed pursuant to 12 CFR 252.54, unless that 
time is extended by the Board in writing.
    (2) A covered company must report the results of the stress test 
required under Sec.  252.55 to the Board in the manner and form 
prescribed by the Board. Such results must be submitted by October 5 of 
the calendar year in which the stress test is performed pursuant to 12 
CFR 252.55, unless that time is extended by the Board in writing.
* * * * *
0
13. Section 252.58 is amended by revising paragraph (a)(1)(ii) to read 
as follows:


Sec.  252.58  Disclosure of stress test results.

    (a) * * *
    (1) * * *
    (ii) A covered company must publicly disclose a summary of the 
results of the stress test required under Sec.  252.55. This disclosure 
must occur in the period beginning on October 5 and ending on November 
4 of the calendar year in which the stress test is performed pursuant 
to 12 CFR 252.55, unless that time is extended by the Board in writing.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, September 26, 2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-23629 Filed 9-29-16; 8:45 am]
 BILLING CODE 6210-01-P



                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                         67239

                                                      PART 225—BANK HOLDING                                   or vessels for the extraction,                        CCAR. The qualitative assessment of the
                                                      COMPANIES AND CHANGE IN BANK                            transportation, storage, or distribution of           capital plans of large and noncomplex
                                                      CONTROL (REGULATION Y)                                  physical commodities pursuant to                      firms instead would be conducted
                                                                                                              section 4(k)(1)(B) of the Bank Holding                outside of CCAR through the
                                                      ■ 11. The authority citation to part 225                Company Act (12 U.S.C. 1843(k)(1)(B)).                supervisory review process. For
                                                      continues to read as follows:                              (e) For purposes of paragraph (d) of               purposes of the proposal, a bank
                                                        Authority: 12 U.S.C. 1817(j)(13), 1818,               this section, the term operate includes               holding company or U.S. intermediate
                                                      1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),              (1) Participation in the day-to-day                holding company with total
                                                      1972(1), 3106, 3108, 3310, 3331–3351, 3906,             management or operations of the                       consolidated assets of $50 billion or
                                                      3907, and 3909; 15 U.S.C. 1681s, 1681w,                 facility;
                                                      6801 and 6805.                                                                                                greater but less than $250 billion, on-
                                                                                                                 (2) Participation in management and                balance sheet foreign exposure of less
                                                      § 225.28   [Amended]                                    operational decisions that occur in the               than $10 billion, and nonbank assets of
                                                      ■ 12. § 225.28 is amended by removing                   ordinary course of the business of the                less than $75 billion would be
                                                      the term ‘‘copper’’ from paragraphs                     facility; and                                         considered a large and noncomplex
                                                      (b)(8)(ii)(B) and (b)(8)(iii).                             (3) Managing, directing, conducting,               firm. The proposal would also modify
                                                      ■ 13. Section 225.95 is added to read as                or providing advice regarding                         reporting requirements for large and
                                                      follows:                                                operations having to do with the leakage              noncomplex firms to reduce burdens by
                                                                                                              or disposal of a physical commodity or                raising materiality thresholds, reducing
                                                      § 225.95 What are some of the                           hazardous waste or decisions about the                the scope of the data collection on these
                                                      requirements to engage in complementary                 facility’s compliance with
                                                      activities?                                                                                                   firms’ stress test results, and reducing
                                                                                                              environmental statutes or regulations,                supporting documentation
                                                         (a) Paragraphs (b)–(e) of this section               including any law or regulation                       requirements. For all bank holding
                                                      apply to financial holding companies                    referenced in the definition of covered
                                                      that the Board has approved to purchase                                                                       companies subject to the capital plan
                                                                                                              physical commodity in section 217.2 of                rule, the proposal would simplify the
                                                      and sell physical commodities in the                    the Board’s Regulation Q (12 CFR
                                                      spot market and to take and make                                                                              initial applicability provisions for the
                                                                                                              217.2).                                               capital plan and stress test rules, reduce
                                                      delivery of physical commodities to
                                                      settle contracts identified in section
                                                                                                                By order of the Board of Governors of the           the amount of additional capital
                                                                                                              Federal Reserve System, September 23, 2016.           distributions that a bank holding
                                                      225.28(b)(8)(B) of this part (12 CFR
                                                                                                              Robert deV. Frierson,                                 company may make during a capital
                                                      225.28(b)(8)(B)) as an activity that is
                                                      complementary to a financial activity                   Secretary of the Board.                               plan cycle without seeking the Board’s
                                                      under section 4(k)(1)(B) of the BHC Act                 [FR Doc. 2016–23349 Filed 9–29–16; 8:45 am]           prior approval, and extend the range of
                                                      (12 U.S.C. 1843(k)(1)(B)).                              BILLING CODE P                                        potential as-of dates for the trading and
                                                         (b) A financial holding company may                                                                        counterparty scenario component used
                                                      not purchase or sell physical                                                                                 in the stress test rules. The proposal
                                                      commodities in the spot market or take                  FEDERAL RESERVE SYSTEM                                would also amend the Parent Company
                                                      or make delivery of physical                                                                                  Only Financial Statements for Large
                                                                                                              12 CFR Parts 225 and 252                              Holding Companies (FR Y–9LP) to
                                                      commodities pursuant to sections
                                                      4(c)(8) or 4(k)(1)(B) of the Bank Holding               [Regulations Y and YY; Docket No. R–1548;             include new line item 17 of PC–B
                                                      Company Act (12 U.S.C. 1843(c)(8),                      RIN 7100 AE–59]                                       Memoranda (Total nonbank assets of a
                                                      (k)(1)(B)) if the market value of physical                                                                    holding company that is subject to the
                                                      commodities owned by the financial                      Amendments to the Capital Plan and                    Federal Reserve Board’s capital plan
                                                      holding company and its subsidiaries                    Stress Test Rules                                     rule) for purposes of identifying the
                                                      (other than through ownership or                        AGENCY: Board of Governors of the                     large and noncomplex firms. All other
                                                      control of assets or subsidiaries                       Federal Reserve System (Board).                       bank holding companies subject to the
                                                      pursuant to sections 4(c)(2), 4(k)(4)(H),                                                                     capital plan rule that are not large and
                                                                                                              ACTION: Notice of proposed rulemaking
                                                      or 4(k)(4)(I) of the Bank Holding                                                                             noncomplex firms would remain subject
                                                                                                              with request for comment.                             to objection to their capital plan based
                                                      Company Act (12 U.S.C. 1843(c)(2),
                                                      (k)(4)(H), (k)(4)(I))) exceeds 5 percent of             SUMMARY:   The Board is inviting                      on qualitative deficiencies under the
                                                      the consolidated tier 1 capital of the                  comment on a notice of proposed                       rule.
                                                      financial holding company, as                           rulemaking to revise the capital plan                    The proposal would not apply to bank
                                                      determined under the Board’s                            and stress test rules for bank holding                holding companies with total
                                                      Regulation Q (12 CFR part 217).                         companies with $50 billion or more in                 consolidated assets of less than $50
                                                         (c) A financial holding company must                 total consolidated assets and U.S.                    billion or to any state member bank or
                                                      notify the Board if the aggregate market                intermediate holding companies of                     savings and loan holding company.
                                                      value of physical commodities owned                     foreign banks. Under the proposal, large              DATES: Comments must be received by
                                                      by the financial holding company and                    and noncomplex firms, defined below,                  November 25, 2016.
                                                      its subsidiaries (other than through                    would no longer be subject to the                     ADDRESSES: You may submit comments,
                                                      ownership or control of assets or                       provisions of the Board’s capital plan                identified by Docket No. R–1548 and
                                                      subsidiaries pursuant to sections 4(c)(2),              rule whereby the Board may object to a                RIN 7100 AE–59 by any of the following
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      4(k)(4)(H) or 4(k)(4)(I) of the Bank                    capital plan on the basis of qualitative              methods:
                                                      Holding Company Act (12 U.S.C.                          deficiencies in the firm’s capital                       • Agency Web site: http://
                                                      1843(c)(2), (k)(4)(H), (k)(4)(I))) exceeds 4            planning process. In connection with                  www.federalreserve.gov. Follow the
                                                      percent of the consolidated tier 1 capital              this modification, large and noncomplex               instructions for submitting comments at
                                                      of the financial holding company, as                    firms would no longer be subject to the               http://www.federalreserve.gov/
                                                      determined under the Board’s                            qualitative assessment in                             generalinfo/foia/ProposedRegs.aspx.
                                                      Regulation Q (12 CFR part 217).                         Comprehensive Capital Analysis and                       • Federal eRulemaking Portal: http://
                                                         (d) A financial holding company may                  Review (CCAR), but would remain                       www.regulations.gov. Follow the
                                                      not own operate, or invest in facilities                subject to a quantitative assessment in               instructions for submitting comments.


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                                                      67240                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                         • Email: regs.comments@                              I. Background                                           companies on an individual basis or by
                                                      federalreserve.gov. Include the docket                                                                          category, taking into consideration their
                                                                                                              A. Description of Capital Plan and
                                                      number and RIN number in the subject                                                                            capital structure, riskiness, complexity,
                                                                                                              Stress Test Requirements
                                                      line of the message.                                                                                            financial activities (including the
                                                         • Fax: (202) 452–3819 or (202) 452–                     Capital planning and stress testing are              financial activities of their subsidiaries),
                                                      3102.                                                   two key components of the Board’s                       size, and any other risk-related factors
                                                                                                              supervisory framework for large                         that the Board deems appropriate.6
                                                         • Mail: Robert deV. Frierson,
                                                                                                              financial companies.1 Under Section
                                                      Secretary, Board of Governors of the                                                                            B. Implementation of Capital Plan and
                                                                                                              165 of the Dodd-Frank Wall Street
                                                      Federal Reserve System, 20th Street and                                                                         Stress Test Requirements
                                                                                                              Reform and Consumer Protection Act
                                                      Constitution Avenue NW., Washington,
                                                                                                              (Dodd-Frank Act), the Board of                             Consistent with the Dodd-Frank Act
                                                      DC 20551.
                                                                                                              Governors of the Federal Reserve                        mandate, the Board conducts an annual
                                                      All public comments will be made                        System (Board) is directed to establish                 assessment of the capital planning and
                                                      available on the Board’s Web site at                    enhanced prudential standards for bank                  post-stress capital adequacy of bank
                                                      http://www.federalreserve.gov/                          holding companies with total                            holding companies with total
                                                      generalinfo/foia/ProposedRegs.aspx as                   consolidated assets of $50 billion or                   consolidated assets of $50 billion or
                                                      submitted, unless modified for technical                more.2 As part of this requirement, the                 more. All U.S. intermediate holding
                                                      reasons. Accordingly, your comments                     Board must conduct annual supervisory                   company subsidiaries of foreign banking
                                                      will not be edited to remove any                        stress tests with respect to these bank                 organizations will be subject to the
                                                      identifying or contact information.                     holding companies and issue                             Board’s capital plan rule beginning in
                                                      Public comments may also be viewed                      regulations requiring these bank holding                2017. The Board’s capital planning and
                                                      electronically or in paper form in Room                 companies to conduct semi-annual                        stress testing framework for these firms
                                                      3515, 1801 K Street NW. (between 18th                   company-run stress tests.3 The Board                    consists of two related programs: CCAR,
                                                      and 19th Streets NW.), Washington, DC                   adopted final rules to implement these                  which is conducted pursuant to the
                                                      20006 between 9:00 a.m. and 5:00 p.m.                   requirements on October 12, 2012.4                      Board’s capital plan rule,7 and the
                                                      on weekdays. For security reasons, the                     The Dodd-Frank Act also requires the                 Dodd-Frank Act stress tests, which is
                                                      Board requires that visitors make an                    enhanced prudential standards                           conducted pursuant to the Board’s stress
                                                      appointment to inspect comments. You                    established by the Board to increase in                 test rules.8
                                                      may do so by calling (202) 452–3684.                    stringency based on several factors,                       In CCAR, the Board assesses the
                                                      Upon arrival, visitors will be required to              including the size and risk                             internal capital planning processes of
                                                      present valid government-issued photo                   characteristics of the bank holding                     bank holding companies and these
                                                      identification and to submit to security                companies subject to the requirements.5                 companies’ ability to maintain sufficient
                                                      screening in order to inspect and                       In prescribing more stringent prudential                capital to continue their operations
                                                      photocopy comments.                                     standards, including stress test                        under expected and stressful conditions.
                                                      FOR FURTHER INFORMATION CONTACT: Lisa
                                                                                                              requirements, the Board may                             Pursuant to the capital plan rule, each
                                                      Ryu, Associate Director, (202) 263–4833,                differentiate among bank holding                        bank holding company must submit an
                                                      Richard Naylor, Associate Director,                        1 In addition to bank holding companies with
                                                                                                                                                                      annual capital plan to the Board that
                                                      (202) 728–5854, Molly Mahar, Deputy                     total consolidated assets of $50 billion or more, the   describes its capital planning processes
                                                      Associate Director, (202) 973–7360,                     changes in this proposed rulemaking would also          and capital adequacy assessment. The
                                                      Constance Horsley, Assistant Director,                  apply to any nonbank financial company                  capital plan must include (i) an
                                                      (202) 452–5239, Mona Touma Elliot,                      supervised by the Board that becomes subject to the     assessment of the expected uses and
                                                                                                              capital planning and stress test requirements
                                                      Manager, (202) 912–4688, Celeste                        pursuant to a rule or order of the Board and to U.S.    sources of capital over the planning
                                                      Molleur, Manager (202) 452–2783,                        intermediate holding companies of foreign banking       horizon; (ii) a detailed description of the
                                                      Elizabeth MacDonald, Manager, (202)                     organizations in accordance with the transition         bank holding company’s processes for
                                                      475–6316, Christine Graham, Senior                      provisions under the capital plan rule and subpart      assessing capital adequacy; (iii) the bank
                                                                                                              O of the Board’s Regulation YY (12 CFR part 252).
                                                      Supervisory Financial Analyst, (202)                    Currently, no nonbank financial companies               holding company’s capital policy; and
                                                      452–3005, Seth Ruhter, Senior                           supervised by the Board are subject to the capital      (iv) a discussion of any expected
                                                      Supervisory Financial Analyst, (202)                    planning or stress test requirements. A U.S.            changes to the bank holding company’s
                                                      452–3997, Joseph Cox, Supervisory                       intermediate holding company that was required to       business plan that could materially
                                                                                                              be established by July 1, 2016, and that was not
                                                      Financial Analyst, (202) 452–3216,                      previously subject to the Board’s capital plan rule     affect its capital adequacy.9 A bank
                                                      Kevin Tran, Supervisory Financial                       is required to submit its first capital plan in 2017    holding company may be required to
                                                      Analyst, (202) 452–2309, or Hillel                      and will become subject to the Board’s stress test      include other information and analysis
                                                      Kipnis, Financial Analyst, (202) 452–                   rules beginning in 2018. References to ‘‘bank           relevant to its capital planning
                                                                                                              holding companies’’ or ‘‘firms’’ in this preamble
                                                      2924, Division of Banking Supervision                   should be read to include all of these companies,       processes and internal capital adequacy
                                                      and Regulation; Laurie Schaffer,                        unless otherwise specified.                             assessment. The Federal Reserve
                                                      Associate General Counsel, (202) 452–                      2 12 U.S.C. 5365.                                    reviews each capital plan submission
                                                      2272, Benjamin McDonough, Special                          3 12 U.S.C. 5365(i).
                                                                                                                                                                      and may object to a bank holding
                                                                                                                 4 77 FR 62380 (October 12, 2012). See 12 CFR part
                                                      Counsel, (202) 452–2036, Julie Anthony,                                                                         company’s capital plan based on criteria
                                                                                                              252, subparts E and F. On October 12, 2012, as
                                                      Counsel, (202) 475–6682, Brian                                                                                  identified in the rule.10 If the Federal
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                                                                                                              required by section 165(i) of the Dodd-Frank Act,
                                                      Chernoff, Senior Attorney, (202) 452–                   the Federal Reserve also adopted a final rule to        Reserve objects to a bank holding
                                                      2952, or Amber Hay, Attorney, (202)                     impose company-run stress testing requirements for      company’s capital plan, the bank
                                                      973–6997, Legal Division, Board of                      state member banks and savings and loan holding         holding company may not make any
                                                                                                              companies with assets of more than $10 billion and
                                                      Governors of the Federal Reserve                        bank holding companies with assets of more than
                                                      System, 20th Street and Constitution                    $10 billion but less than $50 billion, which is
                                                                                                                                                                        6 12 U.S.C. 5363(a)(2)(A).
                                                                                                                                                                        7 12 CFR 225.8.
                                                      Avenue NW., Washington, DC 20551.                       codified at subpart B of 12 CFR part 252. The
                                                                                                                                                                        8 Subparts E and F of the Board’s Regulation YY
                                                      Users of Telecommunication Device for                   Federal Reserve is not proposing to adjust the
                                                                                                              requirements in subpart B of 12 CFR part 252 at this    (12 CFR 252, subparts E and F).
                                                      Deaf (TDD) only, call (202) 263–4869.                   time.                                                     9 See 12 CFR 225.8(e)(2).

                                                      SUPPLEMENTARY INFORMATION:                                 5 See 12 U.S.C. 5365(b).                               10 See 12 CFR 225.8(f).




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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                                   67241

