82 FR 49764 - Annual Stress Test-Technical and Conforming Changes

DEPARTMENT OF THE TREASURY
Comptroller of the Currency

Federal Register Volume 82, Issue 207 (October 27, 2017)

The Office of the Comptroller of the Currency (OCC) is inviting comment on a proposed rule that would make several revisions to its stress testing rule. The proposed rule would change the range of possible ``as-of'' dates used in the global market shock component to conform to changes recently made by the Board of Governors of the Federal Reserve System (Board) to its stress testing regulations. The proposed rule would also change the transition process for covered institutions with $50 billion or more in assets. Under the proposed rule, a covered institution that becomes an over $50 billion covered institution, as that term is defined in the OCC stress testing regulation, before September 30 would become subject to the requirements applicable to an over $50 billion covered institution beginning on January 1 of the second calendar year after the covered institution becomes an over $50 billion covered institution, and a covered institution that becomes an over $50 billion covered institution after September 30 would become subject to the requirements applicable to an over $50 billion covered institution beginning on January 1 of the third calendar year after the covered institution becomes an over $50 billion covered institution. The proposed rule would also make certain technical changes to clarify the requirements of the OCC's stress testing regulation.

[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Proposed Rules]
[Pages 49764-49767]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-23353]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 82, No. 207 / Friday, October 27, 2017 / 
Proposed Rules

[[Page 49764]]



DEPARTMENT OF THE TREASURY

Comptroller of the Currency

12 CFR Part 46

[Docket ID. OCC-2017-0021]
RIN 1557-AD85


Annual Stress Test--Technical and Conforming Changes

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Proposed rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
inviting comment on a proposed rule that would make several revisions 
to its stress testing rule. The proposed rule would change the range of 
possible ``as-of'' dates used in the global market shock component to 
conform to changes recently made by the Board of Governors of the 
Federal Reserve System (Board) to its stress testing regulations. The 
proposed rule would also change the transition process for covered 
institutions with $50 billion or more in assets. Under the proposed 
rule, a covered institution that becomes an over $50 billion covered 
institution, as that term is defined in the OCC stress testing 
regulation, before September 30 would become subject to the 
requirements applicable to an over $50 billion covered institution 
beginning on January 1 of the second calendar year after the covered 
institution becomes an over $50 billion covered institution, and a 
covered institution that becomes an over $50 billion covered 
institution after September 30 would become subject to the requirements 
applicable to an over $50 billion covered institution beginning on 
January 1 of the third calendar year after the covered institution 
becomes an over $50 billion covered institution. The proposed rule 
would also make certain technical changes to clarify the requirements 
of the OCC's stress testing regulation.

DATES: Comments must be received on or before December 26, 2017.

ADDRESSES: You may submit comments to the OCC by any of the methods set 
forth below. Because paper mail in the Washington, DC area and at the 
OCC is subject to delay, commenters are encouraged to submit comments 
through the Federal eRulemaking Portal or email, if possible. Please 
use the title ``Annual Stress Test--Technical and Conforming Changes'' 
to facilitate the organization and distribution of the comments. You 
may submit comments by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
www.regulations.gov. Enter ``Docket ID OCC-2017-0021'' in the Search 
Box and click ``Search.'' Click on ``Comment Now'' to submit public 
comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: [email protected].
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2017-0021'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not include any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to 
www.regulations.gov. Enter ``Docket ID OCC-2017-0021'' in the Search 
box and click ``Search.'' Click on ``Open Docket Folder'' on the right 
side of the screen. Comments and supporting materials can be viewed and 
filtered by clicking on ``View all documents and comments in this 
docket'' and then using the filtering tools on the left side of the 
screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov. The docket may be viewed 
after the close of the comment period in the same manner as during the 
comment period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC 
20219. For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700 or, for persons who are deaf or hearing impaired, TTY, (202) 649-
5597. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.

