81 FR 93917 - Agency Information Collection Activities: Announcement of Board Approval Under Delegated Authority and Submission to OMB

FEDERAL RESERVE SYSTEM

Federal Register Volume 81, Issue 246 (December 22, 2016)

The Board of Governors of the Federal Reserve System (Board or Federal Reserve) is adopting a proposal to revise, with extension for three years, the Capital Assessments and Stress Testing information collection (FR Y-14A/Q/M). The revisions are effective as of December 31, 2016, and December 31, 2017. On June 15, 1984, the Office of Management and Budget (OMB) delegated to the Board of Governors of the Federal Reserve System (Board) its approval authority under the Paperwork Reduction Act (PRA), to approve of and assign OMB numbers to collection of information requests and requirements conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. Copies of the PRA Submission, supporting statements and approved collection of information instruments are placed into OMB's public docket files. The Federal Reserve may not conduct or sponsor, and the respondent is not required to respond to, an information collection that has been extended, revised, or implemented on or after October 1, 1995, unless it displays a currently valid OMB number.

[Federal Register Volume 81, Number 246 (Thursday, December 22, 2016)]
[Notices]
[Pages 93917-93922]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-30855]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.

SUMMARY: The Board of Governors of the Federal Reserve System (Board or 
Federal Reserve) is adopting a proposal to revise, with extension for 
three years, the Capital Assessments and Stress Testing information 
collection (FR Y-14A/Q/M). The revisions are effective as of December 
31, 2016, and December 31, 2017.
    On June 15, 1984, the Office of Management and Budget (OMB) 
delegated to the Board of Governors of the Federal Reserve System 
(Board) its approval authority under the Paperwork Reduction Act (PRA), 
to approve of and assign OMB numbers to collection of

[[Page 93918]]

information requests and requirements conducted or sponsored by the 
Board. Board-approved collections of information are incorporated into 
the official OMB inventory of currently approved collections of 
information. Copies of the PRA Submission, supporting statements and 
approved collection of information instruments are placed into OMB's 
public docket files. The Federal Reserve may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection that has been extended, revised, or implemented on or after 
October 1, 1995, unless it displays a currently valid OMB number.

FOR FURTHER INFORMATION CONTACT: Federal Reserve Board Clearance 
Officer--Nuha Elmaghrabi--Office of the Chief Data Officer, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202) 
452-3884. Telecommunications Device for the Deaf (TDD) users may 
contact (202) 263-4869, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.