                                                      capital distributions unless the Federal                reporting requirements and extend                      capital plans for bank holding
                                                      Reserve indicates in writing that it does               reporting timelines.                                   companies that have total consolidated
                                                      not object to such distributions.11                        In December 2015, the Board released                assets of at least $50 billion but less
                                                         Pursuant to the Board’s stress test                  capital planning guidance in                           than $250 billion, on-balance sheet
                                                                                                              Supervision and Regulation (SR) Letters                foreign exposure of less than $10
                                                      rules, the Board conducts supervisory
                                                                                                              15–18 and 15–19 to consolidate its                     billion, and nonbank assets of less than
                                                      stress tests of bank holding companies
                                                                                                              existing expectations and clarify that the             $75 billion (each, a large and
                                                      with total consolidated assets of $50
                                                                                                              Board’s expectations for capital                       noncomplex firm). Specifically, these
                                                      billion or more, and these bank holding
                                                                                                              planning differ depending on the size                  large and noncomplex firms under the
                                                      companies are required to conduct                       and complexity of the firm.15 The                      proposal would no longer be subject to
                                                      annual and mid-cycle company-run                        guidance provided that firms with $250                 the provisions of the Board’s capital
                                                      stress tests. In conducting the                         billion or more in total consolidated                  plan rule whereby the Board may object
                                                      supervisory stress tests, the Board                     assets, firms with $10 billion or more in              to a firm’s capital plan based on
                                                      projects balance sheets, risk-weighted                  foreign exposures, and firms otherwise                 unresolved supervisory issues or
                                                      assets, net income, and resulting post-                 subject to the Large Institution                       concerns with the assumptions,
                                                      stress capital levels and regulatory                    Supervision Coordinating Committee                     analysis, and methodologies in the
                                                      capital ratios over a planning horizon                  (LISCC) supervisory framework                          firm’s capital plan (qualitative objection
                                                      under baseline, adverse, and severely                   (typically the largest, most                           criteria, as described further in section
                                                      adverse scenarios, incorporating capital                internationally active bank holding                    II.D of this preamble below). In
                                                      action assumptions prescribed in the                    companies) would be subject to                         connection with this change, large and
                                                      Board’s stress test rules.12 Similarly, for             heightened expectations in all aspects of              noncomplex firms would remain subject
                                                      the annual company-run stress tests, a                  capital planning, as compared to other                 to a quantitative assessment in CCAR
                                                      bank holding company uses the same                      large, but less complex firms. The                     and would no longer be subject to the
                                                      planning horizon, capital action                        guidance reflects an important objective               qualitative assessment in CCAR. The
                                                      assumptions, and baseline, adverse, and                 of the Federal Reserve, which is to tailor             proposal would also amend the Parent
                                                      severely adverse scenarios used in the                  supervisory expectations for firms with                Company Only Financial Statements for
                                                      supervisory stress test.13                              a lower systemic risk profile, while                   Large Holding Companies (FR Y–9LP) to
                                                      C. Review of Capital Plan and Stress                    simultaneously protecting financial                    include a new line item for purposes of
                                                      Test Requirements                                       stability and improving the resiliency of              identifying the large and noncomplex
                                                                                                              and the availability of credit from the                firms. All other bank holding companies
                                                        The 2015 capital planning cycle                       largest and most complex firms.16                      subject to the capital plan rule (a LISCC
                                                      marked the fifth anniversary of CCAR.                      While SR Letter 15–19 outlined                      firm, if the bank holding company is
                                                      In 2015, the Board initiated a series of                tailored capital planning expectations                 subject to the LISCC supervisory
                                                      meetings, including with a bank                         for large and noncomplex firms, the                    framework, 17 or large and complex
                                                      officials, debt and equity-side market                  high public profile of the CCAR                        firm, if the bank holding company
                                                      analysts, public interest groups, and                   qualitative review could create a risk                 otherwise has total consolidated assets
                                                      academics, to solicit their views on their              that large and noncomplex firms will                   of $250 billion or more, on-balance
                                                      overall evaluation of, and                              over-invest in stress testing and capital              sheet foreign exposure of $10 billion or
                                                      recommendations for, the CCAR                           planning processes that are unnecessary                more, or nonbank assets of $75 billion
                                                      program. The Board received a wide                      to adequately capture the risks of these               or more) would remain subject to
                                                      range of comments on the program.                       firms. In this proposal, the Board is                  objection to their capital plan based on
                                                      While meeting participants generally                    proposing to further tailor its stress                 qualitative deficiencies under the rule.
                                                      expressed the view that CCAR has been                   testing and capital planning                              The proposal would also modify
                                                      successful in strengthening the capital                 requirements, as discussed below.                      associated regulatory reporting
                                                      positions and improving the risk-                       II. Proposed Revisions to the Capital                  requirements for large and noncomplex
                                                      management capabilities of the bank                     Plan and Stress Test Rules                             firms to collect less detailed information
                                                      holding companies subject to CCAR,                                                                             on these firms’ stress test results and
                                                      some participants provided suggestions                  A. Overview                                            raise the materiality threshold for
                                                      for improving or strengthening various                    This proposal would revise the                       reporting on specific portfolios. Under
                                                      aspects of the program.14 Notably,                      standards that the Board uses to review                the proposal, large and noncomplex
                                                      representatives from bank holding                                                                              firms would no longer be subject to the
                                                      companies with less than $250 billion                      15 Board of Governors of the Federal Reserve        qualitative assessment in CCAR
                                                      in total consolidated assets                            System, Division of Banking Supervision and            beginning with the 2017 CCAR cycle,
                                                                                                              Regulation, ‘‘Federal Reserve Supervisory              and a large and noncomplex firm would
                                                      recommended that the Board modify                       Assessment of Capital Planning and Positions for
                                                      CCAR to reduce burdens for these bank                   LISCC Firms and Large and Complex Firms,’’ SR
                                                                                                                                                                     be able to implement the modified
                                                      holding companies by establishing a                     Letter 15–18 (December 18, 2015), available at         reporting requirements either
                                                      separate capital planning program that
                                                                                                              www.federalreserve.gov/bankinforeg/srletters/          immediately or after a six-month delay.
                                                                                                              sr1518.htm (‘‘SR Letter 15–18’’); Board of Governors      In addition, the proposal would
                                                      would reduce the associated regulatory                  of the Federal Reserve System, Division of Banking
                                                                                                              Supervision and Regulation, ‘‘Federal Reserve
                                                                                                                                                                     simplify the timing of the initial
                                                                                                                                                                     applicability of the capital plan and
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                                                        11 See
                                                                                                              Supervisory Assessment of Capital Planning and
                                                               12 CFR 225.8(f)(2)(iv).
                                                        12 See
                                                                                                              Positions for Large and Noncomplex Firms,’’ SR         stress test rules for all bank holding
                                                               12 CFR 252.44.                                 Letter 15–19 (December 18, 2015), available at
                                                        13 See 12 CFR 252.54. For the mid-cycle
                                                                                                                                                                     companies that cross the $50 billion
                                                                                                              www.federalreserve.gov/bankinforeg/srletters/
                                                      company-run stress tests, each bank holding             sr1519.htm (‘‘SR Letter 15–19’’).                      asset threshold to become subject to
                                                      company must develop and employ baseline,                  16 Daniel K. Tarullo (2015). ‘‘Application of       these rules. These revisions are
                                                      adverse, and severely adverse scenarios that are        Enhanced Prudential Standards to Bank Holding
                                                      appropriate for its risk profile and operations. See    Companies’’ testimony delivered before the               17 Based on the current population of bank
                                                      12 CFR 252.55(b).                                       Committee on Banking, Housing and Urban Affairs,       holding companies, all LISCC firms have total
                                                        14 In addition to the changes in this proposal, the   U.S. Senate, Washington, DC, March 19, available       consolidated assets of $250 billion or more, on-
                                                      Federal Reserve may propose further adjustments to      at: www.federalreserve.gov/newsevents/testimony/       balance sheet foreign exposure of $10 billion or
                                                      CCAR in the future in response to these comments.       tarullo20150319a.htm.                                  more, or nonbank assets of $75 billion or more.



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                                                      67242                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      intended to reduce compliance burdens                      The last proposed change to the                          The proposed thresholds of $250
                                                      associated with the capital plan and                    capital plan rule relates to the trading                 billion in average total consolidated
                                                      stress test rules.                                      and counterparty component of the                        assets and $10 billion in foreign
                                                         The proposal would also revise the de                stress test. Under the Board’s stress test               exposure identify the largest and most
                                                      minimis exception threshold for capital                 rules, the Board may require a bank                      internationally active bank holding
                                                      distributions under the capital plan                    holding company with significant                         companies, whose failure or distress
                                                      rule. As noted, as part of CCAR, the                    trading activity to include a trading and                could pose significant risks to U.S.
                                                      Federal Reserve evaluates the planned                   counterparty component (global market                    financial stability. The proposed
                                                      capital distributions, such as dividends                shock) in its adverse and severely                       thresholds of $250 billion in total
                                                      or repurchases of common stock, that                    adverse scenarios for its company-run                    consolidated assets and $10 billion in
                                                      were included in a capital plan. Under                  stress tests.21 Currently, the Board must                foreign exposure identify the largest and
                                                      the capital plan rule, a bank holding                   select a date between January 1 and                      most internationally active bank holding
                                                      company may make the capital                            March 1 of the calendar year of the                      companies, the failure or distress of
                                                      distributions that were included in the                 current stress test cycle for the ‘‘as-of’’              which could pose significant risks to
                                                      capital plan, provided that the Federal                 date for the data used as part of the                    U.S. financial stability. These thresholds
                                                      Reserve does not object to the plan.18                  global market shock components of the                    would be consistent with thresholds
                                                      Generally, a bank holding company                       bank holding company’s adverse and                       used in the Board’s capital and liquidity
                                                      must obtain the Federal Reserve’s prior                 severely adverse scenarios.22 For the                    requirements to identify companies that
                                                      approval before making additional                       reasons described in section III.B of this               may present elevated risk because of
                                                      capital distributions above the dollar                  preamble, the proposal would extend                      their size and the amount of their cross-
                                                      amount described in its capital plan.19                 the range of dates from which the Board                  border exposure.25
                                                      However, a bank holding company that                    may select the as-of date for the global                    In addition to thresholds based on a
                                                      is well capitalized, as defined in 12 CFR               market shock to October 1 of the                         bank holding company’s average total
                                                      225.2(r), may make additional capital                   calendar year preceding the year of the                  consolidated assets and total on-balance
                                                      distributions above such dollar amount                  stress test cycle to March 1 of the                      sheet foreign exposure, the Board is
                                                      without seeking the Board’s prior                       calendar year of the stress test cycle.                  proposing an additional threshold to
                                                      approval if certain other requirements                                                                           identify a bank holding company as
                                                                                                                 As described in section III.C of this
                                                      are met. These include the requirement                                                                           large and noncomplex based on the
                                                                                                              preamble, the proposal would also
                                                      that the total distribution amount not                                                                           amount of its total nonbank assets. The
                                                                                                              remove transition provisions in the
                                                                                                                                                                       proposed nonbank asset threshold of
                                                      exceed 1.00 percent of the bank holding                 capital plan and stress test rules that are
                                                                                                                                                                       $75 billion would separate out bank
                                                      company’s tier 1 capital for the year-                  no longer operative.
                                                                                                                                                                       holding companies that are significantly
                                                      period following the Federal Reserve’s
                                                                                                              B. Identifying Large and Noncomplex                      engaged in activities outside the
                                                      action on the bank holding company’s
                                                                                                              Firms                                                    business of banking, which have the
                                                      capital plan (the de minimis
                                                                                                                                                                       potential to generate additional systemic
                                                      exception).20                                             Under the proposal, a bank holding                     risk and therefore warrant heightened
                                                         The proposal would amend the de                      company would be considered large and                    capital planning standards. The
                                                      minimis exception in two ways for all                   noncomplex if, as of December 31 of the                  proposed threshold would also facilitate
                                                      bank holding companies subject to the                   calendar year prior to the capital plan                  heightened supervisory oversight with
                                                      capital plan rule. First, the proposal                  cycle, it has average total consolidated                 respect to the capital planning practices
                                                      would establish a one-quarter ‘‘blackout                assets of $50 billion or greater but less                for a bank holding company that
                                                      period’’ while the Federal Reserve is                   than $250 billion,23 total on-balance                    engages in activities through legal
                                                      conducting CCAR (the second quarter of                  sheet foreign exposure of less than $10                  entities that are not subject to direct
                                                      a calendar year), during which bank                     billion,24 and average total nonbank                     regulation and supervision applicable to
                                                      holding companies would not be able to                  assets of less than $75 billion.                         a regulated banking entity, which may
                                                      submit a notice to use the de minimis                                                                            involve a broader range of risks and
                                                      exception. Second, the proposal would                     21 See   12 CFR 252.14(b)(2).                          more complex structure requiring more
                                                      lower the de minimis limitation from                      22 Id.
                                                                                                                                                                       sophisticated risk management.
                                                      1.00 percent to 0.25 percent of a bank                    23 The proposal would not amend the existing
                                                                                                                                                                          As discussed in more detail below,
                                                      holding company’s tier 1 capital,                       methodology for determining average total
                                                                                                              consolidated assets under the capital plan rule.         under the proposal, a LISCC or large and
                                                      beginning April 1, 2017.                                Under the rule, average total consolidated assets        complex firm would remain subject to
                                                         The proposal includes an additional                  equals the amount of total assets reported on the        the qualitative objection criteria, the
                                                      blackout period for additional capital                  bank holding company’s Consolidated Financial            CCAR qualitative review process, and
                                                                                                              Statements for Holding Companies (FR Y–9C),
                                                      distribution requests that require prior                measured as an average over the preceding four
                                                                                                                                                                       the current more detailed reporting
                                                      approval from the Federal Reserve. This                 quarters. If a bank holding company has not filed        requirements. The qualitative objection
                                                      additional blackout period would also                   the FR Y–9C for each of the four most recent             criteria, CCAR qualitative review
                                                      apply during the calendar quarter in                    consecutive quarters, its total consolidated assets      process, and more detailed reporting
                                                                                                              are measured as the average of its total consolidated
                                                      which the Federal Reserve conducts the                  assets, as reported on the FR Y–9C, for the most
                                                                                                                                                                       requirements would continue to provide
                                                      CCAR exercise. The proposed blackout                    recent quarter or consecutive quarters, as               for greater supervisory oversight to
                                                      periods for both the de minimis                                                                                  ensure that these LISCC firms and large
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                                                                                                              applicable. See 12 CFR 225.8(b)(2).
                                                      exception and prior approval requests                     24 Consolidated total on-balance sheet foreign
                                                                                                                                                                       and complex firms are effectively
                                                      are expected to be effective during the                 exposure would be based on a calculation of a bank       identifying and managing risks that may
                                                                                                              holding company’s total foreign countries cross-
                                                      second quarter of 2017, in which the                    border claims on an ultimate-risk basis, plus total      arise in connection with their greater
                                                      Federal Reserve will be conducting                      foreign countries claims on local residents on an        size, international activity, or
                                                      CCAR 2017.                                              ultimate-risk basis, plus total foreign countries fair   nonbanking operations. For bank
                                                                                                              value of foreign exchange and derivative products,       holding companies with significant
                                                                                                              calculated at the most recent year-end in
                                                        18 See 12 CFR 225.8.                                  accordance with the Federal Financial Institutions       nonbanking activities in particular, the
                                                        19 See 12 CFR 225.8(g)(1).                            Examination Council (FFIEC) 009 Country Exposure
                                                        20 See 12 CFR 225.8(g)(2).                            Report.                                                   25 See,   e.g., 12 CFR 217.100(b), 12 CFR 249.1(b).



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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                                 67243

                                                      CCAR qualitative assessment                              similar to those of the most complex                 corporation is designated as
                                                      supplements the existing regulatory                      U.S. financial firms than to the risk                ‘‘Nonbanking’’ in the box on the front
                                                      capital framework by incorporating a                     profiles of the smaller, less complex                page of the FR 2886b; minus (v) assets
                                                      comprehensive review of a bank holding                   bank holding companies.                              of each federal savings association,
                                                      company’s processes to identify,                            The potential complexity and                      federal savings bank, or thrift
                                                      aggregate, and measure risks from all of                 interconnectedness of a bank holding                 subsidiary, as reported on the Call
                                                      its activities, including nonbanking                     company with significant nonbank                     Report as of December 31, 2016.
                                                      activities. The added scrutiny of the                    assets heightens the need for such a                    Question 2: What, if any, additional
                                                      qualitative CCAR review helps to ensure                  bank holding company to be subject to                burdens would the proposed
                                                      that such LISCC firms and large and                      an intensive annual review of its capital            measurement of nonbank assets create
                                                      complex firms are effectively identifying                planning processes and risk                          for firms for the December 31, 2016,
                                                      and managing their combined risks on                     management based on its idiosyncratic                measurement date? What steps should
                                                      a consolidated basis.                                    risk profile, through the CCAR                       the Board take to address any such
                                                         In developing the proposal, the                       qualitative assessment and qualitative               burdens (for example, should the Board
                                                      Federal Reserve considered a range of                    objection criteria (as defined below).The            permit firms to net intercompany
                                                      nonbank asset thresholds between $50                     proposed nonbank asset threshold of                  exposures among all nonbank
                                                      billion and $125 billion. The proposed                   $75 billion would be slightly below the              subsidiaries for purposes of the
                                                      $75 billion threshold was chosen based                   midpoint of the $50-to-$125 billion                  December 31, 2016, report)?
                                                      on historical failures and bankruptcies                  range of potential nonbank asset
                                                      of large financial firms and the risk                                                                         2. Measurement for Capital Plan Cycles
                                                                                                               thresholds considered. Based on the
                                                      profile of the current population of bank                                                                     After 2017
                                                                                                               current population of bank holding
                                                      holding companies.                                       companies, this proposed threshold                      For purposes of capital plan cycles
                                                         At the low end of the range, a $50                    would include large firms with complex               after 2017, the $75 billion average total
                                                      billion nonbank asset threshold would                    capital markets activities, but would not            nonbank asset threshold would be the
                                                      be analogous to the total asset threshold                include firms with less complex                      average of the total nonbank assets of a
                                                      used in section 165 of the Dodd-Frank                    structures or activities. This result                holding company, calculated in
                                                      Act for applying enhanced prudential                     would be consistent with the proposal’s              accordance with the instructions to the
                                                      standards to a bank holding company.26                   objective of focusing supervisory                    FR Y–9LP, for the four most recent
                                                      However, based on the current                            resources and more detailed reporting                consecutive quarters or, if the bank
                                                      population of bank holding companies,                    requirements on firms with elevated risk             holding company has not filed the FR
                                                      a $50 billion nonbank asset threshold                    profiles.                                            Y–9LP for each of the four most recent
                                                      appeared to be too low, as many bank                        The Board invites comment on                      consecutive quarters, for the most recent
                                                      holding companies at this level conduct                  whether the proposed thresholds                      quarter or consecutive quarters, as
                                                      primarily traditional bank-like activities               identify firms for which the proposed                applicable.
                                                      (such as mortgage lending) through                       relief would be most appropriate in light               The proposal would amend the FR Y–
                                                      nonbank subsidiaries. At the high end of                 of the goals and purposes of the CCAR                9LP to include new line item 17 of PC–
                                                      the range, the Board considered a                        exercises.                                           B Memoranda (Total nonbank assets of
                                                      nonbank asset threshold of $125 billion,                    Question 1: What other standards,                 a holding company that is subject to the
                                                      which would scope in bank holding                        such as revenue related to nonbanking                capital plan rule) for purposes of
                                                      companies with at least a majority of                    activities, should the Board consider to             identifying large and noncomplex firms.
                                                      their assets as nonbank assets,                          identify large and noncomplex firms?                 Under the proposal, a bank holding
                                                      indicating a potentially greater                                                                              company with total consolidated assets
                                                      complexity of structure or activities and                C. Measurement and Reporting of
                                                                                                                                                                    of $50 billion or more would be
                                                      therefore greater risk.27 Based on the                   Average Total Nonbank Assets
                                                                                                                                                                    required to report on the FR Y–9LP the
                                                      current population of firms, a nonbank                   1. Measurement for CCAR 2017                         average dollar amount of its total
                                                      asset threshold of $125 billion would
                                                                                                                  In order to determine whether a bank              nonbank assets of consolidated nonbank
                                                      include the most complex U.S. bank
                                                                                                               holding company meets the $75 billion                subsidiaries, whether held directly or
                                                      holding companies with the largest
                                                                                                               average total nonbank asset threshold                indirectly or held through lower-tier
                                                      derivatives trading and capital markets
                                                                                                               for CCAR 2017, average total nonbank                 holding companies, and its direct
                                                      activities, but may exclude some bank
                                                                                                               assets under the proposal would equal                investments in unconsolidated nonbank
                                                      holding companies with risk profiles
                                                                                                               (i) total combined nonbank assets of                 subsidiaries, associated nonbank
                                                      that are significantly concentrated in
                                                                                                               nonbank subsidiaries, as reported on                 companies, and those nonbank
                                                      riskier activities, particularly U.S.
                                                                                                               line 15a of Schedule PC–B of the Parent              corporate joint ventures over which the
                                                      intermediate holding companies of
                                                                                                               Company Only Financial Statements for                bank holding company exercises
                                                      foreign banking organizations that
                                                                                                               Large Holding Companies (FR Y–9LP) as                significant influence (collectively,
                                                      engage in significant capital markets
                                                                                                               of December 31, 2016; plus (ii) the total            ‘‘nonbank companies’’).28
                                                      activities. In particular, a threshold of
                                                      $125 billion in nonbank assets would                     amount of equity investments in                         28 For purposes of the FR Y–9LP, (i) a subsidiary
                                                      exclude companies that engage in                         nonbank subsidiaries and associated                  is a company in which the reporting bank holding
                                                      equities trading, prime brokerage, and                   companies as reported on line 2a of
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                                                                                                                                                                    company directly or indirectly owns more than 50
                                                      investment banking activities, and                       Schedule PC–A of the FR Y–9LP as of                  percent of the outstanding voting stock; (ii) an
                                                                                                               December 31, 2016, (except that any                  associated company is a corporation in which the
                                                      therefore have risk profiles that are more                                                                    reporting bank holding company, directly or
                                                                                                               investments reflected in (i) may be                  indirectly, owns 20 to 50 percent of the outstanding
                                                        26 12 U.S.C. 5365.                                     eliminated); plus (iii) assets of each               voting stock and over which the reporting bank
                                                        27 A firm with total consolidated assets of $250       Edge and Agreement Corporation, as                   holding company exercises significant influence;
                                                      billion or more would have been included by the          reported on the Consolidated Report of               and (iii) a corporate joint venture is a corporation
                                                      total consolidated assets threshold, so $125 billion                                                          owned and operated by a group of companies, no
                                                      or more in nonbank assets would constitute at least
                                                                                                               Condition and Income for Edge and                    one of which has a majority interest, as a separate
                                                      50 percent of the assets of a bank holding company       Agreement Corporations (FR 2886b) as                 and specific business or project for the mutual
                                                      with total consolidated assets less than $250 billion.   of December 31, 2016, to the extent such             benefit of that group of companies.