FOR FURTHER INFORMATION CONTACT: Hein Bogaard, Lead Economic Expert, 
International Analysis and Banking Condition, (202) 649-5450; Andrew 
Tschirhart, Financial Analyst, Large Bank Supervision, (202) 649-6210; 
Kari Falkenborg, Senior Financial Analyst, Midsize and Community Bank 
Supervision, (312) 917-5000; Henry Barkhausen, Counsel, or Ron 
Shimabukuro, Senior Counsel, Legislative and Regulatory Activities 
Division, (202) 649-5490; for persons who are deaf or hearing impaired, 
TTY, (202) 649-5597.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \1\ (``Dodd-Frank Act'') requires two types of stress 
tests. Section 165(i)(1) requires the Board to conduct annual stress 
tests of holding companies with $50 billion or more in assets 
(``supervisory stress tests''). Section 165(i)(2) requires the federal 
banking agencies to issue regulations requiring financial companies 
with more than $10 billion in assets to conduct annual stress tests 
themselves (``company-run stress tests''). In October 2012, the OCC, 
the Board, and the Federal Deposit Insurance Corporation issued final 
rules

[[Page 49765]]

implementing the company-run stress tests.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
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    The Dodd-Frank Act requires that the OCC and other federal primary 
financial regulatory agencies issue consistent and comparable 
regulations to implement the statutory stress testing requirement. In 
order to fulfill this requirement and minimize regulatory burden, the 
OCC has worked to ensure that its stress testing regulation remains 
consistent and comparable to the regulations enacted by other 
regulatory agencies, including the Board.

II. Description of the Proposed Rule

A. New Range of Possible As-Of Dates for Trading and Counterparty 
Scenario Component

    Under 12 CFR 46.5(c) the OCC may require a covered institution with 
significant trading activities to include trading and counterparty 
components in its adverse and severely adverse scenarios. The trading 
and counterparty position data to be used in this component is as of a 
date between January 1 and March 1 of a calendar year. On February 3, 
2017 the Board issued a final rule that extended this range to run from 
October 1 of the calendar year preceding the year of the stress test to 
March 1 of the calendar year of the stress test.\2\ The proposed rule 
would make the same change to the OCC's stress testing regulation. 
Extending this range would increase the OCC's flexibility to choose an 
appropriate as-of date. The OCC continues to coordinate its stress 
testing program with the Board in order to minimize regulatory burden.
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    \2\ 82 FR 9308 (February 3, 2017).
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B. New Applicability Transition and Terminology for Covered 
Institutions With $50 Billion or More in Assets

    The proposed rule would change the term ``over $50 billion covered 
institution'' to ``$50 billion or over covered institution.'' The 
change would not alter the scope of this defined term and would not 
change the substantive requirements of the regulation. The new defined 
term would be a more precise description of the entities included 
within this category, which includes all national banks and federal 
savings associations ``with average total consolidated assets . . . 
that are not less than $50 billion.'' \3\ While the proposed rule would 
change the defined term ``over $50 billion covered institution'' to 
``$50 billion or over covered institution,'' this supplementary 
information section will continue to use the defined term ``over $50 
billion covered institution'' since that is the term used in the 
current regulatory text.
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    \3\ 12 CFR 46.2.
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    The proposed rule would also change the transition process for 
covered institutions that become an ``over $50 billion covered 
institution.'' On February 3, 2017, the Board issued a final rule that 
provides additional time for bank holding companies that cross the $50 
billion asset threshold close to the April 5 submission date.\4\ The 
proposed rule would make a parallel amendment to the OCC's stress 
testing regulation. Under the proposed rule, a national bank or federal 
savings association that becomes an over $50 billion covered 
institution in the fourth quarter of a calendar year \5\ would not be 
subject to the stress testing requirements applicable to over $50 
billion covered institutions until the third year after it crosses the 
asset threshold. For example, if a national bank or federal savings 
association became an over $50 billion covered institution on September 
15, 2017, the institution would be expected to comply with the 
requirements applicable to over $50 billion covered institutions 
beginning in 2019 and file the OCC DFAST-14A in April 2019. If a 
national bank or federal savings association became an over $50 billion 
covered institution on October 15, 2017, the institution would be 
required to comply with the stress testing requirements applicable to 
over $50 billion covered institutions beginning in 2020 and file the 
OCC DFAST-14A in April 2020.
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    \4\ 82 FR 9308 (February 3, 2017).
    \5\ An institution becomes an over $50 billion covered 
institution when its average total consolidated assets, as reported 
on the covered institution's Call Reports, for the four most recent 
consecutive quarters, equals $50 billion or more. 12 CFR 46.3(a).
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    The stress testing timeline and transition process for national 
banks or federal savings associations which become $10 to $50 billion 
covered institutions remains unchanged. A national bank or federal 
savings association that becomes a $10 to $50 billion covered 
institution on or before March 31 of a given year would be required to 
conduct its first stress test in the next calendar year. For example, a 
national bank or federal savings association that becomes a $10 to $50 
billion covered institution as of March 31, 2017 would be required to 
conduct its first stress test in the stress testing cycle beginning 
January 1, 2018. A national bank or federal savings association that 
becomes a $10 to $50 billion covered institution after March 31 of a 
given year would be required to conduct its first stress test in the 
second calendar year after the date the national bank or federal 
savings association becomes a covered institution. For example, a 
national bank or federal savings association that becomes a $10 to $50 
billion covered institution on June 30, 2017 would be required to 
conduct its first stress test in the stress testing cycle beginning 
January 1, 2019.