SUPPLEMENTARY INFORMATION: Final approval under OMB delegated authority 
of the extension for three years, with revision, of the following 
information collection:
    Report title: Capital Assessments and Stress Testing information 
collection.
    Agency form number: FR Y-14A/Q/M.
    OMB control number: 7100-0341.
    Frequency: Annually, semi-annually, quarterly, and monthly.
    Effective Dates: December 31, 2016, or December 31, 2017.
    Respondent type: 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.
    Estimated annual reporting hours: FR Y-14A: Summary, 77,454 hours; 
Macro Scenario, 2,418 hours; Operational Risk, 702 hours; Regulatory 
Capital Transitions; 897 hours, Regulatory Capital Instruments, 819 
hours; Retail Repurchase Exposures, 1,560 hours; Business Plan Changes, 
390 hours; and Adjusted capital plan submission, 500 hours. FR Y-14Q: 
Retail, 2,496 hours; Securities, 2,184 hours; Pre-provision net revenue 
(PPNR), 110,916 hours; Wholesale, 23,712 hours; Trading, 46,224 hours; 
Regulatory Capital Transitions, 3,588 hours; Regulatory Capital 
Instruments, 8,112 hours; Operational risk, 7,800 hours; Mortgage 
Servicing Rights (MSR) Valuation, 1,728 hours; Supplemental, 624 hours; 
Retail Fair Value Option/Held for Sale (Retail FVO/HFS), 1,792 hours; 
Counterparty, 12,192 hours; and Balances, 2,496 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. FR Y-14 Attestation implementation, 14,400 hours; and On-going 
audit and review, 30,720 hours.
    Estimated average hours per response: FR Y-14A: Summary, 993 hours; 
Macro Scenario, 31 hours; Operational Risk, 18 hours; Regulatory 
Capital Transitions, 23 hours; Regulatory Capital Instruments, 21 
hours; Retail Repurchase Exposures, 20 hours; Business Plan Changes, 10 
hours and Adjusted capital plan submission, 100 hours. FR Y-14Q: 
Retail, 16 hours; Securities, 14 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; Counterparty, 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. FR Y-14 
Attestation Implementation, 4,800 hours; and On-going audit and review, 
2,560 hours.
    Number of respondents: 39.
    Legal authorization and confidentiality: The FR Y-14 series of 
reports are authorized by section 165 of the Dodd-Frank Act, which 
requires the Board to ensure that certain BHCs and nonbank financial 
companies supervised by the Board are subject to enhanced risk-based 
and leverage standards in order to mitigate risks to the financial 
stability of the United States (12 U.S.C. 5365). Additionally, section 
5 of the Bank Holding Company Act authorizes the Board to issue 
regulations and conduct information collections with regard to the 
supervision of BHCs (12 U.S.C. 1844).
    With regard to the CFO-level attestation requirement, which is 
intended to improve accountability and accuracy and heighten 
requirements for internal control, the Board has provided sufficient 
description and justification to require such attestation from 
respondents, consistent with the aforementioned statutory authorities.
    As these data are collected as part of the supervisory process, 
they are subject to confidential treatment under exemption 8 of the 
Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(8)). In addition, 
commercial and financial information contained in these information 
collections may be exempt from disclosure under exemption 4 of FOIA (5 
U.S.C. 552(b)(4)), if disclosure would likely have the effect of (1) 
impairing the government's ability to obtain the necessary information 
in the future, or (2) causing substantial harm to the competitive 
position of the respondent. Such exemptions would be made on a case-by-
case basis.
    Abstract: The data collected through the FR Y-14A/Q/M schedules 
provide the Board with the additional information to ensure that large 
BHCs have strong, firm[hyphen]wide risk measurement and management 
processes supporting their internal assessments of capital adequacy and 
that their capital resources are sufficient given their business focus, 
activities, and resulting risk exposures. The annual Comprehensive 
Capital Analysis and Review (CCAR) exercise also is complemented by 
other Board supervisory efforts aimed at enhancing the continued 
viability of large BHCs and IHCs, including continuous monitoring of 
BHCs' and IHCs' 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

[[Page 93919]]