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                                                      67244                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                         Nonbank companies, for purposes of                   to whether a daily, weekly, or monthly                the Federal Reserve evaluates the
                                                      this measure, would exclude (i) all                     average would be most appropriate for                 reasonableness of a bank holding
                                                      national banks, state member banks,                     this calculation. This new line item is               company’s capital plan, the
                                                      state nonmember insured banks                           expected to be effective for the reporting            assumptions and analysis underlying
                                                      (including insured industrial banks),                   period as of March 31, 2017.                          the plan, and the robustness of the bank
                                                      federal savings associations, federal                     Question 3: What are the costs and                  holding company’s capital planning
                                                      savings banks, and thrift institutions                  benefits of using a daily, weekly, or                 process. Under the capital plan rule, the
                                                      (collectively, ‘‘depository institutions’’)             monthly average for purposes of                       Board may object to a bank holding
                                                      and (ii) except for an Edge or Agreement                calculating nonbank assets?                           company’s capital plan if the Board
                                                      Corporation designated as                                 Question 4: What other measures for                 determines that (1) the bank holding
                                                      ‘‘Nonbanking’’ in the box on the front                  identifying large and noncomplex firms                company has material unresolved
                                                      page of the Consolidated Report of                      should the Board consider? For                        supervisory issues, including but not
                                                      Condition and Income for Edge and                       instance, should the Board consider                   limited to issues associated with its
                                                      Agreement Corporations (FR 2886b),                      evaluating the percent of revenues from               capital adequacy process; (2) the
                                                      any subsidiary of a depository                          nonbank activities to total revenue, in               assumptions and analysis underlying
                                                      institution (‘‘depository institution                   addition to the asset measure?                        the bank holding company’s capital
                                                      subsidiary’’).                                          D. Elimination of CCAR Qualitative                    plan, or the bank holding company’s
                                                         For purposes of this measure, a                      Assessment and Objection for Large and                methodologies for reviewing its capital
                                                      reporting bank holding company should                   Noncomplex Firms                                      adequacy process, are not reasonable or
                                                      eliminate all intercompany assets and                                                                         appropriate; 29 or (3) the bank holding
                                                      operating revenue among the nonbank                        Capital planning is a core aspect of
                                                                                                                                                                    company’s capital planning process or
                                                      companies, but should include assets                    financial and risk management for all
                                                                                                                                                                    proposed capital distributions otherwise
                                                      and operating revenue with the                          bank holding companies that helps
                                                                                                                                                                    constitute an unsafe or unsound
                                                      reporting bank holding company; any                     ensure the financial strength and
                                                                                                              resilience of a firm. Strong forward-                 practice, or would violate any law,
                                                      depository institution; any depository                                                                        regulation, Board order, directive, or
                                                      institution subsidiary. For a reporting                 looking capital planning processes
                                                                                                              ensure that a bank holding company                    condition imposed by, or written
                                                      bank holding company that is a                                                                                agreement with, the Board or the
                                                      subsidiary of a foreign banking                         with total consolidated assets of $50
                                                                                                              billion or more has sufficient capital to             appropriate Federal Reserve Bank
                                                      organization, the reporting bank holding                                                                      (together, qualitative objection
                                                      company should include assets and                       absorb losses and continue to lend to
                                                                                                              creditworthy businesses and consumers,                criteria).30 The Board may also object to
                                                      operating revenue with any branch or                                                                          a bank holding company’s capital plan
                                                      agency of the foreign banking                           including during times of stress. The
                                                                                                              Board expects all bank holding                        if the bank holding company has not
                                                      organization or any non-U.S. subsidiary,                                                                      demonstrated an ability to maintain
                                                      non-U.S. associated company, or non-                    companies with total consolidated
                                                                                                              assets of $50 billion or more to maintain             capital above each minimum regulatory
                                                      U.S. corporate joint venture of the                                                                           capital ratio on a pro forma basis under
                                                      foreign banking organization that is not                sound capital planning processes on an
                                                                                                              ongoing basis.                                        expected and stressful conditions
                                                      held through the reporting bank holding                                                                       throughout the planning horizon (that
                                                      company, should be included. For                           The Board has different expectations
                                                                                                              for sound capital planning and capital                is, based on a quantitative
                                                      example, a reporting bank holding                                                                             assessment).31 In the past CCAR
                                                      company should eliminate the loans                      adequacy depending on the size, scope
                                                                                                              of operations, activity, and systemic risk            exercises, the Board has publicly
                                                      made by one nonbank company to a
                                                                                                              profile of a firm. Consistent with those              announced its decision to object to a
                                                      second nonbank company, but should
                                                                                                              different expectations, under the                     bank holding company’s capital plan,
                                                      not eliminate loans made by one
                                                                                                              proposal, large and noncomplex firms                  along with the basis for the decision.32
                                                      nonbank company to the reporting bank
                                                                                                              would no longer be subject to the                        In the feedback meetings that the
                                                      holding company; depository
                                                                                                              provisions of the Board’s capital plan                Board held on CCAR, participants from
                                                      institution; depository institution
                                                                                                              rule whereby the Board may object to a                large and noncomplex firms expressed
                                                      subsidiary; or for a reporting bank
                                                                                                              capital plan on the basis of deficiencies             the view that the CCAR qualitative
                                                      holding company that is a subsidiary of
                                                                                                              in the firm’s capital planning process or             assessment was unduly burdensome
                                                      a foreign banking organization, any
                                                      branch or agency of the foreign banking                 unresolved supervisory issues, that is,               because, in their view, it required the
                                                      organization or any non-U.S. subsidiary,                large and noncomplex firms would no                   development of large amounts of
                                                      non-U.S. associated company, or non-                    longer be subject to the CCAR                         documentation and sophisticated stress
                                                      U.S. corporate joint venture of the                     qualitative assessment.                               test models to the same degree as the
                                                      foreign banking organization that is not                   In the current CCAR process, the                   largest firms in order to avoid a public
                                                      held through the reporting bank holding                 Federal Reserve conducts a qualitative                objection to their capital plan.
                                                      company.                                                assessment of the strength of each bank               Consistent with this feedback, further
                                                         The proposed line item would require                 holding company’s internal capital                    tailoring of regulatory requirements for
                                                      a firm to report nonbank assets based on                planning process and a quantitative                   large and noncomplex firms would
                                                      an average over the quarter, as                         assessment of each bank holding                       avoid creating a risk, based on the high
                                                      calculated on either a daily, weekly, or                company’s capital adequacy in the
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                                                                                                                                                                      29 As discussed in section II.E of this preamble
                                                      monthly basis. Using an average would                   calendar quarter in which the bank
                                                                                                                                                                    below, the proposal would revise this criterion to
                                                      further the integrity of the nonbank                    holding company submits a capital                     permit objection where the Board determines that
                                                      assets measure by ensuring that it is not               plan. In the qualitative assessment, the              the assumptions and analysis underlying the bank
                                                      unduly influenced by end-of-quarter                     Federal Reserve evaluates the extent to               holding company’s capital plan, or the bank
                                                      fluctuations in nonbank assets;                         which the analysis underlying each                    holding company’s methodologies and practices
                                                                                                                                                                    that support its capital planning process, are not
                                                      however, requiring a daily or weekly                    bank holding company’s capital plan                   reasonable or appropriate.
                                                      average may impose undue burden on                      comprehensively captures and                            30 See 12 CFR 225.8(f)(2)(ii)(A), (B), and (D).

                                                      firms to perform this calculation. The                  addresses potential risks stemming from                 31 See 12 CFR 225.8(f)(2)(ii)(C).

                                                      Board is therefore seeking comment as                   company-wide activities. In addition,                   32 See 12 CFR 225.8(f)(v).




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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                            67245

                                                      public profile of the CCAR qualitative                  likely to have a lower systemic risk                   need to ensure the resiliency of these
                                                      review, that large and noncomplex firms                 profile than a LISCC firm or large and                 firms. Furthermore, LISCC firms and
                                                      will over-invest in stress testing and                  complex firm, its activities or distress               large and complex firms engage in more
                                                      capital planning processes that are                     still could pose some degree of risk to                diverse activities and have a larger
                                                      unnecessary to adequately capture the                   financial stability. Moreover, large and               overall size and geographical scope than
                                                      risks of these firms.                                   noncomplex firms collectively represent                large and noncomplex firms. This larger
                                                         In general, large and noncomplex                     over $2 trillion in total assets and nearly            size and greater diversity leads to
                                                      firms present less systemic risk than                   $1.3 trillion in loans and leases as of                greater variation in the material risks at
                                                      LISCC firms and large and complex                       June 30, 2016. A common weakness or                    these firms, which may not be fully
                                                      firms. Furthermore, large and                           insufficient capitalization across a group             captured by a standardized supervisory
                                                      noncomplex firms are generally engaged                  of large and noncomplex firms could                    stress scenario.
                                                      in traditional banking activities and                   still represent a significant threat to the               The intensive, comprehensive
                                                      have a more limited geographical scope                  U.S. economy and to specific regions                   assessment provided by the CCAR
                                                      than LISCC firms and large and complex                  where the firms’ operations or activities              qualitative process enables the Federal
                                                      firms; accordingly, there is less variation             are concentrated. Accordingly, the                     Reserve to assess whether a LISCC firm
                                                      in key risks across these firms relative                proposal would maintain the current                    or large and complex firm has sufficient
                                                      to key risks of LISCC firms and large                   quantitative analysis framework for                    capital and strong capital planning
                                                      and complex firms. The strength of each                 these firms and the possible basis for                 processes in light of the scope and
                                                      large and noncomplex firm’s capital                     objection to a firm’s capital plan based               diversity of its activities, including risks
                                                      planning process may be assessed                        on the results of the quantitative                     that are idiosyncratic to each firm. The
                                                      through normal supervisory reviews                      assessment, in order to appropriately                  systemic footprint of these firms and the
                                                      supplemented with targeted, horizontal                  ensure the capital adequacy of all bank                damage that their failure could pose to
                                                      reviews of aspects of capital planning.                 holding companies subject to the capital               the financial system makes it critical
                                                      Consequently, the Federal Reserve                       plan rule.                                             that a comprehensive assessment occur
                                                      proposes to conduct its supervisory                        As under the current capital plan rule,             on an annual basis, to ensure that the
                                                      assessment of a large and noncomplex                    nothing in the proposal would limit the                capital planning processes of LISCC
                                                      firm’s risk-management and capital                      authority of the Federal Reserve to issue              firms and large and complex firms are
                                                      planning practices through the regular                  a capital directive, such as a directive to            sufficiently dynamic to reflect changes
                                                      supervisory process and targeted,                       reduce capital distributions, or take any              in economic or financial conditions, as
                                                      horizontal assessments of particular                    other supervisory enforcement action,                  well as changes to the risk profile of the
                                                      aspects of capital planning, rather than                including an action to address unsafe or               firm.
                                                      the intensive CCAR qualitative                          unsound practices or conditions or                        The public nature of the CCAR
                                                      horizontal assessment. Further, the                     violations of law, such as an unsafe and               process and disclosure of the results of
                                                      Board would not object to the capital                   unsound capital planning process.33                    the Federal Reserve’s qualitative
                                                      plans of large and noncomplex firms                                                                            assessment helps to ensure that LISCC
                                                                                                              E. Continued Application of CCAR for                   firms and large and complex firms
                                                      due to qualitative deficiencies in their
                                                                                                              LISCC Firms and Large and Complex                      maintain focus on ensuring that their
                                                      capital planning process, but rather
                                                                                                              Firms                                                  practices are consistent with the Federal
                                                      would incorporate an assessment of
                                                      these practices into regular, ongoing                      For LISCC firms and large and                       Reserve’s capital planning expectations
                                                      supervision.                                            complex firms, the proposal would                      articulated in SR Letter 15–18.35
                                                         As compared to CCAR, the proposed                    maintain the current comprehensive                     Additionally, the public profile of the
                                                      review process for large and                            assessment of capital planning                         CCAR qualitative assessment improves
                                                      noncomplex firms is expected to be                      processes in the CCAR qualitative                      incentives for firms to ensure the
                                                      more limited in scope, include targeted                 assessment. The comprehensive                          strength of their capital planning
                                                      horizontal evaluations of specific areas                assessment of capital planning                         processes. The additional scrutiny and
                                                      of the capital planning process, and                    processes in the CCAR qualitative                      market discipline provided by the CCAR
                                                      focus on the standards set forth in the                 assessment produces significant safety                 process is all the more important in
                                                      capital plan rule and SR Letter 15–19.                  and soundness benefits for LISCC firms                 light of the systemic risk presented by
                                                      Before the start of the supervisory                     and large and complex firms and                        LISCC firms and large and complex
                                                      review process, the Federal Reserve                     financial stability benefits for the                   firms.
                                                      would send a supervisory                                financial system as a whole. As the                       The proposal includes a modification
                                                      communication to each large and                         Board noted when it adopted the capital                to the capital plan rule’s qualitative
                                                      noncomplex firm describing the scope                    plan rule in 2011, the analytical                      objection criteria for LISCC firms and
                                                      of the year’s review. The review would                  techniques and other requirements set                  large and complex firms to better align
                                                      likely occur in the quarter following the               forth in the capital plan rule enable a                with the Federal Reserve’s focus during
                                                      CCAR qualitative assessment for LISCC                   firm to identify, measure, and monitor                 the CCAR supervisory assessment.
                                                      firms and large and complex firms.                      its risks and promote the stability of the             Specifically, the proposal provides that
                                                         Under the proposal, the Board would                  U.S. financial system.34                               the Board may object to a the capital
                                                      continue to perform the annual                             Expectations for LISCC firms and                    plan of a LISCC firm or large and
                                                      quantitative assessment of capital plans                large and complex firms are elevated                   complex firm if, among other factors,
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                                                      of the large and noncomplex firms and                   relative to large and noncomplex firms                 the methodologies and practices that
                                                      publicly announce a decision to object                  because material distress or failure of a              support the bank holding company’s
                                                      or not object to a firm’s capital plan on               LISCC firm or large and complex firm is                capital planning process are not
                                                      this basis. The quantitative assessment                 more likely to pose a threat to U.S.                   reasonable or appropriate (emphasis
                                                      ensures that firms maintain sufficient                  financial stability as compared to a large             added). The current rule instead
                                                      capital to continue operations                          and noncomplex firm, heightening the                   provides a basis for objection if the bank
                                                      throughout times of economic and                                                                               holding company’s methodologies for
                                                      financial market stress. While an                         33 See   12 CFR 225.8(b)(4).
                                                      individual large and noncomplex firm is                   34 76   FR 74631, 74632 (December 1, 2011).            35 See   SR Letter 15–18.



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                                                      67246                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      reviewing its capital adequacy process,                 definition of a ‘‘material portfolio’’ for            the FR Y–14A Schedule A (Summary),
                                                      are not reasonable or appropriate                       large and noncomplex firms to mean a                  including the Securities OTTI
                                                      (emphasis added). This modification is                  portfolio with asset balances greater                 methodology sub-schedule, Securities
                                                      intended to clarify the current scope of                than either (1) $5 billion or (2) 10                  Market Value source sub-schedule,
                                                      the CCAR qualitative review and the                     percent of tier 1 capital, both measured              Securities OTTI by security sub-
                                                      areas of the focus in the review of the                 as an average for the four quarters                   schedule, the Retail repurchase sub-
                                                      capital plan of a LISCC firm or a large                 preceding the reporting quarter.37 As a               schedule, the Trading sub-schedule,
                                                      and complex firm.                                       result of this change, respondents would              Counterparty sub-schedule, and
                                                                                                              be able to exclude certain portfolios                 Advanced RWA sub-schedule.38 The
                                                      F. Implementation of Modified
                                                                                                              from reporting and in some cases may                  revised instructions for the FR Y–14A
                                                      Reporting Requirements
                                                                                                              not be required to report certain                     Summary schedule reporting form are
                                                         The Capital Assessments and Stress                   schedules at all. In modeling losses on               available on the Board’s public Web
                                                      Testing Report (FR Y–14 series of                       these portfolios for large and                        site. Removing these elements should
                                                      reports; OMB No. 7100–0341) collects                    noncomplex firms, the Federal Reserve                 reduce burdens associated with
                                                      data used to support supervisory stress                 intends to apply the median, rather than              collecting and validating this data,
                                                      testing models and continuous                           75th percentile, loss rate from                       responding to follow-up inquiries, and
                                                      monitoring efforts for bank holding                     supervisory projections based on the                  implementing and maintaining
                                                      companies with total consolidated                       firms that reported data, so as not to                technical systems. Under the proposal,
                                                      assets of $50 billion or more. The FR Y–                discourage firms from using the                       a large and noncomplex firm may adopt
                                                      14 consists of three reports: The semi-                 increased threshold for materiality.                  these changes for the FR Y–14A report
                                                      annual FR Y–14A, the quarterly FR Y–                       The proposal also would reduce the                 as of December 31, 2016, or as of June
                                                      14Q, and monthly FR Y–14M. Each                         supporting documentation a large and                  30, 2017. The Federal Reserve continues
                                                      report contains multiple schedules,                     noncomplex firm would be required to                  to review the details required to be
                                                      several of which are reported only by                   be submit with its capital plan.                      reported in the FR Y–14 series of
                                                      bank holding companies that meet                        Appendix A of the FR Y–14A report                     reports, and may propose additional
                                                      specified materiality thresholds.                       outlines qualitative information that a               changes in the future to further reduce
                                                         In discussions on CCAR, several large                bank holding company should submit in                 burdens associated with these reporting
                                                      and noncomplex firms recommended                        support of its projections, including                 requirements.
                                                      that the Board revise the FR Y–14 series                descriptions of the methodologies used
                                                      of reports to reduce reporting burdens                  to develop the internal projections of                G. Simplify Initial Application of
                                                      for these firms. For instance, these large              capital across scenarios and other                    Capital Plan and Stress Test Rules and
                                                      and noncomplex firms suggested that                     analyses that support the bank holding                Regulatory Reporting Requirements
                                                      the Board raise the materiality threshold               company’s comprehensive capital plans.                   The proposal would simplify the
                                                      for the FR Y–14 reports and reduce the                  The proposal would revise the                         applicability provisions for the capital
                                                      detail required in the supporting                       instructions to Appendix A of the FR Y–               plan and stress test rules that apply to
                                                      documentation requirements.                             14A to remove the requirement that a                  bank holding companies with $50
                                                      Additionally, these firms indicated that                large and noncomplex firm include in                  billion or more in total consolidated
                                                      in some cases where a portfolio met the                 its capital plan submission certain                   assets (subparts E and F of the Board’s
                                                      criteria to be considered immaterial, the               documentation regarding its models,                   Regulation YY, hereafter subparts E and
                                                      firm voluntarily reported data on the                   including any model inventory mapping                 F) and provide additional time before
                                                      portfolio due to the Federal Reserve’s                  document, methodology documentation,                  the application of these requirements for
                                                      practice of applying a 75th percentile                  model technical documents, and model                  bank holding companies that cross the
                                                      loss rate to immaterial portfolios in the               validation documentation. Large and                   $50 billion asset threshold close to the
                                                      supervisory stress test. The proposal                   noncomplex firms would still be                       April 5 capital plan submission and
                                                      would reduce burdens associated with                    required to be able to produce these                  stress test date. Under the current rules,
                                                      reporting the FR Y–14 schedules for                     materials upon request by the Federal                 a bank holding company that crosses the
                                                      large and noncomplex firms in three                     Reserve, and all or a subset of these                 $50 billion asset threshold on or before
                                                      ways: By raising the materiality                        firms may be required to provide this                 December 31 of a calendar year must
                                                      threshold, reducing the supporting                      documentation depending on the focus                  submit a capital plan by April 5 of the
                                                      documentation requirements, removing                    of the supervisory review of large and
                                                                                                                                                                    following year. Under the proposal, the
                                                      several sub-schedules from the FR Y–                    noncomplex firm capital plans.
                                                                                                                                                                    cutoff date for the capital plan rule
                                                      14A Summary Schedule, and using the                     Removing the requirement that a large
                                                                                                                                                                    would be moved to September 30, so
                                                      median loss rate for immaterial                         and noncomplex firm submit this
                                                                                                                                                                    that a firm that crosses the $50 billion
                                                      portfolios.                                             information in connection with its
                                                                                                                                                                    asset threshold in the fourth quarter of
                                                         The proposal would increase the                      capital plan should reduce the resources
                                                                                                                                                                    a calendar year would not have to
                                                      materiality thresholds for filing                       needed to prepare the plan for
                                                                                                                                                                    submit a capital plan until April 5 of the
                                                      schedules on the FR Y–14Q report and                    submission and alleviate concerns of an
                                                                                                                                                                    second year after it crosses the
                                                      the FR Y–14M report for large and                       adverse supervisory finding that a
                                                                                                                                                                    threshold.
                                                      noncomplex firms. The FR Y–14                           capital plan is incomplete based on the
                                                                                                              failure to provide documentation.                        The proposal would also align the
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                                                      instructions currently define material                                                                        cutoff date for initial application of the
                                                      portfolios as those with asset balances                    Under the proposal, large and
                                                                                                              noncomplex firms would no longer be                   stress test rules in subparts E and F with
                                                      greater than $5 billion or asset balances                                                                     the proposed September 30 cutoff date
                                                      greater than five percent of tier 1 capital             required to complete several elements of
                                                                                                                                                                    for the initial application of the capital
                                                      on average for the four quarters                                                                              plan rule. A bank holding company
                                                                                                                37 The four quarter average percent of tier 1
                                                      preceding the reporting quarter.36 The
                                                                                                              capital is calculated as the sum of the firm’s
                                                      proposal would revise the FR Y–14’s                     preceding four quarters of balances subject to the       38 A large and noncomplex firm would be

                                                                                                              particular materiality threshold divided by the sum   required to report line item 138 of the income
                                                        36 Respondents have the option to complete the        of the firm’s proceeding four quarters of tier 1      statement, as that line item is currently derived
                                                      data schedules for immaterial portfolios.               capital.                                              from the retail repurchase sub-schedule.