C. Remove Obsolete Transition Language

    In 2014 the OCC, in coordination with the Board and Federal Deposit 
Insurance Corporation, shifted the dates of the annual stress testing 
cycle by approximately three months.\6\ The OCC's stress testing 
regulation continues to include transition language to facilitate this 
schedule shift. The transition to the new schedule is now complete, and 
the proposed rule would remove this obsolete transition language.
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    \6\ 79 FR 71630 (December 3, 2014).
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III. Request for Comment

    The OCC requests comment on all aspects of the proposal.

IV. Regulatory Analysis

Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520), the 
OCC may not conduct or sponsor, and a person is not required to respond 
to, an information collection unless the information collection 
displays a valid Office of Management and Budget (OMB) control number. 
This notice of proposed rulemaking amends 12 CFR part 46, which has an 
approved information collection under the PRA (OMB Control No. 1557-
0319). The amendments proposed today do not introduce any new 
collections of information, nor do they amend 12 CFR part 46 in a way 
that modifies the collection of information that OMB has approved. 
Therefore, this proposal does not require a PRA submission to OMB.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires generally that, in connection with a notice of proposed 
rulemaking, an agency prepare and make available for public comment an 
initial regulatory flexibility analysis that describes the impact of a 
proposed rule on small entities. However, the regulatory flexibility 
analysis otherwise required under the RFA is not required if an agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities (defined in regulations 
promulgated by the Small Business Administration (SBA) to include 
banking organizations

[[Page 49766]]

with total assets of less than or equal to $500 million) and publishes 
its certification and a brief explanatory statement in the Federal 
Register together with the rule.
    As discussed in the SUPPLEMENTARY INFORMATION above, the proposed 
changes will only affect institutions with more than $10 billion in 
total assets. Therefore, the rule will not affect any small entities. 
As such, pursuant to section 605(b) of the RFA, the OCC certifies that 
this proposal would not have a significant economic impact on a 
substantial number of small entities because no small national banks or 
federal savings associations would be affected by the proposal. 
Accordingly, an initial regulatory flexibility analysis is not 
required.

Unfunded Mandates Reform Act

    The OCC has analyzed the proposed rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this 
analysis, the OCC considered whether the proposed rule includes a 
federal mandate that may result in the expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). The 
OCC has determined that this proposed rule will not result in 
expenditures by state, local, and tribal governments, or the private 
sector, of $100 million or more in any one year. Accordingly, this 
proposal is not subject to section 202 of the UMRA.