a range of macroeconomic scenarios and qualitative information on 
methodologies used to develop internal projections of capital across 
scenarios.\1\ 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.
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    \1\ BHCs that must re-submit their capital plan generally also 
must provide a revised FR Y-14A in connection with their 
resubmission.
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    Current Actions: On July 28, 2016, the Board published a notice in 
the Federal Register (81 FR 49653) requesting public comment for 60 
days on the proposal to extend, with revision, the FR Y-14A/Q/M. The 
Board proposed revisions to general FR Y-14 requirements and several 
schedules of the FR Y-14A/Q/M reports. For reports as-of December 31, 
2017, the proposed changes included requiring that U.S. IHCs that are 
part of the Large Institution Supervision Coordinating Committee 
(LISCC) framework (``LISCC U.S. IHCs'') attest to the material 
correctness and conformance to instructions of, and internal controls 
around, the data reported on the FR Y-14A/Q/M reports.\2\ For reports 
as-of December 31, 2016, the revisions would add a requirement for BHCs 
and IHCs electing to undertake planned capital adjustments or 
incremental capital distribution requests to provide updated 
submissions of the FR Y-14A Schedule A (Summary--Capital) and Schedule 
C (Regulatory Capital Instruments, RCI) reflecting these adjustments 
(as detailed below). Finally, the revisions would update the FR Y-14A, 
Schedule A.1.d. (Summary--Capital) to collect items related to the 
supplementary leverage ratio (SLR), remove and add sub-schedules to the 
FR Y-14A Schedule E (Operational Risk) to align with applicable 
guidance, add one item to Schedule A.5 (Summary--Counterparty), and 
modify items on the FR Y-14A/Q/M reports to address inconsistencies 
across schedules and ensure the collection of accurate information.
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    \2\ Further information regarding the LISCC designation is 
available on the Board's public Web site: http://www.federalreserve.gov/bankinforeg/large-institution-supervision.htm.
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    The FR Y-14A Schedule A.1.d. (Summary--Capital) would be revised 
for December 31, 2016, to (1) add certain items used to calculate the 
SLR in alignment with the Board's extension of the initial application 
of the SLR requirement in the capital plan rule; \3\ (2) modify two 
items; and (3) remove one item. In addition, one item to capture Other 
Counterparty Losses would be added to Schedule A.5 (Summary--
Counterparty) effective December 31, 2016. Finally, Schedule E 
(Operational Risk) would be revised for December 31, 2016, to (1) 
remove sub-schedule E.1, BHC Operational Risk Historical Capital, (2) 
add two new sub-schedules: E.2, Material Risk Identification and E.3, 
Operational Risk Scenarios, and (3) update outdated methodologies and 
references.
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    \3\ See 12 CFR 225.8(c)(3), 12 CFR 252.53(b)(3).
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    The FR Y-14Q (quarterly collection) would be revised for December 
31, 2016, to add a new column to Schedule B (Securities) to collect the 
price of the security as a percent of par to enhance supervisory 
modeling.
    Finally, the FR Y-14M (monthly collection) would be revised for 
December 31, 2016, to modify the definition of Gross Charge-Off Amount 
on Schedule D (Credit Cards) in order to ensure proper reporting across 
institutions.
    The comment period for this notice expired on September 26, 2016. 
The Federal Reserve received three comment letters addressing the 
proposed changes: One from the Financial Services Roundtable, one from 
The Clearing House, and one from the Federal Advisory Council. 
Commenters requested clarification of the instructions, forms, or 
general requirements for proposed items, in particular the operational 
risk modifications to the FR Y-14A, Schedule E.2 and E.3. The Federal 
Reserve also received general comments regarding (1) the frequency of 
changes and stability of the collection, (2) timing of release of 
technical instructions, and (3) estimates of reporting burden.
    No comments were received specifically related to the modifications 
to the FR Y-14A Schedule A.5, FR Y-14Q Schedule B, or FR Y-14M Schedule 
D. Therefore the Federal Reserve will proceed with the aforementioned 
changes effective December 31, 2016. Furthermore, no comments were 
received on the proposed application of attestation to LISCC US IHCs. 
The Federal Reserve will apply the attestation requirement to LISCC US 
IHCs effective December 31, 2017. The Federal Reserve will adopt the 
remaining reporting requirements as proposed, with revisions in 
response to comment, as outlined below.
    The following section includes a detailed discussion of aspects of 
the proposed FR Y-14 collection for which the Federal Reserve received 
substantive comments and an evaluation of, and responses to the 
comments received. Where appropriate, responses to these comments and 
technical matters are also addressed in the attached draft FR Y-14A/Q/M 
reporting forms and instructions.

Detailed Discussion of Public Comments

A. General Comments

    In general, commenters expressed concerns with the timing of 
implementing changes and the frequency of changes to the FR Y-14 series 
of reports. Two commenters indicated that additional time before the 
implementation of changes would be needed to allow for the development 
of internal processes and procedures, and integration of changes, and 
to materially improve the FR Y-14 data collection. Specifically, 
consistent with previously submitted comments, the Financial Services 
Roundtable requested a minimum of six months between the finalization 
of all reporting and technical requirements and the effective date, and 
a reduction in the frequency of changes. Both the Financial Services 
Roundtable and the Clearing House requested earlier publication of 
technical instructions and the ability to address clarifying questions 
before adoption of any final rule or the effective date of the changes. 
Both organizations expressed their willingness to continue to work with 
the Federal Reserve on addressing these issues. Finally, the Federal 
Advisory Council encouraged stability in the reporting requirements as 
continued iterations and modifications necessitate the utilization of 
manual processes to meet filing deadlines.
    As previously indicated, the Federal Reserve recognizes the 
challenges with implementing changes in a timely and controlled manner, 
especially when the changes are finalized close to the effective 
date.\4\ The Federal Reserve continues to weigh the need to collect 
additional information or benefits of enhancing the collection in light 
of the proposed effective date with the objective of providing as much 
time as is feasible in advance of implementation. The Federal Reserve 
has engaged the industry in ongoing dialogue regarding several of the 
specific recommendations contained in these letters and continues to 
assess these recommendations. In response to these comments, the 
Federal Reserve