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                                                                             Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                                 67247

                                                      would become subject to these stress                     additional onboarding time should                     the need for a complete re-assessment of
                                                      test rules in subparts E and F in the year               facilitate communications between the                 the bank holding company’s capital
                                                      following the first year in which the                    Federal Reserve and a bank holding                    plan. Prior to the 2015 capital planning
                                                      bank holding company submitted a                         company and better prepare the bank                   cycle, requests to make distributions
                                                      capital plan. Under the current stress                   holding company to comply with FR Y–                  under the de minimis exception were
                                                      test rules, a bank holding company that                  14 reporting requirements. Generally, a               generally small and typically related to
                                                      crosses the $50 billion asset threshold                  bank holding company does not begin                   unanticipated events that improved a
                                                      before March 31 of a given year becomes                  the onboarding process, including                     bank holding company’s capital levels
                                                      subject to the stress test rules under                   dialogue with the data aggregators who                (such as tax rebates or litigation
                                                      subparts E and F beginning in the                        collect the FR Y–14M data, until after                settlements). Over time, the Board has
                                                      following year, and accordingly, may                     the Federal Reserve confirms that the                 observed a pattern of certain bank
                                                      have only nine months before its first                   bank holding company has exceeded the                 holding companies using the de
                                                      stress test under these subparts. Under                  asset threshold. Accordingly, providing               minimis exception to increase their
                                                      the proposal, a firm would have at least                 for an extended onboarding period                     common stock repurchases by the
                                                      a year before it would be subject to its                 should help bank holding companies                    maximum amount allowed under the
                                                      initial stress tests under subparts E and                become better prepared to comply with                 exception. This pattern risks treating the
                                                      F. This revision would simplify the                      the FR Y–14 reporting requirements                    de minimis exception as an automatic
                                                      application of the capital plan and stress               when they take effect, which will                     add-on to approved common stock
                                                      test rules and allow for a more orderly                  improve data quality for initial reporting            distributions under a bank holding
                                                      onboarding process for new FR Y–14                       periods and reduce burdens and costs                  company’s capital plan rather than for
                                                      filers, which will improve the quality of                for reporting bank holding companies.                 its intended use for unanticipated
                                                      data used in the supervisory stress                                                                            events. Based on planned net common
                                                      tests.39                                                 III. Other Amendments to the Capital                  stock distributions (i.e., planned
                                                         The proposal would also provide an                    Plan and Stress Test Rules                            common stock dividends and
                                                      extended onboarding period for                           A. Lowering the de minimis Exception                  repurchases less planned common stock
                                                      regulatory reporting requirements to a                   Threshold for All Bank Holding                        issuances) for the CCAR 2016 approval
                                                      bank holding company after it first                      Companies                                             period, the current level of the de
                                                      crosses the $50 billion asset threshold.                                                                       minimis threshold would imply that
                                                      Currently, a bank holding company that                      As noted, a bank holding company                   bank holding companies could increase
                                                      crosses the $50 billion asset threshold                  subject to the capital plan rule must                 their net common stock capital
                                                      must prepare FR Y–14M reports as of                      request prior approval for a capital                  distributions by 32 percent on average
                                                      the end of the month in which it crosses                 distribution that has not explicitly been             (median of 13 percent).42
                                                      the threshold, and must submit its first                 approved by the Board. However, in the                   The proposal would reduce the de
                                                      FR Y–14M within 90 days after the end                    event that a bank holding company                     minimis exception from 1.00 percent to
                                                      of the month (at which time, data for the                received a notice of non-objection to its             0.25 percent of a bank holding
                                                      three intervening months is due). The                    capital plan, the bank holding company                company’s tier 1 capital in order to
                                                      proposal would require a bank holding                    may make a capital distribution that                  ensure that a de minimis distribution
                                                      company to begin preparing its initial                   exceeds the amount described in the                   would represent a smaller percentage of
                                                      FR Y–14M as of the end of the third                      capital plan if: (1) The bank holding                 the bank holding company’s approved
                                                      month after the bank holding company                     company remains well capitalized after                capital distributions and tier 1 capital.
                                                      first meets the $50 billion asset                        the distribution,40 (2) the bank holding              Based on data from CCAR 2016, a 0.25
                                                      threshold (rather than as of the month                   company’s performance and capital                     percent de minimis threshold would
                                                      in which the bank holding company                        levels following the distribution are                 enable bank holding companies to
                                                      crosses the threshold) and must submit                   consistent with its projections under the             increase their planned net common
                                                      its first FR Y–14M within 90 days after                  expected conditions in the bank holding               stock distributions by 8 percent on
                                                      the end of that month (at which time,                    company’s capital plan, (3) the bank                  average (median of 3 percent).
                                                      data for the three intervening months                    holding company provides 15 days’                        The expected aggregate capital impact
                                                      would be due). For example, a bank                       notice prior to execution and the Board               of this proposed change to the de
                                                      holding company that crosses the $50                     does not object within that time period;              minimis exception threshold can be
                                                      billion asset threshold as of September                  and (4) the aggregate dollar amount of                evaluated on both a prospective and
                                                      30, 2016, would be required to prepare                   all capital distributions during the                  historical basis. On a prospective basis,
                                                      its initial FR Y–14M report as of                        capital planning cycle (the period                    a comparison can be made between the
                                                      December 2016, and file its FR Y–14M                     beginning on July 1 of a calendar year                total de minimis capital distributions
                                                      reports for December 2016, January                       and ending on June 30 of the following                that could be made across all bank
                                                      2017, and February 2017 in March 2017.                   year) would not exceed the total amount               holding companies subject to CCAR
                                                      A bank holding company would                             described in the bank holding                         (assuming all applicable conditions
                                                      continue to prepare its FR Y–14Q report                  company’s capital plan by more than                   were met) under the proposal and under
                                                      as of the end of the first quarter after it              1.00 percent of the bank holding                      the current rule, by taking the difference
                                                      initially crosses the threshold. The                     company’s tier 1 capital as reported in               between 1.00 percent and 0.25 percent
                                                                                                               the bank holding company’s first quarter              of tier 1 capital across all firms. Based
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                                                         39 Providing this extension would also have the
                                                                                                               FR Y–9C.41                                            on data as of the first quarter of 2016,
                                                      effect of allowing firms that cross the $50 billion in      The purpose of this de minimis                     this difference equals $9.8 billion,
                                                      the fourth quarter of a given year as much as a year
                                                      and a half before they are required to submit their      exception is to provide flexibility for               equivalent to 0.10 percent of the total
                                                      first capital plan, and two and a half years before      well-capitalized bank holding
                                                                                                                                                                       42 Net common stock distributions is calculated as
                                                      they are subject to the stress tests under subparts      companies to distribute small,
                                                      E and F. This extended period would allow for the                                                              planned common stock dividends and repurchases
                                                      significant investments firms must make to meet
                                                                                                               additional amounts of capital without                 less planned common stock issuances. This analysis
                                                      these requirements and account for the fact that                                                               excludes firms that had no or negative net planned
                                                                                                                40 As   defined by 12 CFR 225.2(r).
                                                      these firms would continue to be subject to                                                                    common stock distributions in their 2016 capital
                                                      prudential supervision during the transition period.      41 See   12 CFR 225.8(g)(2).                         plans.



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                                                      67248                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      risk-weighted assets of bank holding                    LISCC and large and complex firms,                    the as-of date for the global market
                                                      companies subject to CCAR in 2016.43                    where any revision to a firm’s capital                shock as early as possible in January. As
                                                      On a historical basis, if a 0.25 percent                plan to increase capital distributions                such, the Board has a narrow window
                                                      de minimis limitation had applied                       following the CCAR qualitative                        to select the as-of date for the market
                                                      during the CCAR 2015 cycle rather than                  assessment requires strong evidence and               shock, effectively sometime very early
                                                      a 1.00 percent limitation, $2.3 billion of              support.                                              in January. The narrow window creates
                                                      distributions actually made during the                                                                        the possibility for bank holding
                                                                                                              B. Blackout Period for the de minimis
                                                      CCAR 2015 period would not have been                                                                          companies to artificially reduce the risk
                                                                                                              Exception and Requests for Approval To
                                                      permitted without prior approval,                                                                             of their portfolios around the time of the
                                                                                                              Make Additional Distributions Not
                                                      equivalent to 0.02 percent of total risk-                                                                     market shock date. In addition, limiting
                                                                                                              Included in a Bank Holding Company’s
                                                      weighted assets of bank holding                                                                               the as-of date for the market shock to the
                                                                                                              Capital Plan
                                                      companies subject to CCAR in 2015.                                                                            first weeks of the calendar year does not
                                                         A smaller de minimis limitation                         In addition to proposing a change in               account for seasonality in trading
                                                      would not prohibit these additional                     the allowable size of the de minimis                  activity—for example, trading activity
                                                      distributions. Instead, it would require                exception, the proposal would establish               typically slows towards the end of the
                                                      the bank holding company to include                     a one-quarter ‘‘blackout period’’ while               calendar year and gradually picks up in
                                                      the distributions in its next annual                    the Board is conducting CCAR (the                     the new calendar year.
                                                      capital plan.                                           second quarter of a calendar year)                       The proposal would allow the Board
                                                         In addition, with the proposed                       during which bank holding companies                   to select any date between October 1 of
                                                      revision to the de minimis rule, bank                   would not be able to submit a notice to               the prior year and March 1 of the year
                                                      holding companies would still be able                   use the de minimis exception or submit                of the stress test cycle for the as-of date
                                                      to seek approval to make capital                        a request for prior approval for                      of the global market shock. Bank
                                                      distributions not included in their                     additional capital distributions that do              holding companies subject to the
                                                      capital plans, consistent with section                  not qualify for the de minimis                        trading and counterparty component
                                                      225.8(g) of the capital plan rule. Any                  exception. In the absence of this                     would be notified within two weeks of
                                                      bank holding company making such a                      modification, the Federal Reserve’s                   the selected as-of date for the global
                                                      request must provide adequate                           analysis in CCAR may not in all cases                 market shock, to enable the bank
                                                      information regarding any changes to its                represent a comprehensive evaluation of               holding company to preserve trading
                                                      risk profile, financial condition, and                  the bank holding company’s capital                    and counterparty exposure data from
                                                      corporate structure since the previous                  adequacy and the appropriateness of the               the as-of date. This change would help
                                                      CCAR exercise. In many cases, the                       bank holding company’s planned                        ensure that the stress tests capture
                                                      Federal Reserve expects to request                      capital actions in CCAR. Under the                    representative trading exposure for bank
                                                      additional information from bank                        proposal, a bank holding company                      holding companies with significant
                                                      holding companies that request                          seeking to make capital distributions in              trading activity, for example, by
                                                      approval for additional capital                         the second quarter in excess of the                   avoiding effects caused by unusual
                                                      distributions, which will likely include                amount described in the capital plan for              trading conditions around year-end.
                                                      revised stress test results using updated               which a non-objection was issued                      Moreover, the change would provide
                                                      data and scenarios. One exception is                    pursuant to the de minimis exception or               additional time for both bank holding
                                                      where a bank holding company replaces                   prior approval process, when the CCAR                 companies and supervisors to
                                                      the foregone capital with capital of                    exercise is underway, would be required               implement the global market shock
                                                      equal or higher quality prior to or                     submit a notice to use the de minimis                 scenario in a well-controlled manner.
                                                      concurrently with the incremental                       exception by March 15 or submit a                     Under the proposal, this change would
                                                      distribution.                                           request for prior approval for                        take effect for the 2018 stress test cycle.
                                                         One important factor in the Board’s                  incremental capital distributions that do
                                                                                                              not qualify for the de minimis exception              D. Removal of Obsolete Provisions
                                                      decision on a capital distribution
                                                      request is the size and complexity of the               by March 1 and reflect the additional                    In 2014, the Federal Reserve adjusted
                                                      bank holding company making the                         distributions in its capital plan. The                the capital planning and stress test
                                                      request. All else equal, a capital                      proposed blackout periods are expected                cycles from an October 1 as-of date to
                                                      distribution request from a LISCC or                    to be effective for CCAR 2017.                        a January 1 as-of date. The capital plan
                                                      large and complex firm would likely                                                                           and stress test rules currently include
                                                                                                              C. Revisions to the Time Period From
                                                      require stronger justification than a                                                                         several provisions reflecting the
                                                                                                              Which the Market Shock ‘‘as-of’’ Date
                                                      request from a large and noncomplex                                                                           previous October 1 as-of date, as well as
                                                                                                              May Be Selected
                                                      firm. For instance, a request from a                                                                          obsolete transition provisions for foreign
                                                                                                                 Under the Board’s stress test rules, the           banking organizations that previously
                                                      LISCC or large and complex firm
                                                                                                              Board may require a bank holding                      relied on SR Letter 01–01,44 and for the
                                                      directly related to an unforeseeable
                                                                                                              company with significant trading                      application of the supplementary
                                                      event at the time of the last capital plan
                                                                                                              activity to include a trading and                     leverage ratio. The proposal would
                                                      submission that has a positive expected
                                                                                                              counterparty component (‘‘global                      remove these provisions, as they are no
                                                      impact on current or future capital
                                                                                                              market shock’’) in its adverse and                    longer operative.
                                                      ratios would likely require more
                                                                                                              severely adverse scenarios for its
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                                                      supporting evidence (for instance,                                                                            IV. Administrative Law Matters
                                                                                                              company-run stress tests. Currently, the
                                                      updated stress test results) than a
                                                                                                              Board must select a date between                      A. Paperwork Reduction Act
                                                      similar request from a large and
                                                                                                              January 1 and March 1 of the calendar
                                                      noncomplex firm. This difference                                                                                In accordance with section 3512 of
                                                                                                              year of the stress test cycle. However, in
                                                      reflects the Federal Reserve’s elevated                                                                       the Paperwork Reduction Act of 1995
                                                                                                              order to provide bank holding
                                                      expectations for capital planning at                                                                          (44 U.S.C. 3501–3521) (PRA), the Board
                                                                                                              companies with as much time as
                                                         43 Total risk-weighted assets across bank holding    possible to conduct their company-run                   44 SR Letter 01–01 (January 5, 2001), available at

                                                      companies subject to CCAR in 2016 equaled $9.6          stress tests and prepare their capital                www.federalreserve.gov/boarddocs/srletters/2001/
                                                      trillion.                                               plans, the Board has typically specified              sr0101.htm.



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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                           67249

                                                      may not conduct or sponsor, and a                       holding companies (SLHCs), securities                     Nonbank companies, for purposes of
                                                      respondent is not required to respond                   holding companies (SHCs), and U.S.                     this measure, would exclude (i) all
                                                      to, an information collection unless it                 intermediate holding companies (IHCs),                 national banks, state member banks,
                                                      displays a currently valid Office of                    (collectively, ‘‘holding companies’’).                 state nonmember insured banks
                                                      Management and Budget (OMB) control                        Abstract: The FR Y–9LP serves as                    (including insured industrial banks),
                                                      number. The OMB control numbers are                     standardized financial statements for                  federal savings associations, federal
                                                      7100–0128, 7100–0341, and 7100–0342                     large parent holding companies. The FR                 savings banks, thrift institutions
                                                      for this information collection. The                    Y–9 family of reporting forms continues                (collectively for purposes of this
                                                      Board reviewed the proposed rule under                                                                         proposed item 17, ‘‘depository
                                                                                                              to be the primary source of financial
                                                      the authority delegated to the Board by                                                                        institutions’’) and (ii) except for an Edge
                                                                                                              data on holding companies that
                                                      OMB.                                                                                                           or Agreement Corporation designated as
                                                                                                              examiners rely on in the intervals
                                                        The proposed rule contains                                                                                   ‘‘Nonbanking’’ in the box on the front
                                                                                                              between on-site inspections. Financial
                                                      requirements subject to the PRA. The                                                                           page of the Consolidated Report of
                                                                                                              data from these reporting forms are used
                                                      reporting requirements are found in                                                                            Condition and Income for Edge and
                                                                                                              to detect emerging financial problems,
                                                      sections 12 CFR 225.8.                                                                                         Agreement Corporations (FR 2886b),
                                                                                                              to review performance and conduct pre-
                                                        Comments are invited on:                                                                                     any subsidiary of a depository
                                                        a. Whether the collections of                         inspection analysis, to monitor and
                                                                                                                                                                     institution (for purposes of this
                                                      information are necessary for the proper                evaluate capital adequacy, to evaluate
                                                                                                                                                                     proposed item 17, ‘‘depository
                                                      performance of the Federal Reserve’s                    holding company mergers and                            institution subsidiary’’).
                                                      functions, including whether the                        acquisitions, and to analyze a holding                    All intercompany assets and operating
                                                      information has practical utility;                      company’s overall financial condition to               revenue among the nonbank companies
                                                        b. The accuracy or the estimate of the                ensure the safety and soundness of its                 should be eliminated, but assets and
                                                      burden of the information collections,                  operations.                                            operating revenue with the reporting
                                                      including the validity of the                              Current Actions: The proposal would                 holding company; any depository
                                                      methodology and assumptions used;                       amend the FR Y–9LP to include new                      institution; any depository institution
                                                        c. Ways to enhance the quality,                       line item 17 of PC–B Memoranda (Total                  subsidiary; and for a reporting holding
                                                      utility, and clarity of the information to              nonbank assets of a holding company                    company that is a subsidiary of a foreign
                                                      be collected;                                           subject to the Federal Reserve Board’s                 banking organization, any branch or
                                                        d. Ways to minimize the burden of the                 capital plan rule) for purposes of                     agency of the foreign banking
                                                      information collections on respondents,                 identifying large and noncomplex firms                 organization or any non-U.S. subsidiary,
                                                      including through the use of automated                  subject to the capital plan rule. Under                non-U.S. associated company, or non-
                                                      collection techniques or other forms of                 the proposal, a top-tier holding                       U.S. corporate joint venture of the
                                                      information technology; and                             company that is subject to the Board’s                 foreign banking organization that is not
                                                        e. Estimates of capital or startup costs              capital plan rule would be required to                 held through the reporting holding
                                                      and costs of operation, maintenance,                    report on the FR Y–9LP the average                     company, should be included. For
                                                      and purchase of services to provide                     dollar amount for the calendar quarter                 example, eliminate the loans made by
                                                      information.                                            (as calculated on either a daily, weekly,              one nonbank company to a second
                                                        All comment will become a matter of                   or monthly basis during the calendar                   nonbank company, but do not eliminate
                                                      public record. Comments on aspects of                   quarter) of its total nonbank assets of                loans made by one nonbank company to
                                                      this notice that may affect reporting,                  consolidated nonbank subsidiaries,                     the parent holding company; depository
                                                      recordkeeping, or disclosure                            whether held directly or indirectly or                 institution; depository institution
                                                      requirements and burden estimates                       held through lower-tier holding                        subsidiary; or for a reporting holding
                                                      should be sent to: Secretary, Board of                  companies, and its direct investments in               company that is a subsidiary of a foreign
                                                      Governors of the Federal Reserve                        unconsolidated nonbank subsidiaries,                   banking organization, any branch or
                                                      System, 20th and C Streets NW.,                         associated nonbank companies, and                      agency of the foreign banking
                                                      Washington, DC 20551. A copy of the                     those nonbank corporate joint ventures                 organization or any non-U.S. subsidiary,
                                                      comments may also be submitted to the                   over which the bank holding company                    non-U.S. associated company, or non-
                                                      OMB desk officer by mail to U.S. Office                 exercises significant influence                        U.S. corporate joint venture of the
                                                      of Management and Budget, 725 17th                      (collectively, ‘‘nonbank companies’’).45               foreign banking organization that is not
                                                      Street NW., #10235, Washington, DC                      As noted in section II.C.2 of this                     held through the reporting holding
                                                      20503 or by facsimile to 202–3955806,                   preamble, the Board seeks comment as                   company.
                                                      Attention, Agency Desk Officer.                         to whether a daily, weekly, or monthly                    While the FR Y–9LP collects another
                                                        Proposed Revisions, With Extension                    average would be most appropriate for                  measure of nonbank assets (line item 15
                                                      for Three Years, of the Following                       this calculation. This proposed                        of PC–B Memoranda (Total combined
                                                      Information Collections:                                amendment would be effective as of                     nonbank assets of nonbank
                                                        (1) Title of Information Collection:                  March 31, 2017.                                        subsidiaries)), the proposed nonbank
                                                      Parent Company Only Financial                                                                                  assets measure differs in several
                                                      Statements for Large Holding                               45 For purposes of the FR Y–9LP, (i) a subsidiary
                                                                                                                                                                     important ways. Specifically, proposed
                                                      Companies.                                              is a company in which the reporting bank holding       line item 17 excludes assets of an
                                                        Agency Form Number: FR Y–9C; FR                                                                              insured industrial bank, federal savings
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                                                                                                              company directly or indirectly owns more than 50
                                                      Y–9LP; FR Y–9SP; FR Y–9ES; FR Y–                        percent of the outstanding voting stock; (ii) an       association, federal savings bank, or
                                                                                                              associated company is a corporation in which the       thrift institution and includes assets of
                                                      9CS.                                                    reporting bank holding company, directly or
                                                        OMB Control Number: 7100–0128.                        indirectly, owns 20 to 50 percent of the outstanding
                                                                                                                                                                     an Edge or Agreement Corporation
                                                        Frequency of Response: Quarterly,                     voting stock and over which the reporting bank         designated as ‘‘Nonbanking’’ in the box
                                                      semi-annually, and annually.                            holding company exercises significant influence;       on the front page of the Consolidated
                                                        Affected Public: Businesses or other                  and (iii) a corporate joint venture is a corporation   Report of Condition and Income for
                                                                                                              owned and operated by a group of companies, no
                                                      for-profit.                                             one of which has a majority interest, as a separate
                                                                                                                                                                     Edge and Agreement Corporations (FR
                                                        Respondents: Bank holding                             and specific business or project for the mutual        2886b). It also includes the value of an
                                                      companies (BHCs), savings and loan                      benefit of that group of companies.                    investment in an unconsolidated