Riegle Community Development and Regulatory Improvement Act of 1994

    The Riegle Community Development and Regulatory Improvement Act of 
1994 (RCDRIA) requires that each federal banking agency, in determining 
the effective date and administrative compliance requirements for new 
regulations that impose additional reporting, disclosure, or other 
requirements on insured depository institutions, consider, consistent 
with principles of safety and soundness and the public interest, any 
administrative burdens that such regulations would place on depository 
institutions, including small depository institutions, and customers of 
depository institutions, as well as the benefits of such regulations. 
In addition, new regulations and amendments to regulations that impose 
additional reporting, disclosures, or other new requirements on insured 
depository institutions generally must take effect on the first day of 
a calendar quarter that begins on or after the date on which the 
regulations are published in final form.\7\ The proposed rule would not 
impose additional reporting, disclosure, or other requirements; 
therefore the requirements of the RCDRIA do not apply.
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    \7\ 12 U.S.C. 4802.
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Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The OCC has sought to present the 
proposed rule in a simple and straightforward manner, and invites 
comment on the use of plain language. For example:
     Has the OCC organized the material to suit your needs? If 
not, how could the OCC present the proposed rule more clearly?
     Are the requirements in the proposed rule clearly stated? 
If not, how could the proposed 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 achieve that?
     Is this section format adequate? If not, which of the 
sections should be changed and how?
     What other changes can the OCC incorporate to make the 
regulation easier to understand?

List of Subjects in 12 CFR Part 46

    Banking, Banks, Capital, Disclosures, National banks, 
Recordkeeping, Risk, Savings associations, Stress test.

Authority and Issuance

    For the reasons set forth in the preamble, the OCC proposes to 
amend 12 CFR part 46 as follows:

PART 46--ANNUAL STRESS TEST

0
1. The authority citation for part 46 continues to read as follows:

    Authority:  12 U.S.C. 93a; 1463(a)(2); 5365(i)(2); and 
5412(b)(2)(B).

PART 46--[Amended]

0
2. Remove the phrase ``over $50 billion covered institution'' and add 
the phrase ``$50 billion or over covered institution'' in its place 
wherever it appears.
0
3. Section 46.2 is amended by removing the definition of ``over $50 
billion covered institution'' and adding the definition for ``$50 
billion or over covered institution'' in its place:


Sec.  46.2  Definitions.

* * * * *
    $50 billion or over covered institution means a national bank or 
Federal savings association with average total consolidated assets, 
calculated as required under this part, that are not less than $50 
billion.
* * * * *
0
4. Section 46.3 is amended by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraphs (c) through (e) as paragraphs (b) through 
(d), respectively; and
0
c. Revising newly redesignated paragraphs (b) and (c).
    The revisions read as follows:


Sec.  46.3  Applicability.

* * * * *
    (b) Covered institutions that become subject to stress testing 
requirements. A national bank or Federal savings association that 
becomes a $10 to $50 billion covered institution on or before March 31 
of a given year shall conduct its first annual stress test under this 
part in the next calendar year after the date the national bank or 
Federal savings association becomes a $10 to $50 billion covered 
institution, unless that time is extended by the OCC in writing. A 
national bank or Federal savings association that becomes a $10 to $50 
billion covered institution after March 31 of a given year shall 
conduct its first annual stress test under this part in the second 
calendar year after the calendar year in which the national bank or 
Federal savings association becomes a $10 to $50 billion covered 
institution, unless that time is extended by the OCC in writing.
    (c) Ceasing to be a covered institution or changing categories. (1) 
A covered institution shall remain subject to the stress test 
requirements based on its applicable category, as defined in Sec.  
46.2, unless and until total consolidated assets of the covered 
institution falls below the relevant size threshold for each of four 
consecutive quarters as reported by the covered institution's most 
recent Call Reports. The calculation shall be effective on the ``as 
of'' date of the fourth consecutive Call Report.
    (2) Notwithstanding paragraph (c)(1) of this section, a national 
bank or Federal savings association that becomes a $50 billion or over 
covered institution, whether by migrating from being a $10 to $50 
billion covered institution or by directly becoming a $50 billion or 
over covered institution, after September 30 of a calendar year

[[Page 49767]]

must comply with the requirements applicable to a $50 billion or over 
covered institution beginning on January 1 of the third calendar year 
after the national bank or Federal savings association becomes a $50 
billion or over covered institution, unless that time is extended by 
the OCC in writing. A national bank or Federal savings association that 
becomes a $50 billion or over covered institution on or before 
September 30 of a calendar year must comply with the requirements 
applicable to a $50 billion or over covered institution beginning on 
January 1 of the second calendar year after the national bank or 
Federal savings association becomes a $50 billion or over covered 
institution, unless that time is extended by the OCC in writing.
* * * * *
0
5. Revise Sec.  46.5 to read as follows:


Sec.  46.5  Annual stress test.