[[Page 93920]]

will revisit these discussions and consider additional ways to further 
engage the industry throughout the process in order to improve the 
transparency and clarity surrounding proposed changes.
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    \4\ See, e.g., 79 Federal Register 59264.
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    In regards to the proposed changes contained in this notice, the 
Federal Reserve notes that the changes related to collecting components 
of SLR on the FR Y-14A Schedule A (Summary--Capital) align with related 
changes to the rule and allow for the incorporation of regulatory 
elements into the stress test as required. The inclusion of the 
requirement to submit certain FR Y-14 schedules to collect information 
on adjustments to planned capital actions and incremental capital 
distribution from firms that have elected to make such adjustments 
formalizes the process and format by which firms undertaking such 
actions would be providing the information. It is expected, therefore, 
that firms could leverage existing processes and controls for 
collecting and reporting this information given that regardless of the 
collection method, this information would be provided. Similarly, the 
information collected on proposed FR Y-14A, Schedules E.2 and E.3, 
would otherwise be provided as part of the supporting documentation 
submitted by a firm subject to SR Letter 15-18. Furthermore, the 
Federal Reserve has engaged the industry regarding the expectations 
outlined in SR Letter 15-18, and the requirements remain largely the 
same as proposed. Therefore, the Federal Reserve will not delay the 
implementation of these proposed changes given they are consistent with 
recent supervisory guidance or replace collections of the same or 
similar information through other methods or processes.
    Other changes with a December 31, 2016, implementation date are 
clarifying in nature, streamline the instructions, address industry 
feedback, or remove information. These include the remaining changes to 
the FR Y-14A, Schedule A.1.d (Summary--Capital), the changes to the FR 
Y-14A, Schedule A.6 (Ops Risk) which align with updated methodology, 
the elimination of the FR Y-14A, Schedule E.1, and the definitional 
change to the FR Y-14M, Schedule D (Credit Cards). Given these changes 
will reduce burden and address reporting issues to alleviate confusion 
and inconsistent reporting for the CCAR cycle and do not involve the 
collection of new information, these changes will be implemented with a 
December 31, 2016, effective date.
    While the collection of other losses on the FR Y-14A, Schedule A.5 
(Summary--Counterparty) results in the collection of additional 
information for which internal processes and controls need to be 
developed, the Federal Reserve reiterates that this information was 
previously collected. Draft forms and instructions were provided with 
the publication of the initial notice and remain the same as proposed. 
No comments were received specifically regarding this change, therefore 
the Federal Reserve will implement this change as proposed.
    Finally, the addition of the column for ``Price'' on the FR Y-14Q, 
Schedule B (Securities) addresses inconsistencies in reporting 
identified in prior reporting periods. As noted in the proposal, the 
data currently collected on the FR Y-14 leaves data gaps that can 
result in outdated information and ultimately reduced accuracy of 
modeling. While the Federal Reserve understands that the collection of 
new information close to the effective date results in process 
challenges, delaying the collection of price information could result 
in the need for resubmissions in the short term. The Federal Reserve 
indicated in the initial notice that they understood these data to be 
readily available on the as of date, and no comments were received 
specifically indicating challenges with collecting the information 
necessary for this proposed change. Therefore, the Federal Reserve will 
implement this change as proposed.
    In response to the Federal Reserve's solicitation for feedback 
regarding burden associated with the FR Y-14A/Q/M, the Financial 
Services Roundtable noted that dialogue regarding the estimates of 
burden associated with the FR Y-14 collection with Federal Reserve 
staff is ongoing. The Federal Reserve regularly reviews burden 
estimates and discussions with industry groups, including the Financial 
Services Roundtable, regarding FR Y-14 burden are ongoing.