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                                                      67250                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      nonbank company that is held directly                   the four most recent quarters as reported             of the portfolio and loan-level
                                                      by the holding company. While these                     quarterly on the firm’s Consolidated                  collections.
                                                      elements may be sourced from other                      Financial Statements for Bank Holding                    Current Actions: The Capital
                                                      reporting forms, the new line item is                   Companies (FR Y–9C) (OMB No. 7100–                    Assessments and Stress Testing Report
                                                      necessary to reflect the elimination of                 0128); or (ii) the average of the firm’s              (FR Y–14 series of reports; OMB No.
                                                      intercompany transactions among these                   total consolidated assets in the most                 7100–0341) collects data used to
                                                      nonbank companies, as described above.                  recent consecutive quarters as reported               support supervisory stress testing
                                                        Number of Respondents: Proposed                       quarterly on the firm’s FR Y–9Cs, if the              models and continuous monitoring
                                                      revision would apply to top-tier holding                firm has not filed an FR Y–9C for each
                                                                                                                                                                    efforts for bank holding companies with
                                                      companies subject to the Board’s capital                of the most recent four quarters.
                                                      plan rule (BHCs and IHCs with total                                                                           total consolidated assets of $50 billion
                                                                                                              Reporting is required as of the first day
                                                      consolidated assets of $50 billion or                                                                         or more. The FR Y–14 consists of three
                                                                                                              of the quarter immediately following the
                                                      more), for a total of 38 of the existing                                                                      reports, the semi-annual FR Y–14A, the
                                                                                                              quarter in which it meets this asset
                                                      792 FR Y–9LP respondents. FR Y–9C                                                                             quarterly FR Y–14Q, and monthly FR
                                                                                                              threshold, unless otherwise directed by
                                                      (non-Advanced Approaches holding                        the Board.                                            Y–14M. Each report contains multiple
                                                      companies or other respondents): 654;                                                                         schedules, several of which are reported
                                                                                                                 Abstract: The data collected through               only by bank holding companies that
                                                      FR Y–9C (Advanced Approaches                            the FR Y–14A/Q/M schedules provide
                                                      holding companies or other                                                                                    meet specified materiality thresholds. In
                                                                                                              the Board with the additional                         discussions on CCAR, several large and
                                                      respondents): 13; FR Y–9SP: 4,122; FR                   information and perspective needed to
                                                      Y–9ES: 88; FR Y–9CS: 236.                                                                                     noncomplex firms recommended that
                                                                                                              help ensure that large BHCs and IHCs                  the Board revise the FR Y–14 series of
                                                        Estimated Average Hours per                           have strong, firm-wide risk
                                                      Response: FR Y–9C (non-Advanced                                                                               reports to reduce the reporting burden
                                                                                                              measurement and management
                                                      Approaches holding companies or other                                                                         on these firms. For instance, these large
                                                                                                              processes supporting their internal
                                                      respondents): 50.17 hours; FR Y–9C                                                                            and noncomplex firms suggested that
                                                                                                              assessments of capital adequacy and
                                                      (Advanced Approaches holding                                                                                  the Board raise the materiality threshold
                                                                                                              that their capital resources are sufficient
                                                      companies or other respondents): 52.42                                                                        for the FR Y–14 reports and reduce the
                                                                                                              given their business focus, activities,
                                                      hours; FR Y–9LP: 5.25 hours; FR Y–9SP:                                                                        detail required in the supporting
                                                                                                              and resulting risk exposures. The
                                                      5.4 hours; FR Y–9ES: 0.5 hours; FR Y–                                                                         documentation requirements. The
                                                                                                              annual CCAR exercise is also
                                                      9CS: 0.5 hours.                                                                                               proposal would reduce burdens
                                                                                                              complemented by other Board
                                                        Current Estimated Annual Burden                                                                             associated with reporting the FR Y–14
                                                                                                              supervisory efforts aimed at enhancing
                                                      Hours: FR Y–9C (non-Advanced                                                                                  schedules for large and noncomplex
                                                                                                              the continued viability of large firms,
                                                      Approaches holding companies or other                                                                         firms by raising the materiality
                                                                                                              including continuous monitoring of
                                                      respondents): 131,245 hours; FR Y–9C                                                                          threshold, reducing supporting
                                                                                                              firms’ planning and management of
                                                      (Advanced Approaches holding                                                                                  documentation requirements, removing
                                                                                                              liquidity and funding resources and
                                                      companies or other respondents): 2,674                                                                        several sub-schedules from the FR Y–
                                                                                                              regular assessments of credit, market
                                                      hours; FR Y–9LP: 16,632 hours; FR Y–                                                                          14A Summary Schedule, and using the
                                                                                                              and operational risks, and associated
                                                      9SP: 44,518; FR Y–9ES: 44; FR Y–9CS:                                                                          median loss rate for immaterial
                                                                                                              risk management practices. Information
                                                      472.                                                                                                          portfolios.
                                                        Proposed Revisions only change in                     gathered in this data collection is also
                                                                                                              used in the supervision and regulation                   The proposal would increase the
                                                      Estimated Annual Burden Hours: FR Y–
                                                                                                              of these financial institutions. In order             materiality thresholds for filing
                                                      9LP: 76 hours (0.5 hours per quarter for
                                                                                                              to fully evaluate the data submissions,               schedules on the FR Y–14Q report and
                                                      the 38 impacted FR Y–9LP
                                                                                                              the Board may conduct follow-up                       the FR Y–14M report for large and
                                                      respondents).
                                                        Proposed Total Estimated Annual                       discussions with or request responses to              noncomplex firms. The FR Y–14
                                                      Burden Hours: FR Y–9C (non-Advanced                     follow up questions from respondents,                 instructions currently define material
                                                      Approaches holding companies or other                   as needed.                                            portfolios as those with asset balances
                                                      respondents): 131,245 hours; FR Y–9C                       The Capital Assessments and Stress                 greater than $5 billion or asset balances
                                                      (Advanced Approaches holding                            Testing information collection consists               greater than five percent of tier 1 capital,
                                                      companies or other respondents): 2,674                  of the FR Y–14A, Q, and M reports. The                both measured as an average for the four
                                                      hours; FR Y–9LP: 16,651 hours; FR Y–                    semi-annual FR Y–14A collects                         quarters preceding the reporting
                                                      9SP: 44,518; FR Y–9ES: 44; FR Y–9CS:                    quantitative projections of balance                   quarter.47 The proposal would revise
                                                      472.                                                    sheet, income, losses, and capital across             the FR Y–14’s definition of a ‘‘material
                                                        (2) Title of Information Collection:                  a range of macroeconomic scenarios and                portfolio’’ for large and noncomplex
                                                      Capital Assessments and Stress Testing                  qualitative information on                            firms to mean a portfolio with asset
                                                      information collection.                                 methodologies used to develop internal                balances greater than either (1) $5
                                                        Agency Form Number: FR Y–14A/Q/                       projections of capital across scenarios.46            billion or (2) 10 percent of tier 1 capital
                                                      M.                                                      The quarterly FR Y–14Q collects                       on average for the four quarters
                                                        OMB Control Number: 7100–0341.                        granular data on various asset classes,               preceding the reporting quarter.48 As a
                                                        Frequency of Response: Annually,                      including loans, securities, and trading              result of this change, respondents would
                                                      semi-annually, quarterly, and monthly.                                                                        be able to exclude certain portfolios
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                                                                                                              assets, and pre-provision net revenue
                                                        Affected Public: Businesses or other                  (PPNR) for the reporting period. The                  from reporting and in some cases may
                                                      for-profit.                                             monthly FR Y–14M comprises three
                                                        Respondents: The respondent panel                     retail portfolio- and loan-level                        47 Respondents have the option to complete the
                                                      consists of any top-tier bank holding                   collections, and one detailed address                 data schedules for immaterial portfolios.
                                                      company (BHC) or intermediate holding                   matching collection to supplement two
                                                                                                                                                                      48 The four quarter average percent of tier 1

                                                      company (IHC) that has $50 billion or                                                                         capital is calculated as the sum of the firm’s
                                                                                                                                                                    preceding four quarters of balances subject to the
                                                      more in total consolidated assets, as                     46 A BHC that must re-submit its capital plan       particular materiality threshold divided by the sum
                                                      determined based on: (i) The average of                 generally also must provide a revised FR Y–14A in     of the firm’s proceeding four quarters of tier 1
                                                      the firm’s total consolidated assets in                 connection with its resubmission.                     capital.



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                                                                             Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                       67251

                                                      not be required to report certain                        a large and noncomplex firm may adopt                 capital instruments, 7,904 hours;
                                                      schedules at all.                                        these changes for the FR Y–14A report                 Operational risk, 7,600 hours; Mortgage
                                                         In addition, the proposal would                       as of December 31, 2016, or as of June                Servicing Rights (MSR) Valuation, 1,632
                                                      reduce the supporting documentation a                    30, 2017. The Federal Reserve continues               hours; Supplemental, 608 hours; and
                                                      large and noncomplex firm would be                       to review the details required to be                  Retail Fair Value Option/Held for Sale
                                                      required to be submit with its capital                   reported in the FR Y–14 series of                     (Retail FVO/HFS), 1,728 hours;
                                                      plan. Appendix A of the FR Y–14A                         reports, and may propose additional                   Counterparty, 12,192 hours; and
                                                      report outlines qualitative information                  changes in the future to further reduce               Balances, 2,432 hours. FR Y–14M: 1st
                                                      that a bank holding company should                       burdens associated with these reporting               lien mortgage, 228,660 hours; Home
                                                      submit in support of its projections,                    requirements.                                         equity, 197,760 hours; and Credit card,
                                                      including descriptions of the                               These changes are expected to                      153,000 hours. FR Y–14 On-going
                                                      methodologies used to develop the                        decrease burden for the information                   automation revisions, 18,720 hours; and
                                                      internal projections of capital across                   collection by 56,454 hours. This                      implementation, 0 hours. FR Y–14
                                                      scenarios and other analyses that                        includes a decrease in the average hours              Attestation: Implementation, 0 hours;
                                                      support the bank holding company’s                       per response for the FR Y–14A due to                  and on-going revisions, 23,040 hours.
                                                      comprehensive capital plans. The                         the elimination of the requirement for                   Proposed Revisions Only Change in
                                                      proposal would revise the instructions                   large and noncomplex firms to file four               Estimated Annual Burden Hours: FR Y–
                                                      to Appendix A of the FR Y–14A to                         Summary sub-schedules and a                           14A: ¥6,346 Hours, FR Y–14Q: ¥1,088
                                                      remove the requirement that a large and                  reduction in the supporting                           FR Y–14M: ¥49,020 Hours.
                                                      noncomplex firm include in its capital                   documentation requirements, resulting                    Proposed Total Estimated Annual
                                                      plan submission certain documentation                    in a decrease of 6,346 hours. The                     Burden Hours: FR Y–14A: Summary,
                                                      regarding its models, including any                      modification to the materiality                       68,780 hours; Macro scenario, 2,356
                                                      model inventory mapping document,                        threshold for the FR Y–14Q and FR Y–                  hours; Operational Risk, 456 hours;
                                                      methodology documentation, model                         14M reports would be anticipated to                   Regulatory capital transitions, 760
                                                      technical documents, and model                           reduce the number of firms filing certain             hours; Regulatory capital instruments,
                                                      validation documentation. Large and                      schedules on the FR Y–14Q and FR Y–                   760 hours; Retail repurchase, 1,520
                                                      noncomplex firms would still be                          14M reports. Specifically, this would                 hours; and Business plan changes, 380.
                                                      required to be able to produce these                     result in a decrease of 1,088 hours on                FR Y–14Q: Securities risk, 2,280 hours;
                                                      materials upon request by the Federal                    the FR Y–14Q report and 49,020 hours                  Retail risk, 1,824 hours, Pre-provision
                                                      Reserve, and all or a subset of these                    for the FR Y–14M report.                              net revenue (PPNR), 108,072 hours;
                                                      firms may be required to provide this                       Number of Respondents: 38.                         Wholesale, 22,952 hours; Trading,
                                                      documentation depending on the focus                        Estimated Average Hours per                        46,224 hours; Regulatory capital
                                                      of the supervisory review of large and                   Response: FR Y–14A: Summary, 987                      transitions, 3,496 hours; Regulatory
                                                                                                               hours; Macro scenario, 31 hours;                      capital instruments, 7,904 hours;
                                                      noncomplex firm capital plans.
                                                                                                               Operational Risk, 12 hours; Regulatory                Operational risk, 7,600 hours; Mortgage
                                                      Removing the requirement that a large
                                                                                                               capital transitions, 23 hours; Regulatory             Servicing Rights (MSR) Valuation, 1,288
                                                      and noncomplex firm submit this
                                                                                                               capital instruments, 20 hours; Retail                 hours; Supplemental, 608 hours; and
                                                      information in connection with its
                                                                                                               repurchase, 20 hours; and Business plan               Retail Fair Value Option/Held for Sale
                                                      capital plan should reduce the resources
                                                                                                               changes, 10 hours. FR Y–14Q: Securities               (Retail FVO/HFS), 1,440 hours;
                                                      needed to prepare the plan for
                                                                                                               risk, 13 hours; Retail risk, 16 hours;                Counterparty, 12,192 hours; and
                                                      submission and alleviate concerns of an
                                                                                                               PPNR, 711 hours; Wholesale, 152 hours;                Balances, 2,432 hours. FR Y–14M: 1st
                                                      adverse supervisory finding that a
                                                                                                               Trading, 1,926 hours; Regulatory capital
                                                      capital plan is incomplete based on the                                                                        lien mortgage, 228,660 hours; Home
                                                                                                               transitions, 23 hours; Regulatory capital
                                                      failure to provide documentation.                                                                              equity, 191,580 hours; and Credit card,
                                                                                                               instruments, 52 hours; Operational risk,
                                                         Under the proposal, large and                                                                               110,160 hours. FR Y–14 On-going
                                                                                                               50 hours; MSR Valuation, 24 hours;
                                                      noncomplex firms would no longer be                                                                            automation revisions, 18,720 hours; and
                                                                                                               Supplemental, 4 hours; Retail FVO/
                                                      required to complete several elements of                                                                       implementation, 0 hours. FR Y–14
                                                                                                               HFS, 16 hours; CCR, 508 hours; and
                                                      the FR Y–14A Schedule A (Summary),                                                                             Attestation: Implementation, 0 hours;
                                                                                                               Balances, 16 hours. FR Y–14M: 1st lien
                                                      including the Securities OTTI                                                                                  and on-going revisions, 23,040 hours.
                                                                                                               mortgage, 515 hours; Home equity, 515                    (3) Title of Information Collection:
                                                      methodology sub-schedule, Securities
                                                                                                               hours; and Credit card, 510 hours. FR
                                                      Market Value source sub-schedule,                                                                              Recordkeeping and Reporting
                                                                                                               Y–14 On-Going automation revisions,
                                                      Securities OTTI by security sub-                                                                               Requirements Associated with
                                                                                                               480 hours; and implementation, 7,200
                                                      schedule, the Retail repurchase sub-                                                                           Regulation Y (Capital Plans).
                                                                                                               hours. FR Y–14 Attestation:                              Agency Form Number: Reg Y–13.
                                                      schedule, the Trading sub-schedule,                      Implementation, 4,800 hours; and on-
                                                      Counterparty sub-schedule, and                                                                                    OMB Control Number: 7100–0342.
                                                                                                               going revisions, 2,560 hours.                            Frequency of Response: Annually.
                                                      Advanced RWA sub-schedule.49 The                            Current Estimated Annual Burden
                                                      revised instructions for the FR Y–14A                                                                             Affected Public: Businesses or other
                                                                                                               Hours: FR Y–14A: Summary, 75,012                      for-profit.
                                                      Summary schedule reporting form are                      hours; Macro scenario, 2,356 hours;                      Respondents: BHCs and IHCs.
                                                      available on the Board’s public Web                      Operational Risk, 456 hours; Regulatory                  Abstract: Regulation Y (12 CFR part
                                                      site. Removing these elements should                     capital transitions, 874 hours;                       225) requires large bank holding
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                                                      reduce burdens associated with                           Regulatory capital instruments, 760                   companies (BHCs) to submit capital
                                                      collecting and validating this data,                     hours; Retail repurchase, 1,520 hours;                plans to the Federal Reserve on an
                                                      responding to follow-up inquiries, and                   and Business plan changes, 380 hours.                 annual basis and to require such BHCs
                                                      implementing and maintaining                             FR Y–14Q: Securities risk, 2,432 hours;               to request prior approval from the
                                                      technical systems. Under the proposal,                   Retail risk, 1,976 hours, Pre-provision               Federal Reserve under certain
                                                         49 A large and noncomplex firm would be
                                                                                                               net revenue (PPNR), 108,072 hours;                    circumstances before making a capital
                                                      required to report line item 138 of the income
                                                                                                               Wholesale, 23,104 hours; Trading,                     distribution.
                                                      statement, as that line item is currently derived        46,224 hours; Regulatory capital                         Current Actions: The proposed rule
                                                      from the retail repurchase sub-schedule.                 transitions, 3,496 hours; Regulatory                  contains requirements subject to the


