82_FR_9983 82 FR 9958 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Capital Adequacy Standards

82 FR 9958 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Capital Adequacy Standards

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency

Federal Register Volume 82, Issue 25 (February 8, 2017)

Page Range9958-9960
FR Document2017-02583

The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a continuing information collection as required by the Paperwork Reduction Act of 1995 (PRA). In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment concerning renewal of its information collection titled ``Capital Adequacy Standards.''

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9958-9960]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02583]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency


Agency Information Collection Activities: Information Collection 
Renewal; Comment Request; Capital Adequacy Standards

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Notice and request for comment.

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SUMMARY: The OCC, as part of its continuing effort to reduce paperwork 
and respondent burden, invites the general public and other Federal 
agencies to take this opportunity to comment on a continuing 
information collection as required by the Paperwork Reduction Act of 
1995 (PRA).
    In accordance with the requirements of the PRA, the OCC may not 
conduct or sponsor, and the respondent is not required to respond to, 
an information collection unless it displays a currently valid Office 
of Management and Budget (OMB) control number.
    The OCC is soliciting comment concerning renewal of its information 
collection titled ``Capital Adequacy Standards.''

DATES: Comments must be submitted on or before April 10, 2017.

ADDRESSES: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments by 
email, if possible. Comments may be sent to: Legislative and Regulatory 
Activities Division, Office of the Comptroller of the Currency, 
Attention: 1557-0318, 400 7th Street SW., Suite 3E-218, mail stop 9W-
11, Washington, DC 20219. In addition, comments may be sent by fax to 
(571) 465-4326 or by electronic mail to [email protected]. You may 
personally inspect and photocopy comments at the OCC, 400 7th Street 
SW., Washington, DC 20219. For security reasons, the OCC requires that 
visitors make an appointment to inspect comments. You may do so by 
calling (202) 649-6700 or, for persons who are deaf or hard of hearing, 
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.
    All 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.

FOR FURTHER INFORMATION CONTACT: Shaquita Merritt, OCC Clearance 
Officer, (202) 649-5490 or, for persons who are deaf or hard of 
hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities 
Division, Office of the Comptroller of the Currency, 400 7th Street 
SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION: Under the PRA (44 U.S.C. 3501-3520), Federal 
agencies must obtain approval from OMB for each collection of 
information that they conduct or sponsor. ``Collection of information'' 
is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency 
requests or requirements that members of the public submit reports, 
keep records, or provide information to a third party. Section 
3506(c)(2)(A) of title 44 requires Federal agencies to provide a 60-day 
notice in the Federal Register concerning each proposed collection of 
information, including each proposed extension of an existing 
collection of information, before submitting the collection to OMB for 
approval. To comply with this requirement, the OCC is publishing notice 
of the renewal of the collection of information set forth in this 
document.
    Title: Capital Adequacy Standards.
    OMB Control No.: 1557-0318.
    Frequency of Response: On occasion.
    Affected Public: Business or other for-profit.

Section-by-Section-Analysis

    Twelve CFR part 3 sets forth the OCC's minimum capital requirements 
and overall capital adequacy standards for national banks and Federal 
savings associations (institutions).
    Section 3.3(c) allows for the recognition of netting across 
multiple types of transactions or agreements if an institution obtains 
a written legal opinion verifying the validity and enforceability of 
the agreement under certain circumstances and maintains sufficient 
written documentation of this legal review.
    Section 3.22(h)(2)(iii)(A) permits the use of a conservative 
estimate of the amount of an institution's investment in its own 
capital or the capital of unconsolidated financial institutions held 
through the index security with prior approval by the OCC.
    Section 3.35(b)(3)(i)(A) requires, for a cleared transaction with a 
qualified central counterparty (QCCP), that a client bank apply a risk 
weight of two percent, provided that the collateral posted by the bank 
to the QCCP is subject to certain arrangements and the client bank has 
conducted a sufficient legal review (and maintains sufficient written 
documentation of the legal review) to conclude with a well-founded 
basis that the arrangements, in the event of a legal challenge, would 
be found to be legal, valid, binding, and enforceable under the law of 
the relevant jurisdictions.
    Section 3.37(c)(4)(i)(E), regarding collateralized transactions, 
requires that an institution have policies and procedures in place 
describing how it determines the period of significant financial stress 
used to calculate its own internal estimates for haircuts and be able 
to provide empirical support for the period used.
    Section 3.41(b)(3) which sets forth operational requirements for 
securitization exposures, allows an institution to recognize for risk-
based capital purposes, in the case of synthetic securitizations, a 
credit risk mitigant to hedge underlying exposures if certain 
conditions are met, including a requirement that the institution obtain 
a well-reasoned opinion from legal counsel that confirms the 
enforceability of the credit risk mitigant in all relevant 
jurisdictions.
    Section 3.41(c)(2)(i) requires that an institution demonstrate its 
comprehensive understanding of a