B. Schedule Specific Comments

FR Y-14A

Schedule A.1.d. (Capital)

    The Federal Reserve received two requests for clarification related 
to the proposed modifications requiring firms to estimate the SLR for 
the projection horizon beginning January 1, 2018, for baseline and 
stress scenarios, in accordance with revisions to the capital plan and 
stress test rules, and report these ratios on Schedule A.1.d. The 
requests related to the application of this requirement to both BHCs 
and IHCs.
    Specifically, one industry group commented that the inclusion of 
this information on the FR Y-14A, Schedule A (Summary) suggests that 
the Federal Reserve will require institutions' projections to remain 
above the regulatory minimum on a post-stress basis beginning January 
1, 2018, and going forward in order to quantitatively pass the 
Comprehensive Capital Analysis and Review (CCAR), implying an 
accelerated effective date from January 1, 2018, to December 31, 2016. 
Accordingly, the commenter asked the Federal Reserve to clarify that 
information regarding the SLR would be collected for informational 
purposes only on the FR Y-14A Summary Schedule as of December 31, 2016, 
and that banks would not be expected to meet the post stress 
supplementary minimum for purposes of the 2017 CCAR. The commenter also 
asked the Federal Reserve to confirm this would be informational and on 
a best efforts basis for IHCs of FBOs and that they would not be 
expected to meet leverage or supplementary leverage post stress minima 
for CCAR 2017.
    Bank holding companies (BHCs) must maintain capital above each 
minimum regulatory capital ratio on a pro forma basis throughout the 
planning horizon. The capital plan rule defines minimum regulatory 
capital ratio to include the SLR.\5\ Under the 2015 amendment to the 
capital plan rule, the Board delayed the incorporation of the SLR 
requirement in the capital plan and stress test rules for one year, 
until 2017.\6\ Accordingly, for the 2017 capital plan and stress test 
cycle, BHCs subject to the SLR will be required to maintain capital 
above a minimum three (3) percent SLR on a pro forma basis for quarters 
of the planning horizon beginning January 1, 2018, which corresponds 
with the fifth projection quarter of the CCAR 2017 exercise.
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    \5\ See 12 CFR 225.8(d)(8).
    \6\ See 80 FR 75419, 75421 (December 2, 2015), 12 CFR 
225.8(c)(3)).
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    Under the capital plan rule and stress test rules, all regulatory 
capital ratios are calculated using the definitions of capital, risk-
weighted assets, and total assets that are in effect during a 
particular quarter of a planning horizon.\7\ For example, the Federal 
Reserve required firms to meet minimum common equity tier 1 ratio 
requirements, which came into effect on January 1, 2015, beginning in 
the fourth projection quarter of CCAR 2014.
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    \7\ See Comprehensive Capital Analysis and Review 2016 Summary 
Instructions (January 2016), p. 3.
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    Similarly, both the leverage and supplementary leverage 
requirements become effective for the IHCs of foreign banking 
organizations (FBOs) on January 1, 2018. In CCAR 2017,

[[Page 93921]]