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                                                      67252                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      PRA. The collection of information                      page of the FR 2886b; minus (D) assets                recordkeeping (225.8(e)(1)(i)) (LISCC
                                                      revised by this final rule is found in                  of a federal savings association, federal             and large and complex firms), 238,400
                                                      section 225.8 of Regulation Y (12 CFR                   savings bank, or thrift subsidiary, as                hours; Annual capital planning
                                                      part 225). Under section 225.8(f)(2) of                 reported on the Report of Condition and               recordkeeping (225.8(e)(1)(i) (large and
                                                      the proposal, large and noncomplex                      Income (Call Report) as of December 31,               noncomplex firms), 160,560 hours;
                                                      firms would no longer be subject to the                 2016. Performing this calculation is                  annual capital planning reporting
                                                      provisions of the Board’s capital plan                  expected to require 1 hour per firm.                  (225.8(e)(1)(ii)), 2,240 hours; annual
                                                      rule whereby the Board can object to a                     As noted above, for calculation dates              capital planning recordkeeping
                                                      capital plan on the basis of qualitative                following the initial calculation date,               (225.8(e)(1)(iii)), 2,800 hours; data
                                                      deficiencies in the firm’s capital                      the Federal Reserve is adding a new line              collections reporting ((225.8(e)(3)(i)–
                                                      planning process. In feedback meetings                  item to the FR Y–9LP (Parent Company                  (vi)), 38,190 hours; data collections
                                                      that the Board held on CCAR,                            Only Financial Statements for Large                   reporting (225.8(e)(4)), 1,000 hours;
                                                      participants from large and noncomplex                  Holding Companies) to collect average                 review of capital plans by the Federal
                                                      firms expressed the view that the                       total nonbank assets; however, for the                Reserve reporting (225.8(f)(3)(i)), 32
                                                      provision of the rule permitting the                    December 31, 2016 calculation date, a                 hours; prior approval request
                                                      Board to object to a capital plan on the                firm will be required to calculate the                requirements reporting (225.8(g)(1), (3),
                                                      basis of qualitative deficiencies, in their             line item based on existing line items.               & (4)), 2,600 hours; prior approval
                                                      view, required a large and noncomplex                   The burden associated with this line                  request requirements exceptions
                                                      firm to develop a large amount of                       item will be reflected in that collection.            (225.8(g)(3)(iii)(A)), 32 hours; prior
                                                      documentation and stress test models to                    Number of Respondents: 38.                         approval request requirements reports
                                                      the same degree as the largest firms in                    Estimated Average Hours per                        (225.8(g)(6)), 32 hours.
                                                      order to avoid risk of a public objection               Response: Annual capital planning
                                                                                                              recordkeeping (225.8(e)(1)(i)), 11,920                B. Regulatory Flexibility Act
                                                      to its capital plan. Accordingly, this
                                                      revision to section 225.8(f)(2) is                      hours; annual capital planning reporting                 The Board is providing an initial
                                                      expected to reduce the recordkeeping                    (225.8(e)(1)(ii)), 80 hours; annual capital           regulatory flexibility analysis with
                                                      requirements for large and noncomplex                   planning recordkeeping                                respect to this proposed rule. The
                                                      firms by approximately 25 percent, or                   (225.8(e)(1)(iii)), 100 hours; data                   Regulatory Flexibility Act, 5 U.S.C. 601
                                                      3,000 hours for large and noncomplex                    collections reporting ((225.8(e)(3)(i)–               et seq., generally requires that an agency
                                                      firms.                                                  (vi)), 1,005 hours; data collections                  prepare and make available an initial
                                                         The proposed rule defines a large and                reporting (225.8(e)(4)), 100 hours;                   regulatory flexibility analysis in
                                                      noncomplex bank holding company as a                    review of capital plans by the Federal                connection with a notice of proposed
                                                      bank holding company with average                       Reserve reporting (225.8(f)(3)(i)), 16                rulemaking.
                                                      total consolidated assets of $50 billion                hours; prior approval request                            Under regulations issued by the Small
                                                      or more but less than $250 billion,                     requirements reporting (225.8(g)(1), (3),             Business Administration (‘‘SBA’’), a
                                                      consolidated total on-balance sheet                     & (4)), 100 hours; prior approval request             small entity includes a depository
                                                      foreign exposure of less than $10                       requirements exceptions                               institution, bank holding company, or
                                                      billion, and average total nonbank assets               (225.8(g)(3)(iii)(A)), 16 hours; prior                savings and loan holding company with
                                                      of less than $75 billion. While the total               approval request requirements reports                 total assets of $550 million or less (a
                                                      consolidated assets and on-balance                      (225.8(g)(6)), 16 hours.                              small banking organization).50 As of
                                                      sheet foreign exposure measures are                        Current Estimated Annual Burden                    June 30, 2016, there were approximately
                                                      calculated for purposes of other                        Hours: Annual capital planning                        594 small state member banks, 3,203
                                                      regulatory requirements, the proposed                   recordkeeping (225.8(e)(1)(i)), 452,960               small bank holding companies and 162
                                                      average total nonbank assets threshold                  hours; annual capital planning reporting              small savings and loan holding
                                                      is not otherwise calculated for purposes                (225.8(e)(1)(ii)), 2,240 hours; annual                companies. The proposed rule would
                                                      of a regulatory requirement.                            capital planning recordkeeping                        apply only to bank holding companies
                                                         For the first calculation date                       (225.8(e)(1)(iii)), 2,800 hours; data                 with total consolidated asset of $50
                                                      (December 31, 2016), firms will be                      collections reporting ((225.8(e)(3)(i)–               billion or more. Companies that would
                                                      required to calculate nonbank assets by                 (vi)), 38,190 hours; data collections                 be subject to the proposed rule therefore
                                                      aggregating items reported on other                     reporting (225.8(e)(4)), 1,000 hours;                 substantially exceed the $550 million
                                                      reporting forms. Specifically, nonbank                  review of capital plans by the Federal                total asset threshold at which a
                                                      assets would be calculated as (A) total                 Reserve reporting (225.8(f)(3)(i)), 32                company is considered a small company
                                                      combined nonbank assets of nonbank                      hours; prior approval request                         under SBA regulations. Therefore, there
                                                      subsidiaries, as reported on line 15a of                requirements reporting (225.8(g)(1), (3),             are no significant alternatives to the
                                                      Schedule PC–B of the Parent Company                     & (4)), 2,600 hours; prior approval                   proposed rule that would have less
                                                      Only Financial Statements for Large                     request requirements exceptions                       economic impact on small banking
                                                      Holding Companies (FR Y–9LP) as of                      (225.8(g)(3)(iii)(A)), 32 hours; prior                organizations. As discussed above, the
                                                      December 31, 2016; plus (B) the total                   approval request requirements reports                 projected reporting, recordkeeping, and
                                                      amount of equity investments in                         (225.8(g)(6)), 32 hours.                              other compliance requirements of the
                                                      nonbank subsidiaries and associated                        Proposed Revisions Only Change in                  rule are expected to be small. The Board
                                                      companies as reported on line 2a of                     Estimated Average Hours per Response:                 does not believe that the rule duplicates,
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                                                      Schedule PC–A of the FR Y–9LP as of                     For large and noncomplex firms:                       overlaps, or conflicts with any other
                                                      December 31, 2016; plus (C) assets of                   Annual capital planning recordkeeping                 Federal rules. In light of the foregoing,
                                                      each Edge and Agreement Corporation,                    (225.8(e)(1)(i)), 8,920 hours.                        the Board does not believe that the final
                                                      as reported on the Consolidated Report                     Proposed Revisions Only Change in                  rule would have a significant economic
                                                      of Condition and Income for Edge and                    Estimated Annual Burden Hours:
                                                      Agreement Corporations (FR 2886b) as                    Annual capital planning reporting                        50 See 13 CFR 121.201. Effective July 14, 2014, the

                                                      of December 31, 2016, to the extent such                                                                      Small Business Administration revised the size
                                                                                                              (225.8(e)(1)(ii)): ¥54,000 hours.                     standards for banking organizations to $550 million
                                                      corporation is designated as                               Proposed Total Estimated Annual                    in assets from $500 million in assets. 79 FR 33647
                                                      ‘‘Nonbanking’’ in the box on the front                  Burden Hours: Annual capital planning                 (June 12, 2014).



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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                            67253

                                                      impact on a substantial number of small                 PART 225—BANK HOLDING                                 consolidated assets fall below $50
                                                      entities.                                               COMPANIES AND CHANGE IN BANK                          billion for each of four consecutive
                                                         The Board welcomes comment on all                    CONTROL (REGULATION Y)                                quarters, as reported on the FR Y–9C
                                                      aspects of its analysis. A final regulatory                                                                   and effective on the as-of date of the
                                                      flexibility analysis will be conducted                  ■ 1. The authority citation for part 225              fourth consecutive FR Y–9C.
                                                      after consideration of comments                         continues to read as follows:                            (4) Reservation of authority. Nothing
                                                      received during the public comment                        Authority: 12 U.S.C. 1817(j)(13), 1818,             in this section shall limit the authority
                                                      period.                                                 1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b),         of the Federal Reserve to issue a capital
                                                                                                              1972(1), 3106, 3108, 3310, 3331–3351, 3906,           directive or take any other supervisory
                                                      C. Solicitation of Comments of Use of                   3907, and 3909; 15 U.S.C. 1681s, 1681w,               or enforcement action, including an
                                                      Plain Language                                          6801 and 6805.                                        action to address unsafe or unsound
                                                         Section 722 of the Gramm-Leach-                                                                            practices or conditions or violations of
                                                                                                              Subpart A—General Provisions
                                                      Bliley Act (Pub. L. 106–102, 113 Stat.                                                                        law.
                                                      1338, 1471, 12 U.S.C. 4809) requires the                ■ 2. Section 225.8 is revised to read as                 (5) Rule of construction. Unless the
                                                      federal banking agencies to use plain                   follows:                                              context otherwise requires, any
                                                      language in all proposed and final rules                                                                      reference to bank holding company in
                                                                                                              § 225.8   Capital planning.
                                                      published after January 1, 2000. The                                                                          this section shall include a U.S.
                                                                                                                (a) Purpose. This section establishes               intermediate holding company and shall
                                                      Board has sought to present the
                                                                                                              capital planning and prior notice and                 include a nonbank financial company
                                                      proposed rule in a simple and
                                                                                                              approval requirements for capital                     supervised by the Board to the extent
                                                      straightforward manner, and invites
                                                                                                              distributions by certain bank holding                 this section is made applicable pursuant
                                                      comment on the use of plain language.
                                                                                                              companies.                                            to a rule or order of the Board.
                                                         For example:                                           (b) Scope and reservation of                           (c) Transitional arrangements. (1)
                                                         • Have we organized the material to                  authority—(1) Applicability. Except as                Transition periods for certain bank
                                                      suit your needs? If not, how could the                  provided in paragraph (c) of this                     holding companies. (i) A bank holding
                                                      rule be more clearly stated?                            section, this section applies to:                     company that meets the $50 billion
                                                         • Are the requirements in the rule                     (i) Any top-tier bank holding
                                                                                                                                                                    asset threshold (as measured under
                                                      clearly stated? If not, how could the rule              company domiciled in the United States
                                                                                                                                                                    paragraph (b) of this section) on or
                                                      be more clearly stated?                                 with average total consolidated assets of
                                                                                                                                                                    before September 30 of a calendar year
                                                         • Do the regulations contain technical               $50 billion or more ($50 billion asset
                                                                                                                                                                    must comply with the requirements of
                                                      language or jargon that is not clear? If                threshold);
                                                                                                                (ii) Any other bank holding company                 this section beginning on January 1 of
                                                      so, which language requires                                                                                   the next calendar year, unless that time
                                                                                                              domiciled in the United States that is
                                                      clarification?                                                                                                is extended by the Board in writing.
                                                                                                              made subject to this section, in whole or
                                                         • Would a different format (grouping                 in part, by order of the Board;                          (ii) A bank holding company that
                                                      and order of sections, use of headings,                   (iii) Any U.S. intermediate holding                 meets the $50 billion asset threshold
                                                      paragraphing) make the regulation                       company subject to this section                       after September 30 of a calendar year
                                                      easier to understand? If so, what                       pursuant to 12 CFR 252.153; and                       must comply with the requirements of
                                                      changes would make the regulation                         (iv) Any nonbank financial company                  this section beginning on January 1 of
                                                      easier to understand?                                   supervised by the Board that is made                  the second calendar year after the bank
                                                         • Would more, but shorter, sections                  subject to this section pursuant to a rule            holding company meets the $50 billion
                                                      be better? If so, which sections should                 or order of the Board.                                asset threshold, unless that time is
                                                      be changed?                                               (2) Average total consolidated assets.              extended by the Board in writing.
                                                         • What else could we do to make the                  For purposes of this section, average                    (iii) The Board or the appropriate
                                                      regulation easier to understand?                        total consolidated assets means the                   Reserve Bank with the concurrence of
                                                                                                              average of the total consolidated assets              the Board, may require a bank holding
                                                      List of Subjects                                        as reported by a bank holding company                 company described in paragraph
                                                      12 CFR Part 225                                         on its Consolidated Financial                         (c)(1)(i) or (ii) of this section to comply
                                                                                                              Statements for Bank Holding Companies                 with any or all of the requirements in
                                                        Administrative practice and                           (FR Y–9C) for the four most recent                    paragraphs (e)(1), (e)(3), (f), or (g) of this
                                                      procedure, Banks, Banking, Capital                      consecutive quarters. If the bank                     section if the Board or appropriate
                                                      planning, Holding companies, Reporting                  holding company has not filed the FR                  Reserve Bank with concurrence of the
                                                      and recordkeeping requirements,                         Y–9C for each of the four most recent                 Board, determines that the requirement
                                                      Securities, Stress testing.                             consecutive quarters, average total                   is appropriate on a different date based
                                                      12 CFR Part 252                                         consolidated assets means the average of              on the company’s risk profile, scope of
                                                                                                              the company’s total consolidated assets,              operation, or financial condition and
                                                        Administrative practice and                           as reported on the company’s FR Y–9C,                 provides prior notice to the company of
                                                      procedure, Banks, Banking, Capital                      for the most recent quarter or                        the determination.
                                                      planning, Federal Reserve System,                       consecutive quarters, as applicable.                     (2) Transition periods for subsidiaries
                                                      Holding companies, Reporting and                        Average total consolidated assets are                 of certain foreign banking organizations.
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                                                      recordkeeping requirements, Securities,                 measured on the as-of date of the most                (i) U.S. intermediate holding companies.
                                                      Stress testing.                                         recent FR Y–9C used in the calculation                (A) A U.S. intermediate holding
                                                      Authority and Issuance                                  of the average.                                       company required to be established or
                                                                                                                (3) Ongoing applicability. A bank                   designated pursuant to 12 CFR 252.153
                                                        For the reasons stated in the                         holding company (including any                        on or before September 30 of a calendar
                                                      SUPPLEMENTARY INFORMATION,    the Board                 successor bank holding company) that is               year must comply with the requirements
                                                      of Governors of the Federal Reserve                     subject to any requirement in this                    of this section beginning on January 1 of
                                                      System proposes to amend 12 CFR                         section shall remain subject to such                  the next calendar year, unless that time
                                                      chapter II as follows:                                  requirements unless and until its total               is extended by the Board in writing.


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                                                      67254                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                         (B) A U.S. intermediate holding                      Large Holding Companies (FR Y–9LP) as                    (7) Capital plan cycle means the
                                                      company required to be established or                   of December 31, 2016; plus                            period beginning on January 1 of a
                                                      designated pursuant to 12 CFR 252.153                      (B) The total amount of equity                     calendar year and ending on December
                                                      after September 30 of a calendar year                   investments in nonbank subsidiaries                   31 of that year.
                                                      must comply with the requirements of                    and associated companies as reported                     (8) Capital policy means a bank
                                                      this section beginning on January 1 of                  on line 2a of Schedule PC–A of the FR                 holding company’s written assessment
                                                      the second calendar year after the U.S.                 Y–9LP as of December 31, 2016 (except                 of the principles and guidelines used for
                                                      intermediate holding company is                         that any investments reflected in (A)                 capital planning, capital issuance,
                                                      required to be established, unless that                 may be eliminated); plus                              capital usage and distributions,
                                                      time is extended by the Board in                           (C) Assets of each Edge and                        including internal capital goals; the
                                                      writing.                                                Agreement Corporation, as reported on                 quantitative or qualitative guidelines for
                                                         (C) The Board or the appropriate                     the Consolidated Report of Condition                  capital distributions; the strategies for
                                                      Reserve Bank with the concurrence of                    and Income for Edge and Agreement                     addressing potential capital shortfalls;
                                                      the Board, may require a U.S.                           Corporations (FR 2886b) as of December                and the internal governance procedures
                                                      intermediate holding company                            31, 2016, to the extent such corporation              around capital policy principles and
                                                      described in paragraph (c)(2)(i)(A) or (B)              is designated as ‘‘Nonbanking’’ in the                guidelines.
                                                      of this section to comply with any or all               box on the front page of the FR 2886b;                   (9) Large and noncomplex bank
                                                      of the requirements in paragraphs (e)(1),               minus                                                 holding company means any bank
                                                      (e)(3), (f), or (g) of this section if the                 (D) Assets of each federal savings                 holding company subject to this section
                                                      Board or appropriate Reserve Bank with                  association, federal savings bank, or                 that has, as of December 31 of the
                                                      concurrence of the Board, determines                    thrift subsidiary, as reported on the                 calendar year prior to the capital plan
                                                      that the requirement is appropriate on a                Report of Condition and Income (Call                  cycle:
                                                                                                                                                                       (i) Average total consolidated assets of
                                                      different date based on the company’s                   Report) as of December 31, 2016.
                                                                                                                                                                    less than $250 billion;
                                                      risk profile, scope of operation, or                       (ii) For purposes of any capital plan                 (ii) Consolidated total on-balance
                                                      financial condition and provides prior                  cycles beginning on or after January 1,               sheet foreign exposure at the most
                                                      notice to the company of the                            2018, the average of the total nonbank                recent year-end equal to less than $10
                                                      determination.                                          assets of a holding company subject to                billion (where total on-balance sheet
                                                         (ii) Bank holding company                            the Federal Reserve Board’s capital plan              foreign exposure equals total foreign
                                                      subsidiaries of U.S. intermediate                       rule, calculated in accordance with the               countries cross-border claims on an
                                                      holding companies required to be                        instructions to the FR Y–9LP, for the                 ultimate-risk basis, plus total foreign
                                                      established by July 1, 2016. (A)                        four most recent consecutive quarters                 countries claims on local residents on
                                                      Notwithstanding any other requirement                   or, if the bank holding company has not               an ultimate-risk basis, plus total foreign
                                                      in this section, a bank holding company                 filed the FR Y–9LP for each of the four               countries fair value of foreign exchange
                                                      that is a subsidiary of a U.S.                          most recent consecutive quarters, for the             and derivative products, calculated in
                                                      intermediate holding company (or, with                  most recent quarter or consecutive                    accordance with the Federal Financial
                                                      the mutual consent of the company and                   quarters, as applicable.                              Institutions Examination Council
                                                      Board, another bank holding company                        (3) BHC stress scenario means a                    (FFIEC) 009 Country Exposure Report);
                                                      domiciled in the United States) shall                   scenario designed by a bank holding                   and
                                                      remain subject to paragraph (e) of this                 company that stresses the specific                       (iii) Average total nonbank assets of
                                                      section until December 31, 2017, and                    vulnerabilities of the bank holding                   less than $75 billion.
                                                      shall remain subject to the requirements                company’s risk profile and operations,                   (10) Minimum regulatory capital ratio
                                                      of paragraphs (f) and (g) of this section               including those related to the                        means any minimum regulatory capital
                                                      until the Board issues an objection or                  company’s capital adequacy and                        ratio that the Federal Reserve may
                                                      non-objection to the capital plan of the                financial condition.                                  require of a bank holding company, by
                                                      relevant U.S. intermediate holding                         (4) Capital action means any issuance              regulation or order, including the bank
                                                      company.                                                or redemption of a debt or equity capital             holding company’s tier 1 and
                                                         (B) After the time periods set forth in              instrument, any capital distribution, and             supplementary leverage ratios as
                                                      paragraph (c)(2)(ii)(A) of this section,                any similar action that the Federal                   calculated under 12 CFR part 217,
                                                      this section will cease to apply to a bank              Reserve determines could impact a bank                including the deductions required
                                                      holding company that is a subsidiary of                 holding company’s consolidated capital.               under 12 CFR 248.12, as applicable, and
                                                      a U.S. intermediate holding company,                       (5) Capital distribution means a                   the bank holding company’s common
                                                      unless otherwise determined by the                      redemption or repurchase of any debt or               equity tier 1, tier 1, and total risk-based
                                                      Board in writing.                                       equity capital instrument, a payment of               capital ratios as calculated under 12
                                                         (d) Definitions. For purposes of this                common or preferred stock dividends, a                CFR part 217, including the deductions
                                                      section, the following definitions apply:               payment that may be temporarily or                    required under 12 CFR 248.12 and the
                                                         (1) Advanced approaches means the                    permanently suspended by the issuer on                transition provisions at 12 CFR
                                                      risk-weighted assets calculation                        any instrument that is eligible for                   217.1(f)(4) and 217.300; except that the
                                                      methodologies at 12 CFR part 217,                       inclusion in the numerator of any                     bank holding company shall not use the
                                                      subpart E, as applicable, and any                       minimum regulatory capital ratio, and                 advanced approaches to calculate its
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                                                      successor regulation.                                   any similar transaction that the Federal              regulatory capital ratios.
                                                         (2) Average total nonbank assets                     Reserve determines to be in substance a                  (11) Nonbank financial company
                                                      means:                                                  distribution of capital.                              supervised by the Board means a
                                                         (i) For purposes of the capital plan                    (6) Capital plan means a written                   company that the Financial Stability
                                                      cycle beginning January 1, 2017:                        presentation of a bank holding                        Oversight Council has determined
                                                         (A) Total combined nonbank assets of                 company’s capital planning strategies                 under section 113 of the Dodd-Frank
                                                      nonbank subsidiaries, as reported on                    and capital adequacy process that                     Act (12 U.S.C. 5323) shall be supervised
                                                      line 15a of Schedule PC–B of the Parent                 includes the mandatory elements set                   by the Board and for which such
                                                      Company Only Financial Statements for                   forth in paragraph (e)(2) of this section.            determination is still in effect.