    Each covered institution must conduct the annual stress test under 
this part subject to the following requirements:
    (a) Financial data. A covered institution must use financial data 
as of December 31 of the previous calendar year.
    (b) Scenarios provided by the OCC. In conducting the stress test 
under this part, each covered institution must use the scenarios 
provided by the OCC. The scenarios provided by the OCC will reflect a 
minimum of three sets of economic and financial conditions, including 
baseline, adverse, and severely adverse scenarios. The OCC will provide 
a description of the scenarios required to be used by each covered 
institution no later than February 15 of that calendar year.
    (c) Significant trading activities. The OCC may require a covered 
institution with significant trading activities, as determined by the 
OCC, to include trading and counterparty components in its adverse and 
severely adverse scenarios. The trading and counterparty position data 
to be used in this component will be as of a date between October 1 of 
the previous calendar year and March 1 of that calendar year in which 
the stress test is performed, and the OCC will communicate a 
description of the component to the covered institution no later than 
March 1 of that calendar year.
    (d) Use of stress test results. The board of directors and senior 
management of each covered institution must consider the results of the 
stress tests conducted under this section in the normal course of 
business, including but not limited to the covered institution's 
capital planning, assessment of capital adequacy, and risk management 
practices.
0
6. Section 46.7 is amended by revising paragraphs (a) and (b) to read 
as follows:


Sec.  46.7   Reports to the Office of the Comptroller of the Currency 
and the Board of Governors of the Federal Reserve System.

    (a) $10 to $50 billion covered institution. A $10 to $50 billion 
covered institution must report to the OCC and to the Board of 
Governors of the Federal Reserve System, on or before July 31, the 
results of the stress test in the manner and form specified by the OCC.
    (b) $50 billion or over covered institution. A $50 billion or over 
covered institution must report to the OCC and to the Board of 
Governors of the Federal Reserve System, on or before April 5, the 
results of the stress test in the manner and form specified by the OCC.
* * * * *
0
7. Section 46.8 is amended by revising paragraph (a) to read as 
follows:


Sec.  46.8   Publication of disclosures.

    (a) Publication date. (1) $50 billion or over covered institution. 
A $50 billion or over covered institution must publish a summary of the 
results of its annual stress test in the period starting June 15 and 
ending July 15 provided:
    (i) Unless the OCC determines otherwise, if the $50 billion or over 
covered institution is a consolidated subsidiary of a bank holding 
company or savings and loan holding company subject to supervisory 
stress tests conducted by the Board of Governors of the Federal Reserve 
System pursuant to 12 CFR part 252, then within the June 15 to July 15 
period such covered institution may not publish the required summary of 
its annual stress test earlier than the date that the Board of 
Governors of the Federal Reserve System publishes the supervisory 
stress test results of the covered bank's parent holding company.
    (ii) If the Board of Governors of the Federal Reserve System 
publishes the supervisory stress test results of the covered 
institution's parent holding company prior to June 15, then such 
covered institution may publish its stress test results prior to June 
15, but no later than July 15, through actual publication by the 
covered institution or through publication by the parent holding 
company pursuant to paragraph (b) of this section.
    (2) $10 to $50 billion covered institution. A $10 to $50 billion 
covered institution must publish a summary of the results of its annual 
stress test in the period starting October 15 and ending October 31.
* * * * *

    Dated: October 19, 2017.
Keith A. Noreika,
Acting Comptroller of the Currency.
[FR Doc. 2017-23353 Filed 10-26-17; 8:45 am]
 BILLING CODE 4810-33-P