beginning with quarters that correspond to dates after January 1, 2018 
(i.e. the fifth quarter of the CCAR 2017 planning horizon), each U.S. 
IHC will be required to calculate the tier 1 leverage ratio and the SLR 
and demonstrate in the IHC's own baseline and stress projections that 
it can maintain capital above a minimum four (4) percent tier 1 
leverage ratio and three (3) percent SLR. Notably, however, for an IHC 
designated by an FBO that was not a BHC previously subject to CCAR, the 
IHC will not be subject to the supervisory stress test or public 
objection to its 2017 capital plan. For CCAR 2018, all IHCs will be 
subject to all aspects of CCAR, including the supervisory stress test, 
public disclosure of results, and public notice of the Federal 
Reserve's action on each IHCs capital plan. In CCAR 2018, leverage 
requirements will be in effect for all quarters of the planning 
horizon.
    Given the alignment with the capital plan and stress testing rules 
as outlined above, the modifications to the FR Y-14A, Schedule A.1.d 
(Summary--Capital), will be implemented as proposed for reports 
submitted as of December 31, 2016. No further comments were received 
regarding the other proposed changes to the FR Y-14A, Schedule A.1.d 
(Summary--Capital) and these changes will also be implemented as 
proposed.

Schedule A.6 (BHC Operational Risk Scenario Inputs and Projections)

    Two commenters requested clarification regarding the change of the 
column heading from ``Unit of Measure'' to ``Risk Segment'' in the FR 
Y-14A, Schedule A.6 and associated instructions. First, one commenter 
asked whether there was an expectation that respondents use 
classifications other than Basel event types in the reporting of the 
risk segment. The Federal Reserve clarifies that large and complex 
firms should use risk segments that best describe the risks to which 
they are exposed. Classifications other than the current Units of 
Measure are acceptable and in some cases may be preferable to more 
clearly link the methodologies used to measure those risks for both 
day-to-day business operations and to estimate post-stress capital 
needs.
    Second, the other commenter inquired as to whether the change in 
heading would also result in a change in the definition of the reported 
column. Specifically, the commenter asked whether (i) the definition of 
Risk Segment to be used is the same definition for Risk Segment 
contained in the prior instructions (i.e., ``the BHC's internal 
classification of operational risk into granular risk categories used 
for risk management and operational risk loss projection purposes''), 
(ii) the prior definition of Unit of Measure should be applied (i.e., 
``the level at which the BHC's quantification model generates a 
separate distribution for estimating potential operational losses''), 
or (iii) an alternate definition of Risk Segment should be applied. The 
Federal Reserve confirms that the definition of Risk Segment to be used 
is the same definition for Risk Segment contained in the prior 
instructions and as indicated in the draft instructions associated with 
this notice (i.e., ``the BHC's internal classification of operational 
risk into granular risk categories used for risk management and 
operational risk loss projection purposes''). Because this definition 
is already contained in the instructions, the change will be 
implemented as proposed.

Schedule C (RCI)

    Under the proposed revisions to the FR Y-14A, firms would be 
required to resubmit the FR Y-14A, Schedule C for incremental capital 
action requests at the time a firm seeks approval for or notifies the 
Federal Reserve of its intention to make additional capital 
distributions in the period between CCAR exercises. While the commenter 
expressed support for the Federal Reserve's objective of formalizing a 
standard process for firms to submit information regarding requests for 
additional capital distributions in the period between CCAR exercises, 
the commenter requested that the Federal Reserve institute a threshold, 
below which firms would not need to resubmit the FR Y-14A, Schedule C 
(RCI) as part of the request. The commenter indicated that this would 
enable firms to make small incremental distributions without requiring 
the internal processes and control structure otherwise needed to 
resubmit the template outside of the annual CCAR process.
    The Federal Reserve reiterates that firms may not exceed the 
distributions included in their capital plan on a gross or net basis. 
As such, a firm seeking to make incremental capital distributions must 
notify the Federal Reserve (in the case of a de minimis incremental 
distribution) or request approval (in the case of incremental 
distributions that do not qualify for the de minimis exception for well 
capitalized firms). In any case where a firm seeks to make incremental 
distributions it is important that the Federal Reserve have up to date 
information on the firm's capital plan. As such, the Federal Reserve 
does not believe such a threshold is appropriate and will implement the 
requirement as proposed.