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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                          67255

                                                         (12) Planning horizon means the                         (C) A description of all planned                   holding company’s capital plan under
                                                      period of at least nine consecutive                     capital actions over the planning                     this section.
                                                      quarters, beginning with the quarter                    horizon.                                                 (4) Re-submission of a capital plan. (i)
                                                      preceding the quarter in which the bank                    (ii) A detailed description of the bank            A bank holding company must update
                                                      holding company submits its capital                     holding company’s process for assessing               and re-submit its capital plan to the
                                                      plan, over which the relevant                           capital adequacy, including:                          appropriate Reserve Bank within 30
                                                      projections extend.                                        (A) A discussion of how the bank                   calendar days of the occurrence of one
                                                         (13) Tier 1 capital has the same                     holding company will, under expected                  of the following events:
                                                      meaning as under 12 CFR part 217.                       and stressful conditions, maintain                       (A) The bank holding company
                                                         (14) U.S. intermediate holding                       capital commensurate with its risks,                  determines there has been or will be a
                                                      company means the top-tier U.S.                         maintain capital above the minimum                    material change in the bank holding
                                                      company that is required to be                          regulatory capital ratios, and serve as a             company’s risk profile, financial
                                                      established pursuant to 12 CFR 252.153.                 source of strength to its subsidiary                  condition, or corporate structure since
                                                                                                              depository institutions;                              the bank holding company last
                                                         (e) General requirements. (1) Annual
                                                                                                                 (B) A discussion of how the bank                   submitted the capital plan to the Board
                                                      capital planning. (i) A bank holding
                                                                                                              holding company will, under expected                  and the appropriate Reserve Bank under
                                                      company must develop and maintain a
                                                                                                              and stressful conditions, maintain                    this section; or
                                                      capital plan.                                                                                                    (B) The Board or the appropriate
                                                                                                              sufficient capital to continue its
                                                         (ii) A bank holding company must                     operations by maintaining ready access                Reserve Bank with concurrence of the
                                                      submit its complete capital plan to the                 to funding, meeting its obligations to                Board, directs the bank holding
                                                      Board and the appropriate Reserve Bank                  creditors and other counterparties, and               company in writing to revise and
                                                      by April 5 of each calendar year, or such               continuing to serve as a credit                       resubmit its capital plan for any of the
                                                      later date as directed by the Board or by               intermediary;                                         following reasons:
                                                      the appropriate Reserve Bank with                          (iii) The bank holding company’s                      (1) The capital plan is incomplete or
                                                      concurrence of the Board.                               capital policy; and                                   the capital plan, or the bank holding
                                                         (iii) The bank holding company’s                        (iv) A discussion of any expected                  company’s internal capital adequacy
                                                      board of directors or a designated                      changes to the bank holding company’s                 process, contains material weaknesses;
                                                      committee thereof must at least                         business plan that are likely to have a                  (2) There has been, or will likely be,
                                                      annually and prior to submission of the                 material impact on the bank holding                   a material change in the bank holding
                                                      capital plan under paragraph (e)(1)(ii) of              company’s capital adequacy or                         company’s risk profile (including a
                                                      this section:                                           liquidity.                                            material change in its business strategy
                                                         (A) Review the robustness of the bank                   (3) Data collection. Upon the request              or any risk exposure), financial
                                                      holding company’s process for assessing                 of the Board or appropriate Reserve                   condition, or corporate structure;
                                                      capital adequacy,                                       Bank, the bank holding company shall                     (3) The BHC stress scenario(s) are not
                                                         (B) Ensure that any deficiencies in the              provide the Federal Reserve with                      appropriate for the bank holding
                                                      bank holding company’s process for                      information regarding:                                company’s business model and
                                                      assessing capital adequacy are                             (i) The bank holding company’s                     portfolios, or changes in financial
                                                      appropriately remedied; and                             financial condition, including its                    markets or the macro-economic outlook
                                                         (C) Approve the bank holding                         capital;                                              that could have a material impact on a
                                                      company’s capital plan.                                    (ii) The bank holding company’s                    bank holding company’s risk profile and
                                                         (2) Mandatory elements of capital                    structure;                                            financial condition require the use of
                                                                                                                 (iii) Amount and risk characteristics              updated scenarios; or
                                                      plan. A capital plan must contain at
                                                                                                              of the bank holding company’s on- and                    (4) The capital plan or the condition
                                                      least the following elements:
                                                                                                              off-balance sheet exposures, including                of the bank holding company raise any
                                                         (i) An assessment of the expected uses               exposures within the bank holding                     of the issues described in paragraph
                                                      and sources of capital over the planning                company’s trading account, other                      (f)(2)(ii) of this section.
                                                      horizon that reflects the bank holding                  trading-related exposures (such as                       (ii) A bank holding company may
                                                      company’s size, complexity, risk profile,               counterparty-credit risk exposures) or                resubmit its capital plan to the Federal
                                                      and scope of operations, assuming both                  other items sensitive to changes in                   Reserve if the Board or the appropriate
                                                      expected and stressful conditions,                      market factors, including, as                         Reserve Bank objects to the capital plan.
                                                      including:                                              appropriate, information about the                       (iii) The Board or the appropriate
                                                         (A) Estimates of projected revenues,                 sensitivity of positions to changes in                Reserve Bank with concurrence of the
                                                      losses, reserves, and pro forma capital                 market rates and prices;                              Board, may extend the 30-day period in
                                                      levels, including any minimum                              (iv) The bank holding company’s                    paragraph (e)(4)(i) of this section for up
                                                      regulatory capital ratios (for example,                 relevant policies and procedures,                     to an additional 60 calendar days, or
                                                      leverage, tier 1 risk-based, and total risk-            including risk management policies and                such longer period as the Board or the
                                                      based capital ratios) and any additional                procedures;                                           appropriate Reserve Bank, with
                                                      capital measures deemed relevant by the                    (v) The bank holding company’s                     concurrence of the Board, determines,
                                                      bank holding company, over the                          liquidity profile and management;                     in its discretion, appropriate.
                                                      planning horizon under expected                            (vi) The loss, revenue, and expense                   (iv) Any updated capital plan must
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                                                      conditions and under a range of                         estimation models used by the bank                    satisfy all the requirements of this
                                                      scenarios, including any scenarios                      holding company for stress scenario                   section; however, a bank holding
                                                      provided by the Federal Reserve and at                  analysis, including supporting                        company may continue to rely on
                                                      least one BHC stress scenario;                          documentation regarding each model’s                  information submitted as part of a
                                                         (B) A discussion of the results of any               development and validation; and                       previously submitted capital plan to the
                                                      stress test required by law or regulation,                 (vii) Any other relevant qualitative or            extent that the information remains
                                                      and an explanation of how the capital                   quantitative information requested by                 accurate and appropriate.
                                                      plan takes these results into account;                  the Board or by the appropriate Reserve                  (5) Confidential treatment of
                                                      and                                                     Bank to facilitate review of the bank                 information submitted. The


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                                                      67256                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      confidentiality of information submitted                  (2) Federal Reserve action on a capital             any proposed capital distribution would
                                                      to the Board under this section and                     plan. (i) Timing of action. The Board or              constitute an unsafe or unsound
                                                      related materials shall be determined in                the appropriate Reserve Bank with                     practice, the Board or the appropriate
                                                      accordance with applicable exemptions                   concurrence of the Board, will object, in             Reserve Bank would consider whether
                                                      under the Freedom of Information Act                    whole or in part, to the capital plan or              the bank holding company is and would
                                                      (5 U.S.C. 552(b)) and the Board’s Rules                 provide the bank holding company with                 remain in sound financial condition
                                                      Regarding Availability of Information                   a notice of non-objection to the capital              after giving effect to the capital plan and
                                                      (12 CFR part 261).                                      plan:                                                 all proposed capital distributions.
                                                         (f) Review of capital plans by the                     (A) By June 30 of the calendar year in                 (iii) Notification of decision. The
                                                      Federal Reserve; publication of                         which a capital plan was submitted                    Board or the appropriate Reserve Bank
                                                      summary results. (1) Considerations and                 pursuant to paragraph (e)(1)(ii) of this              will notify the bank holding company in
                                                      inputs. (i) The Board or the appropriate                section; and                                          writing of the reasons for a decision to
                                                      Reserve Bank with concurrence of the                      (B) For a capital plan resubmitted                  object to a capital plan.
                                                      Board, will consider the following                      pursuant to paragraph (e)(4) of this                     (iv) General distribution limitation. If
                                                      factors in reviewing a bank holding                     section, within 75 calendar days after                the Board or the appropriate Reserve
                                                      company’s capital plan:                                 the date on which a capital plan is                   Bank objects to a capital plan and until
                                                         (A) The comprehensiveness of the                     resubmitted, unless the Board provides                such time as the Board or the
                                                      capital plan, including the extent to                   notice to the company that it is                      appropriate Reserve Bank with
                                                      which the analysis underlying the                       extending the time period.                            concurrence of the Board, issues a non-
                                                                                                                (ii) Objection. (A) Large and                       objection to the bank holding company’s
                                                      capital plan captures and addresses
                                                                                                              noncomplex bank holding companies.                    capital plan, the bank holding company
                                                      potential risks stemming from activities
                                                                                                              The Board, or the appropriate Reserve                 may not make any capital distribution,
                                                      across the firm and the company’s
                                                                                                              Bank with concurrence of the Board,                   other than capital distributions arising
                                                      capital policy;
                                                                                                              may object to a capital plan submitted                from the issuance of a regulatory capital
                                                         (B) The reasonableness of the bank
                                                                                                              by a large and noncomplex bank                        instrument eligible for inclusion in the
                                                      holding company’s capital plan, the
                                                                                                              holding company if it determines that                 numerator of a minimum regulatory
                                                      assumptions and analysis underlying
                                                                                                              the bank holding company has not                      capital ratio or capital distributions with
                                                      the capital plan, and the robustness of
                                                                                                              demonstrated an ability to maintain                   respect to which the Board or the
                                                      its capital adequacy process; and
                                                                                                              capital above each minimum regulatory                 appropriate Reserve Bank has indicated
                                                         (C) The bank holding company’s
                                                                                                              capital ratio on a pro forma basis under              in writing its non-objection.
                                                      ability to maintain capital above each                                                                           (v) Publication of summary results.
                                                                                                              expected and stressful conditions
                                                      minimum regulatory capital ratio on a                                                                         The Board may disclose publicly its
                                                                                                              throughout the planning horizon.
                                                      pro forma basis under expected and                        (B) Bank holding companies that are                 decision to object or not object to a bank
                                                      stressful conditions throughout the                     not large and noncomplex bank holding                 holding company’s capital plan under
                                                      planning horizon, including but not                     companies. The Board or the                           this section, along with a summary of
                                                      limited to any scenarios required under                 appropriate Reserve Bank with                         the Board’s analyses of that company.
                                                      paragraphs (e)(2)(i)(A) and (e)(2)(ii) of               concurrence of the Board, may object to               Any disclosure under this paragraph
                                                      this section.                                           a capital plan submitted by a bank                    will occur by June 30 of the calendar
                                                         (ii) The Board or the appropriate                    holding company that is not a large and               year in which a capital plan was
                                                      Reserve Bank with concurrence of the                    noncomplex bank holding company if it                 submitted pursuant to paragraph
                                                      Board, will also consider the following                 determines that:                                      (e)(1)(ii) of this section, unless the Board
                                                      information in reviewing a bank holding                   (1) The bank holding company has                    determines that a later disclosure date is
                                                      company’s capital plan:                                 not demonstrated an ability to maintain               appropriate.
                                                         (A) Relevant supervisory information                 capital above each minimum regulatory                    (3) Request for reconsideration or
                                                      about the bank holding company and its                  capital ratio on a pro forma basis under              hearing. (i) General. Within 15 calendar
                                                      subsidiaries;                                           expected and stressful conditions                     days of receipt of a notice of objection
                                                         (B) The bank holding company’s                       throughout the planning horizon;                      to a capital plan by the Board or the
                                                      regulatory and financial reports, as well                 (2) The bank holding company has                    appropriate Reserve Bank:
                                                      as supporting data that would allow for                 material unresolved supervisory issues,                  (A) A bank holding company may
                                                      an analysis of the bank holding                         including but not limited to issues                   submit a written request to the Board
                                                      company’s loss, revenue, and reserve                    associated with its capital adequacy                  requesting reconsideration of the
                                                      projections;                                            process;                                              objection, including an explanation of
                                                         (C) As applicable, the Federal                         (3) The assumptions and analysis                    why reconsideration should be granted.
                                                      Reserve’s own pro forma estimates of                    underlying the bank holding company’s                 Within 15 calendar days of receipt of
                                                      the firm’s potential losses, revenues,                  capital plan, or the bank holding                     the bank holding company’s request, the
                                                      reserves, and resulting capital adequacy                company’s methodologies and practices                 Board will notify the company of its
                                                      under expected and stressful conditions,                that support its capital planning                     decision to affirm or withdraw the
                                                      including but not limited to any                        process, are not reasonable or                        objection to the bank holding company’s
                                                      scenarios required under paragraphs                     appropriate; or                                       capital plan or a specific capital
                                                      (e)(2)(i)(A) and (e)(2)(ii) of this section,              (4) The bank holding company’s                      distribution; or
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                                                      as well as the results of any stress tests              capital planning process or proposed                     (B) As an alternative to paragraph
                                                      conducted by the bank holding                           capital distributions otherwise                       (f)(3)(i)(A) of this section, a bank
                                                      company or the Federal Reserve; and                     constitute an unsafe or unsound                       holding company may request an
                                                         (D) Other information requested or                   practice, or would violate any law,                   informal hearing on the objection.
                                                      required by the Board or the appropriate                regulation, Board order, directive, or                   (ii) Request for an informal hearing.
                                                      Reserve Bank, as well as any other                      condition imposed by, or written                      (A) A request for an informal hearing
                                                      information relevant, or related, to the                agreement with, the Board or the                      shall be in writing and shall be
                                                      bank holding company’s capital                          appropriate Reserve Bank. In                          submitted within 15 calendar days of a
                                                      adequacy.                                               determining whether a capital plan or                 notice of an objection. The Board may,


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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                         67257

                                                      in its sole discretion, order an informal               the amount described in the capital plan              elements described in paragraph (g)(4)
                                                      hearing if the Board finds that a hearing               for which a non-objection was issued                  of this section; and
                                                      is appropriate or necessary to resolve                  under this section, as measured on an                    (F) The Board or the appropriate
                                                      disputes regarding material issues of                   aggregate basis beginning in the third                Reserve Bank with concurrence of the
                                                      fact.                                                   quarter of the planning horizon through               Board, does not object to the transaction
                                                         (B) An informal hearing shall be held                the quarter at issue; or                              proposed in the notice. In determining
                                                      within 30 calendar days of a request, if                   (iv) The capital distribution would                whether to object to the proposed
                                                      granted, provided that the Board may                    occur after the occurrence of an event                transaction, the Board or the appropriate
                                                      extend this period upon notice to the                   requiring resubmission under                          Reserve Bank shall apply the criteria
                                                      requesting party.                                       paragraphs (e)(4)(i)(A) or (B) of this                described in paragraph (g)(5)(ii) of this
                                                         (C) Written notice of the final decision             section and before the Federal Reserve                section.
                                                      of the Board shall be given to the bank                 has acted on the resubmitted capital                     (ii) The exception in this paragraph
                                                      holding company within 60 calendar                      plan.                                                 (g)(2) shall not apply if the Board or the
                                                      days of the conclusion of any informal                     (2) Exception for well capitalized                 appropriate Reserve Bank notifies the
                                                      hearing ordered by the Board, provided                  bank holding companies. (i) A bank                    bank holding company in writing that it
                                                      that the Board may extend this period                   holding company may make a capital                    is ineligible for this exception.
                                                      upon notice to the requesting party.                    distribution for which the dollar amount                 (3) Net distribution limitation. (i)
                                                         (D) While the Board’s final decision is              exceeds the amount described in the                   General. Notwithstanding a notice of
                                                      pending and until such time as the                      capital plan for which a non-objection                non-objection under paragraph (f)(2)(i)
                                                      Board or the appropriate Reserve Bank                   was issued under paragraph (f)(2)(i) of               of this section, a bank holding company
                                                      with concurrence of the Board issues a                  this section if the following conditions
                                                                                                                                                                    must reduce its capital distributions in
                                                      non-objection to the bank holding                       are satisfied:
                                                                                                                                                                    accordance with paragraph (g)(3)(ii) of
                                                      company’s capital plan, the bank                           (A) The bank holding company is, and
                                                                                                              after the capital distribution would                  this section if the bank holding
                                                      holding company may not make any
                                                                                                              remain, well capitalized as defined in                company raises a smaller dollar amount
                                                      capital distribution, other than those
                                                                                                              § 225.2(r) of Regulation Y (12 CFR                    of capital of a given category of
                                                      capital distributions with respect to
                                                                                                              225.2(r));                                            regulatory capital instruments than it
                                                      which the Board or the appropriate
                                                                                                                 (B) The bank holding company’s                     had included in its capital plan, as
                                                      Reserve Bank has indicated in writing
                                                                                                              performance and capital levels are, and               measured on an aggregate basis
                                                      its non-objection.
                                                         (4) Application of this section to other             after the capital distribution would                  beginning in the third quarter of the
                                                      bank holding companies. The Board                       remain, consistent with its projections               planning horizon through the end of the
                                                      may apply this section, in whole or in                  under expected conditions as set forth                current quarter.
                                                      part, to any other bank holding                         in its capital plan under paragraph                      (ii) Reduction of distributions. (A)
                                                      company by order based on the                           (f)(2)(i) of this section;                            Common equity tier 1 capital. If the
                                                      institution’s size, level of complexity,                   (C) Until March 31, 2017, the annual               bank holding company raises a smaller
                                                      risk profile, scope of operations, or                   aggregate dollar amount of all capital                dollar amount of common equity tier 1
                                                      financial condition.                                    distributions in the period beginning on              capital (as defined in 12 CFR 217.2), the
                                                         (g) Approval requirements for certain                July 1 of a calendar year and ending on               bank holding company must reduce its
                                                      capital actions. (1) Circumstances                      June 30 of the following calendar year                capital distributions relating to common
                                                      requiring approval. Notwithstanding a                   would not exceed the total amounts                    equity tier 1 capital such that the dollar
                                                      notice of non-objection under paragraph                 described in the company’s capital plan               amount of the bank holding company’s
                                                      (f)(2)(i) of this section, a bank holding               for which the bank holding company                    capital distributions, net of the dollar
                                                      company may not make a capital                          received a notice of non-objection by                 amount of its capital raises, (‘‘net
                                                      distribution (excluding any capital                     more than 1.00 percent multiplied by                  distributions’’) relating to common
                                                      distribution arising from the issuance of               the bank holding company’s tier 1                     equity tier 1 capital is no greater than
                                                      a regulatory capital instrument eligible                capital, as reported to the Federal                   the dollar amount of net distributions
                                                      for inclusion in the numerator of a                     Reserve on the bank holding company’s                 relating to common equity tier 1 capital
                                                      minimum regulatory capital ratio) under                 most recent first-quarter FR Y–9C;                    included in its capital plan, as measured
                                                      the following circumstances, unless it                     (D) Beginning April 1, 2017, the                   on an aggregate basis beginning in the
                                                      receives prior approval from the Board                  annual aggregate dollar amount of all                 third quarter of the planning horizon
                                                      or appropriate Reserve Bank pursuant to                 capital distributions in the period                   through the end of the current quarter.
                                                      paragraph (g)(5) of this section:                       beginning on July 1 of a calendar year                   (B) Additional tier 1 capital. If the
                                                         (i) After giving effect to the capital               and ending on June 30 of the following                bank holding company raises a smaller
                                                      distribution, the bank holding company                  calendar year would not exceed the total              dollar amount of additional tier 1
                                                      would not meet a minimum regulatory                     amounts described in the company’s                    capital (as defined in 12 CFR 217.2), the
                                                      capital ratio;                                          capital plan for which the bank holding               bank holding company must reduce its
                                                         (ii) The Board or the appropriate                    company received a notice of non-                     capital distributions relating to
                                                      Reserve Bank with concurrence of the                    objection by more than 0.25 percent                   additional tier 1 capital (other than
                                                      Board, notifies the company in writing                  multiplied by the bank holding                        scheduled payments on additional tier 1
                                                      that the Federal Reserve has determined                 company’s tier 1 capital, as reported to              capital instruments) such that the dollar
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      that the capital distribution would                     the Federal Reserve on the bank holding               amount of the bank holding company’s
                                                      result in a material adverse change to                  company’s most recent first-quarter FR                net distributions relating to additional
                                                      the organization’s capital or liquidity                 Y–9C;                                                 tier 1 capital is no greater than the
                                                      structure or that the company’s earnings                   (E) Between July 1 of a calendar year              dollar amount of net distributions
                                                      were materially underperforming                         and March 15 of the following calendar                relating to additional tier 1 capital
                                                      projections;                                            year, the bank holding company                        included in its capital plan, as measured
                                                         (iii) Except as provided in paragraph                provides the appropriate Reserve Bank                 on an aggregate basis beginning in the
                                                      (g)(2) of this section, the dollar amount               with notice 15 calendar days prior to a               third quarter of the planning horizon
                                                      of the capital distribution will exceed                 capital distribution that includes the                through the end of the current quarter.