Schedules E (Operational Risk)

    Several of the changes proposed to the FR Y-14A, Schedule E 
(Operational Risk) were consistent with the guidance and expectations 
contained in recent supervisory letters, notably SR Letter 15-18. SR 
Letter 15-18 sets out the differences in expectations for U.S. bank 
holding companies and intermediate holding companies of foreign banking 
organizations that are either: (i) Subject to the Federal Reserve's 
Large Institution Supervision Coordinating Committee (LISCC) framework 
or (ii) have total consolidated assets of $250 billion or more or 
consolidated total on-balance sheet foreign exposure of $10 billion or 
more (``Large and Complex firms''). Two commenters requested 
clarification as to whether the proposed changes to the FR Y-14A, 
Schedule E were intended to apply to all BHCs and IHCs, or only to 
those institutions subject to SR Letter 15-18. The Federal Reserve 
confirms that the additional sub-schedules proposed for the FR Y-14A 
Schedule E would apply only to BHCs and IHCs subject to SR Letter 15-
18, in alignment with the guidance outlined therein; however, notes 
that the elimination of Schedule E.1 would apply for all firms.
    The Federal Reserve proposed adding a new sub-schedule, Schedule 
E.2 Material Risk Identification, to capture material operational risks 
included in a firm's projections. Two commenters requested additional 
clarification on the information to be captured in this sub-schedule. 
One commenter requested guidance regarding the definition of 
``material'' operational risks, as the subjective application of 
materiality may lead to varying definitions across organizations. The 
commenter also questioned at what point organizations not just include 
Basel Loss Event Type I as their material operational risks and if 
additional guidance would be provided on quantifying risks that do not 
have a one-to-one (1:1) match of risk to dollars (e.g., those 
implicitly captured in the estimates through historical losses 
experienced).
    The Federal Reserve expects large and complex firms to maintain 
capital planning processes that capture or otherwise consider the full 
range of material risks facing the firm. A firm should identify how and 
where its material risks are accounted for within the capital planning 
process. The Federal Reserve expects a firm to seek input from multiple 
stakeholders across the organization (for example, senior management, 
finance and risk

[[Page 93922]]

professionals, front office and line-of-business leadership) in 
identifying its material risks. Materiality thresholds should be 
established at multiple levels of the BHC and include: (1) Easily 
quantifiable risks, and (2) risks that are more difficult to quantify. 
The specifics of the risk identification process will differ across 
firms given differences in organizational structure, business 
activities, and size and complexity of operations. However, the risk 
identification process at all firms subject to this guidance should be 
dynamic, inclusive, and comprehensive, and drive the firm's capital 
adequacy analysis. A firm should: (1) Evaluate material risks across 
the enterprise to ensure comprehensive risk capture on an ongoing 
basis; (2) establish a formal risk identification process and evaluate 
material risks at least quarterly; (3) actively monitor its material 
risks; and (4) use identified material risks to inform key aspects of 
the firm's capital planning, including the development of stress 
scenarios, the assessment of the adequacy of post-stress capital 
levels, and the appropriateness of potential capital actions in light 
of the firm's capital objectives.
    Regarding risks that do not have a 1:1 match of risk to dollars, 
firms should have transparent and well-supported estimation approaches 
based on both quantitative analysis and expert judgment, and should not 
rely on unstable or unintuitive correlations to project operational 
losses. Scenario analysis should be a core component of the firm's 
operational loss projection approaches. Certain operational risks, 
particularly those most likely to give rise to large losses, often may 
not have measureable relationships to the overall scenario conditions. 
In addition, large operational loss events are often idiosyncratic, 
limiting the relevance of historical data.
    The other commenter suggested that rather than create a new 
template to capture material operational risks that are included in a 
firm's risk projections, as well as those excluded from the firm's risk 
projections, the Federal Reserve continues to refer to the CCAR 
supporting documentation for a discussion of operational risks provided 
that the supporting documentation conforms with all Federal Reserve 
requirements. By collecting this information in a structured way via 
the new FR Y-14 sub-schedule, the Federal Reserve expects to ensure a 
clear and consistent reporting of material risks, including a 
transparent reconciliation of which risks are included or excluded from 
the projections. The supporting documentation should, among other 
things, provide a description of the process(es) employed to identify, 
select and/or exclude risks from the reported projections.
    Several comments were received regarding the draft forms and 
instructions associated with the proposed FR Y-14A, Schedule E.2. 
First, commenters requested additional clarification as to the Federal 
Reserve's expectations with respect to the reporting of Material Risks 
in Schedule E.2, particularly as to the intended definitions of ``Risk 
Name'', ``Risk Segment'' and ``BHC Stress Projection Amount'' in this 
schedule.
    As indicated in the draft instructions and consistent with other 
instructions for this schedule, the Federal Reserve does not intend to 
provide specific definition for these terms. Each firm uses its unique 
methodology for each identified material risk as well as its risk 
segment. Risk segmentation and resulting material risks vary based on 
business mix, risk profile and risk drivers. Therefore the Federal 
Reserve does not expect a standard taxonomy for reporting purposes. 
Risk Name is the firm's taxonomy for a given material risk. Risk 
Segment is the firm's chosen taxonomy for risk segmentation/risk 
categorization.
    Second, in order to better conform the items as proposed in the 
draft forms and consistent with the item description, the commenter 
requested the addition of ``Operational'' before ``Risk(s)'' to the (i) 
title of the schedule, (ii) header of the first column in the schedule, 
and (iii) descriptions below the aforementioned header on Schedule E.2. 
Consistent with the request regarding the insertion of the word 
``Operational'' into the appropriate locations on Schedule E.2, the 
commenter also suggested the addition of the words ``Operational Risk'' 
to each of the names of the columns in Schedule E.3, as well as to the 
lines for ``percentage of the loss estimates'' and ``total number of 
scenarios.'' The forms will be updated as suggested.
    In regards to Schedule E.3, the commenter requested the addition of 
the word ``9-Qtr Projection'' after ``BHC Baseline'' and ``BHC Stress'' 
to clarify that the total nine quarter projections are the information 
being sought on this schedule. To further clarify the column titles in 
schedule E.3, ``Nine-Quarter Loss Projection'' will be added after 
``BHC Base Line'' and after ``BHC Stress.''
    Finally, one commenter requested additional clarity surrounding 
expectations for the information to be reported under the column 
``Methodology for applying scenario results'' on the proposed FR Y-14A, 
Schedule E.3. The Federal Reserve clarifies that the intent of this 
column is for the firm to note the name of methodology used to quantify 
losses using the Scenario approach. For example, quantitative model, 
historical averages, estimate based on expert judgment, etc.
    The changes to the FR Y-14A, Schedule E (Operational Risk) will be 
implemented as of December 31, 2016, with the revisions noted above.

FR Y-14Q

Schedule H.1 (Corporate Loan)

    In addition to the comments specific to the proposed changes 
contained in the initial notice, the Federal Reserve also received two 
comments regarding the reporting of syndicated pipelines and 
disposition activity on Schedule H.1 (Wholesale--Corporate), to which 
no changes were proposed. The commenter inquired as to when the Federal 
Reserve would provide draft and/or final technical instructions for the 
third quarter 2016 reporting requirements on Syndicated Finance 
Pipeline Reporting and Disposition Activity. Technical instructions for 
the third quarter were posted to the public Web site on October 17, 
2016.
    The commenter also questioned whether the Federal Reserve would 
provide an interim exemption on having to provide responses to edit 
check exceptions for these new reporting requirements similar to what 
was done for the 2Q 2016 Fronting Exposure edit checks, which did not 
require responses until 4Q 2016. The Federal Reserve emphasizes the 
value of edit checks for both firms and the Federal Reserve in ensuring 
data quality, particularly for newly reported items. The final notice 
adopting these changes delayed the implementation of these requirements 
an additional quarter (to be effective as of September 30, 2016), in 
order to allow firms additional time to prepare for the reporting of 
these exposures.\8\ Therefore, exemptions to edit checks responses on 
these reporting requirements are not planned at this time.
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    \8\ See 81 Federal Register 3412.

    Board of Governors of the Federal Reserve System, December 19, 
2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-30855 Filed 12-21-16; 8:45 am]
 BILLING CODE 6210-01-P