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                                                      67258                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                         (C) Tier 2 capital. If the bank holding              between July 1 of a calendar year and                    (C) A description of the capital
                                                      company raises a smaller dollar amount                  March 15 of the following calendar year,              distribution, including for redemptions
                                                      of tier 2 capital (as defined in 12 CFR                 the bank holding company provides the                 or repurchases of securities, the gross
                                                      217.2), the bank holding company must                   appropriate Reserve Bank with notice 15               consideration to be paid and the terms
                                                      reduce its capital distributions relating               calendar days prior to any capital                    and sources of funding for the
                                                      to tier 2 capital (other than scheduled                 distribution in that category of                      transaction, and for dividends, the
                                                      payments on tier 2 capital instruments)                 regulatory capital instruments that                   amount of the dividend(s); and
                                                      such that the dollar amount of the bank                 includes the elements described in                       (D) Any additional information
                                                      holding company’s net distributions                     paragraph (g)(4) of this section; and the             requested by the Board or the
                                                      relating to tier 2 capital is no greater                Board or the appropriate Reserve Bank                 appropriate Reserve Bank (which may
                                                      than the dollar amount of net                           with concurrence of the Board, does not               include, among other things, an
                                                      distributions relating to tier 2 capital                object to the transaction proposed in the             assessment of the bank holding
                                                      included in its capital plan, as measured               notice. In determining whether to object              company’s capital adequacy under a
                                                      on an aggregate basis beginning in the                  to the proposed transaction, the Board                revised stress scenario provided by the
                                                      third quarter of the planning horizon                   or the appropriate Reserve Bank shall                 Federal Reserve, a revised capital plan,
                                                      through the end of the current quarter.                 apply the criteria described in                       and supporting data).
                                                         (iii) Exceptions. Paragraphs (g)(3)(i)               paragraph (g)(5)(ii) of this section; or                 (ii) Any request submitted with
                                                      and (g)(3)(ii) of this section shall not                   (F) Beginning April 1, 2017, to the                respect to a capital distribution
                                                      apply:                                                  extent that the dollar amount by which                described in paragraph (g)(1)(i) of this
                                                         (A) To the extent that the Board or                  the bank holding company’s net                        section shall also include a plan for
                                                      appropriate Reserve Bank indicates in                   distributions exceed the dollar amount                restoring the bank holding company’s
                                                      writing its non-objection pursuant to                   of net distributions included in its                  capital to an amount above a minimum
                                                      paragraph (g)(5) of this section,                       capital plan in the category of regulatory            level within 30 calendar days and a
                                                      following a request for non-objection                   capital instruments described in                      rationale for why the capital
                                                      from the bank holding company that                      paragraph (g)(3)(i) of this section, as               distribution would be appropriate.
                                                      includes all of the information required                measured on an aggregate basis                           (5) Approval of certain capital
                                                      to be submitted under paragraph (g)(4)                  beginning in the third quarter of the                 distributions. (i) The Board or the
                                                      of this section;                                        planning horizon through the end of the               appropriate Reserve Bank with
                                                         (B) To capital distributions arising                 current quarter, is less than 0.25 percent            concurrence of the Board, will act on a
                                                      from the issuance of a regulatory capital               of the bank holding company’s tier 1                  request under this paragraph (g)(5)
                                                      instrument eligible for inclusion in the                capital, as reported to the Federal                   within 30 calendar days after the receipt
                                                      numerator of a minimum regulatory                       Reserve on the bank holding company’s                 of all the information required under
                                                      capital ratio that the bank holding                     most recent first-quarter FR Y–9C;                    paragraph (g)(4) of this section.
                                                      company had not included in its capital                 between July 1 of a calendar year and                    (ii) In acting on a request under this
                                                      plan;                                                   March 15 of the following calendar year,              paragraph, the Board or appropriate
                                                         (C) To the extent that the bank                      the bank holding company provides the                 Reserve Bank will apply the
                                                      holding company raised a smaller dollar                 appropriate Reserve Bank with notice 15               considerations and principles in
                                                      amount of capital in the category of                    calendar days prior to any capital                    paragraph (f) of this section. In addition,
                                                      regulatory capital instruments described                distribution in that category of                      the Board or the appropriate Reserve
                                                      in paragraph (g)(3)(i) of this section due              regulatory capital instruments that                   Bank may disapprove the transaction if
                                                      to employee-directed capital issuances                  includes the elements described in                    the bank holding company does not
                                                      related to an employee stock ownership                  paragraph (g)(4) of this section; and the             provide all of the information required
                                                      plan;                                                   Board or the appropriate Reserve Bank                 to be submitted under paragraph (g)(4)
                                                         (D) To the extent that the bank                      with concurrence of the Board, does not               of this section.
                                                      holding company raised a smaller dollar                 object to the transaction proposed in the                (6) Disapproval and hearing. (i) The
                                                      amount of capital in the category of                    notice. In determining whether to object              Board or the appropriate Reserve Bank
                                                      regulatory capital instruments described                to the proposed transaction, the Board                will notify the bank holding company in
                                                      in paragraph (g)(3)(i) of this section due              or the appropriate Reserve Bank shall                 writing of the reasons for a decision to
                                                      to a planned merger or acquisition that                 apply the criteria described in                       disapprove any proposed capital
                                                      is no longer expected to be                             paragraph (g)(5)(ii) of this section.                 distribution. Within 15 calendar days
                                                      consummated or for which the                               (iv) The exceptions in paragraph                   after receipt of a disapproval by the
                                                      consideration paid is lower than the                    (g)(3)(iii) shall not apply if the Board or           Board, the bank holding company may
                                                      projected price in the capital plan;                    the appropriate Reserve Bank notifies                 submit a written request for a hearing.
                                                         (E) Until March 31, 2017, to the extent              the bank holding company in writing                      (A) The Board may, in its sole
                                                      that the dollar amount by which the                     that it is ineligible for this exception.             discretion, order an informal hearing if
                                                      bank holding company’s net                                 (4) Contents of request. (i) A request             the Board finds that a hearing is
                                                      distributions exceed the dollar amount                  for a capital distribution under this                 appropriate or necessary to resolve
                                                      of net distributions included in its                    section shall be filed between July 1 of              disputes regarding material issues of
                                                      capital plan in the category of regulatory              a calendar year and March 1 of the                    fact.
                                                      capital instruments described in                        following calendar year with the                         (B) An informal hearing shall be held
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                                                      paragraph (g)(3)(i) of this section, as                 appropriate Reserve Bank and the Board                within 30 calendar days of a request, if
                                                      measured on an aggregate basis                          and shall contain the following                       granted, provided that the Board may
                                                      beginning in the third quarter of the                   information:                                          extend this period upon notice to the
                                                      planning horizon through the end of the                    (A) The bank holding company’s                     requesting party.
                                                      current quarter, is less than 1.00 percent              current capital plan or an attestation                   (C) Written notice of the final decision
                                                      of the bank holding company’s tier 1                    that there have been no changes to the                of the Board shall be given to the bank
                                                      capital, as reported to the Federal                     capital plan since it was last submitted              holding company within 60 calendar
                                                      Reserve on the bank holding company’s                   to the Federal Reserve;                               days of the conclusion of any informal
                                                      most recent first-quarter FR Y–9C;                         (B) The purpose of the transaction;                hearing ordered by the Board, provided


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                                                                            Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules                                          67259

                                                      that the Board may extend this period                   the Board will apply to conduct the                   § 252.54   Annual stress test.
                                                      upon notice to the requesting party.                    analysis for each stress test cycle by no                (a) In general. A covered company
                                                        (D) While the Board’s final decision is               later than February 15 of each year,                  must conduct an annual stress test. The
                                                      pending and until such time as the                      except with respect to trading or any                 stress test must be conducted by April
                                                      Board or the appropriate Reserve Bank                   other components of the scenarios and                 5 of each calendar year based on data as
                                                      with concurrence of the Board, approves                 any additional scenarios that the Board               of December 31 of the preceding
                                                      the capital distribution at issue, the                  will apply to conduct the analysis,                   calendar year, unless the time or the
                                                      bank holding company may not make                       which will be communicated by no later                as-of date is extended by the Board in
                                                      such capital distribution.                              than March 1 of that year.                            writing.
                                                                                                              ■ 7. Section 252.46 is amended by                        (b) Scenarios provided by the Board.
                                                      PART 252—ENHANCED PRUDENTIAL                            revising paragraph (b)(1) to read as                  (1) In general. In conducting a stress test
                                                      STANDARDS (REGULATION YY)                               follows:                                              under this section, a covered company
                                                      ■ 3. The authority citation for part 252                                                                      must, at a minimum, use the scenarios
                                                                                                              § 252.46 Review of the Board’s analysis;
                                                      continues to read as follows:                           publication of summary results.                       provided by the Board. Except as
                                                                                                                                                                    provided in paragraphs (b)(2) and (3) of
                                                        Authority: 12 U.S.C. 321–338a, 1467a(g),              *      *    *     *     *                             this section, the Board will provide a
                                                      1818, 1831p–1, 1844(b), 1844(c), 5361, 5365,               (b) Publication of results by the Board.
                                                                                                                                                                    description of the scenarios to each
                                                      5366.                                                   (1) The Board will publicly disclose a
                                                                                                                                                                    covered company no later than February
                                                      ■ 4. Section 252.42 is amended by                       summary of the results of the Board’s
                                                                                                                                                                    15 of the calendar year in which the
                                                      revising paragraph (p) to read as                       analyses of a covered company by June
                                                                                                                                                                    stress test is performed pursuant to this
                                                      follows:                                                30 of the calendar year in which the
                                                                                                                                                                    section.
                                                                                                              stress test was conducted pursuant to 12
                                                      § 252.42   Definitions.                                                                                          (2) Additional components. (i) The
                                                                                                              CFR 252.44.
                                                                                                                                                                    Board may require a covered company
                                                      *     *     *     *     *                               *      *    *     *     *                             with significant trading activity, as
                                                        (p) Stress test cycle means the period                ■ 8. Section 252.52 is amended by
                                                                                                                                                                    determined by the Board and specified
                                                      beginning on January 1 of a calendar                    revising paragraphs (k) and (r) to read as            in the Capital Assessments and Stress
                                                      year and ending on December 31 of that                  follows:                                              Testing report (FR Y–14), to include a
                                                      year.
                                                                                                              § 252.52    Definitions.                              trading and counterparty component in
                                                      *     *     *     *     *                                                                                     its adverse and severely adverse
                                                      ■ 5. Section 252.43 is amended by                       *      *     *     *    *
                                                                                                                (k) Planning horizon means the period               scenarios in the stress test required by
                                                      ■ a. Revising paragraph (b); and                                                                              this section:
                                                      ■ b. Removing paragraph (c).                            of at least nine consecutive quarters,
                                                                                                              beginning on the first day of a stress test              (A) For the stress test cycle beginning
                                                        The revision reads as follows:                                                                              on January 1, 2017, the data used in this
                                                                                                              cycle over which the relevant
                                                      § 252.43   Applicability.                               projections extend.                                   component must be as of a date selected
                                                                                                                                                                    by the Board between January 1, 2017
                                                      *     *    *     *      *                               *      *     *     *    *                             and March 1, 2017, and the Board will
                                                        (b) Transitional arrangements. (1) A                    (r) Stress test cycle means the period
                                                                                                                                                                    communicate the
                                                      bank holding company that becomes a                     beginning on January 1 of a calendar
                                                                                                                                                                    as-of date and a description of the
                                                      covered company on or before                            year and ending on December 31 of that
                                                                                                                                                                    component to the company no later than
                                                      September 30 of a calendar year must                    year.
                                                                                                                                                                    March 1, 2017; and
                                                      comply with the requirements of this                    *      *     *     *    *                                (B) For the stress test cycle beginning
                                                      subpart beginning on January 1 of the                   ■ 9. Section 252.53 is amended by
                                                                                                                                                                    on January 1, 2018, and for each stress
                                                      second calendar year after the bank                     revising paragraph (b) to read as follows:            test cycle beginning thereafter, the data
                                                      holding company becomes a covered
                                                                                                              § 252.53    Applicability.                            used in this component must be as of a
                                                      company, unless that time is extended
                                                                                                              *     *      *     *      *                           date selected by the Board between
                                                      by the Board in writing.
                                                                                                                (b) Transitional arrangements. (1) A                October 1 of the previous calendar year
                                                        (2) A bank holding company that
                                                                                                              bank holding company that becomes a                   and March 1 of the calendar year in
                                                      becomes a covered company after
                                                                                                              covered company on or before                          which the stress test is performed
                                                      September 30 of a calendar year must
                                                                                                              September 30 of a calendar year must                  pursuant to this section, and the Board
                                                      comply with the requirements of this
                                                                                                              comply with the requirements of this                  will communicate the as-of date and a
                                                      subpart beginning on January 1 of the
                                                                                                              subpart beginning on January 1 of the                 description of the component to the
                                                      third calendar year after the bank
                                                                                                              second calendar year after the bank                   company no later than March 1 of the
                                                      holding company becomes a covered
                                                                                                              holding company becomes a covered                     calendar year in which the stress test is
                                                      company, unless that time is extended
                                                                                                              company, unless that time is extended                 performed pursuant to this section.
                                                      by the Board in writing.
                                                      ■ 6. Section 252.44 is amended by                       by the Board in writing.                              *      *     *     *     *
                                                      revising paragraph (b) to read as follows:                (2) A bank holding company that                        (4) Notice and response—(i)
                                                                                                              becomes a covered company after                       Notification of additional component. If
                                                      § 252.44   Annual analysis conducted by the             September 30 of a calendar year must                  the Board requires a covered company
                                                      Board.                                                  comply with the requirements of this                  to include one or more additional
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                                                      *     *     *    *     *                                subpart beginning on January 1 of the                 components in its adverse and severely
                                                        (b) Economic and financial scenarios                  third calendar year after the bank                    adverse scenarios under paragraph (b)(2)
                                                      related to the Board’s analysis. The                    holding company becomes a covered                     of this section or to use one or more
                                                      Board will conduct its analysis under                   company, unless that time is extended                 additional scenarios under paragraph
                                                      this section using a minimum of three                   by the Board in writing.                              (b)(3) of this section, the Board will
                                                      different scenarios, including a baseline               ■ 10. Section 252.54 is amended by                    notify the company in writing. The
                                                      scenario, adverse scenario, and severely                revising paragraphs (a), (b)(1), (b)(2)(i),           Board will provide such notification no
                                                      adverse scenario. The Board will notify                 (b)(4)(i), and (b)(4)(iii) to read as                 later than December 31 of the preceding
                                                      covered companies of the scenarios that                 follows:                                              calendar year. The notification will


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                                                      67260                 Federal Register / Vol. 81, No. 190 / Friday, September 30, 2016 / Proposed Rules

                                                      include a general description of the                    the stress test is performed pursuant to              DATES:  Submit either electronic or
                                                      additional component(s) or additional                   12 CFR 252.54, unless that time is                    written comments on FDA’s
                                                      scenario(s) and the basis for requiring                 extended by the Board in writing.                     environmental assessment by October
                                                      the company to include the additional                     (2) A covered company must report                   31, 2016.
                                                      component(s) or additional scenario(s).                 the results of the stress test required               ADDRESSES: You may submit comments
                                                      *      *      *    *      *                             under § 252.55 to the Board in the                    as follows:
                                                        (iii) Description of component. The                   manner and form prescribed by the
                                                      Board will respond in writing within 14                 Board. Such results must be submitted                 Electronic Submissions
                                                      calendar days of receipt of the                         by October 5 of the calendar year in                    Submit electronic comments in the
                                                      company’s request. The Board will                       which the stress test is performed                    following way:
                                                      provide the covered company with a                      pursuant to 12 CFR 252.55, unless that                  • Federal eRulemaking Portal: http://
                                                      description of any additional                           time is extended by the Board in                      www.regulations.gov. Follow the
                                                      component(s) or additional scenario(s)                  writing.                                              instructions for submitting comments.
                                                      by March 1 of the calendar year in                      *     *     *      *     *                            Comments submitted electronically,
                                                      which the stress test is performed                      ■ 13. Section 252.58 is amended by                    including attachments, to http://
                                                      pursuant to this section.                               revising paragraph (a)(1)(ii) to read as              www.regulations.gov will be posted to
                                                      ■ 11. Section 252.55 is amended by                      follows:                                              the docket unchanged. Because your
                                                      revising paragraphs (a), (b)(4)(i), and                                                                       comment will be made public, you are
                                                      (b)(4)(iii) to read as follows:                         § 252.58    Disclosure of stress test results.
                                                                                                                                                                    solely responsible for ensuring that your
                                                                                                                 (a) * * *                                          comment does not include any
                                                      § 252.55   Mid-cycle stress test.                          (1) * * *                                          confidential information that you or a
                                                        (a) Mid-cycle stress test requirement.                   (ii) A covered company must publicly               third party may not wish to be posted,
                                                      In addition to the stress test required                 disclose a summary of the results of the              such as medical information, your or
                                                      under § 252.54, a covered company                       stress test required under § 252.55. This             anyone else’s Social Security number, or
                                                      must conduct a mid-cycle stress test.                   disclosure must occur in the period                   confidential business information, such
                                                      The stress test must be conducted by                    beginning on October 5 and ending on                  as a manufacturing process. Please note
                                                      September 30 of each calendar year                      November 4 of the calendar year in                    that if you include your name, contact
                                                      based on data as of June 30 of that                     which the stress test is performed                    information, or other information that
                                                      calendar year, unless the time or the as-               pursuant to 12 CFR 252.55, unless that                identifies you in the body of your
                                                      of date is extended by the Board in                     time is extended by the Board in                      comment, that information will be
                                                      writing.                                                writing.
                                                        (b) * * *                                                                                                   posted on http://www.regulations.gov.
                                                        (4) Notice and response—(i)                           *       *    *    *    *                                • If you want to submit a comment
                                                      Notification of additional component. If                  By order of the Board of Governors of the           with confidential information that you
                                                      the Board requires a covered company                    Federal Reserve System, September 26, 2016.           do not wish to be made available to the
                                                      to include one or more additional                       Robert deV. Frierson,                                 public, submit the comment as a
                                                      components in its adverse and severely                  Secretary of the Board.                               written/paper submission and in the
                                                      adverse scenarios under paragraph (b)(2)                [FR Doc. 2016–23629 Filed 9–29–16; 8:45 am]           manner detailed (see ‘‘Written/Paper
                                                      of this section or one or more additional               BILLING CODE 6210–01–P
                                                                                                                                                                    Submissions’’ and ‘‘Instructions’’).
                                                      scenarios under paragraph (b)(3) of this                                                                      Written/Paper Submissions
                                                      section, the Board will notify the
                                                      company in writing. The Board will                                                                               Submit written/paper submissions as
                                                                                                              DEPARTMENT OF HEALTH AND                              follows:
                                                      provide such notification no later than                 HUMAN SERVICES
                                                      June 30. The notification will include a                                                                         • Mail/Hand delivery/Courier (for
                                                      general description of the additional                   Food and Drug Administration                          written/paper submissions): Division of
                                                      component(s) or additional scenario(s)                                                                        Dockets Management (HFA–305), Food
                                                      and the basis for requiring the company                 21 CFR Part 573                                       and Drug Administration, 5630 Fishers
                                                      to include the additional component(s)                                                                        Lane, Rm. 1061, Rockville, MD 20852.
                                                      or additional scenario(s).
                                                                                                              [Docket No. FDA–2014–F–0988]                             • For written/paper comments
                                                                                                                                                                    submitted to the Division of Dockets
                                                      *      *    *      *     *                              BASF Corp.; Filing of Food Additive
                                                        (iii) Description of component. The                                                                         Management, FDA will post your
                                                                                                              Petition (Animal Use)                                 comment, as well as any attachments,
                                                      Board will provide the covered
                                                      company with a description of any                       AGENCY:    Food and Drug Administration,              except for information submitted,
                                                      additional component(s) or additional                   HHS.                                                  marked and identified, as confidential,
                                                      scenario(s) by September 1 of the                       ACTION:    Notice of petition.                        if submitted as detailed in
                                                      calendar year prior to the year in which                                                                      ‘‘Instructions.’’
                                                      the stress test is performed pursuant to                SUMMARY:   The Food and Drug                             Instructions: All submissions received
                                                      this section.                                           Administration (FDA) is announcing                    must include the Docket No. FDA–
                                                      ■ 12. Section 252.57 is amended by                      that BASF Corp., as a part of their                   2014–F–0988 for ‘‘Food Additives
                                                                                                              petition (FAP 2286) proposing that the                Permitted in Feed and Drinking Water
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                                                      revising paragraph (a) to read as follows:
                                                                                                              food additive regulations be amended to               of Animals; Feed Grade Sodium
                                                      § 252.57   Reports of stress test results.              provide for the safe use of feed grade                Formate.’’ Received comments will be
                                                        (a) Reports to the Board of stress test               sodium formate as a feed acidifying                   placed in the docket and, except for
                                                      results. (1) A covered company must                     agent in complete swine feeds, also                   those submitted as ‘‘Confidential
                                                      report the results of the stress test                   proposed that FDA amend the animal                    Submissions,’’ publicly viewable at
                                                      required under § 252.54 to the Board in                 food additive regulations for formic acid             http://www.regulations.gov or at the
                                                      the manner and form prescribed by the                   and ammonium formate to limit formic                  Division of Dockets Management
                                                      Board. Such results must be submitted                   acid and formate salts from all added                 between 9 a.m. and 4 p.m., Monday
                                                      by April 5 of the calendar year in which                sources.                                              through Friday.


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Document Created: 2018-02-09 13:34:01
Document Modified: 2018-02-09 13:34:01
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionNotice of proposed rulemaking with request for comment.
DatesComments must be received by November 25, 2016.
ContactLisa Ryu, Associate Director, (202) 263-4833, Richard Naylor, Associate Director, (202) 728-5854, Molly Mahar, Deputy Associate Director, (202) 973-7360, Constance Horsley, Assistant Director, (202) 452-5239, Mona Touma Elliot, Manager, (202) 912-4688, Celeste Molleur, Manager (202) 452-2783, Elizabeth MacDonald, Manager, (202) 475-6316, Christine Graham, Senior Supervisory Financial Analyst, (202) 452-3005, Seth Ruhter, Senior Supervisory Financial Analyst, (202) 452-3997, Joseph Cox, Supervisory Financial Analyst, (202) 452-3216, Kevin Tran, Supervisory Financial Analyst, (202) 452- 2309, or Hillel Kipnis, Financial Analyst, (202) 452-2924, Division of Banking Supervision and Regulation; Laurie Schaffer, Associate General Counsel, (202) 452-2272, Benjamin McDonough, Special Counsel, (202) 452-2036, Julie Anthony, Counsel, (202) 475-6682, Brian Chernoff, Senior Attorney, (202) 452-2952, or Amber Hay, Attorney, (202) 973- 6997, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-4869.
FR Citation81 FR 67239 
CFR Citation12 CFR 225
12 CFR 252
CFR AssociatedAdministrative Practice and Procedure; Banks; Banking; Capital Planning; Holding Companies; Reporting and Recordkeeping Requirements; Securities; Stress Testing and Federal Reserve System

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