[[Page 9959]]

securitization exposure by conducting and documenting an analysis of 
the risk characteristics of each securitization exposure prior to its 
acquisition, taking into account a number of specified considerations.
    If an institution provides non-contractual support to a 
securitization, Sec.  3.42(e)(2) requires the institution to publicly 
disclose that it has provided implicit support to a securitization and 
the risk-based capital impact to the bank of providing such implicit 
support.
    Section 3.62 sets forth disclosure requirements related to the 
capital requirements of an institution. These requirements apply to an 
institution with total consolidated assets of $50 billion or more that 
is not a consolidated subsidiary of an entity that is itself subject to 
Basel III disclosures. Section 3.62(a) requires quarterly disclosure of 
information in the applicable tables in section 3.63 and, if a 
significant change occurs, such that the most recent reported amounts 
are no longer reflective of the institution's capital adequacy and risk 
profile, Sec.  3.62(a) requires the institution to disclose as soon as 
practicable thereafter, a brief discussion of the change and its likely 
impact. Section 3.62(a) permits annual disclosure of qualitative 
information that typically does not change each quarter, provided that 
any significant changes are disclosed in the interim. Section 3.62(b) 
requires that an institution have a formal disclosure policy approved 
by the board of directors that addresses its approach for determining 
the disclosures it makes. The policy must address the associated 
internal controls and disclosure controls and procedures. Section 
3.62(c) permits an institution to disclose more general information 
about certain subjects if the institution concludes that the specific 
commercial or financial information required to be disclosed under 
Sec.  3.62 is exempt from disclosure under the Freedom of Information 
Act (5 U.S.C. 552), and the institution provides the reason the 
specific items of information have not been disclosed.
    Section 3.63 sets forth the specific disclosure requirements for a 
non-advanced approaches institution with total consolidated assets of 
$50 billion or more that is not a consolidated subsidiary of an entity 
that is itself subject to Basel III disclosure requirements. Section 
3.63(a) requires those institutions to make the disclosures in Tables 1 
through 10 to Sec.  3.63 and in Sec.  3.63(b) for each of the last 
three years beginning on the effective date of the rule. Section 
3.63(b) requires quarterly disclosure of an institution's common equity 
tier 1 capital, additional tier 1 capital, tier 2 capital, tier 1 and 
total capital ratios, including the regulatory capital elements and all 
the regulatory adjustments and deductions needed to calculate the 
numerator of such ratios; total risk-weighted assets, including the 
different regulatory adjustments and deductions needed to calculate 
total risk-weighted assets; regulatory capital ratios during any 
transition periods, including a description of all the regulatory 
capital elements and all regulatory adjustments and deductions needed 
to calculate the numerator and denominator of each capital ratio during 
any transition period; and a reconciliation of regulatory capital 
elements as they relate to its balance sheet in any audited 
consolidated financial statements. Tables 1 through 10 to Sec.  3.63 
set forth qualitative and/or quantitative requirements for scope of 
application, capital structure, capital adequacy, capital conservation 
buffer, credit risk, counterparty credit risk-related exposures, credit 
risk mitigation, securitizations, equities not subject to Subpart F 
(Market Risk requirements) of the rule, and interest rate risk for non-
trading activities.
    Section 3.121 requires an institution subject to the advanced 
approaches risk-based capital requirements to adopt a written 
implementation plan to address how it will comply with the advanced 
capital adequacy framework's qualification requirements and also 
develop and maintain a comprehensive and sound planning and governance 
process to oversee the implementation efforts described in the plan. 
Section 3.122 further requires these institutions to: Develop processes 
for assessing capital adequacy in relation to an organization's risk 
profile; establish and maintain internal risk rating and segmentation 
systems for wholesale and retail risk exposures, including 
comprehensive risk parameter quantification processes and processes for 
annual reviews and analyses of reference data to determine their 
relevance; document their processes for identifying, measuring, 
monitoring, controlling, and internally reporting operational risk; 
verify the accurate and timely reporting of risk-based capital 
requirements; and monitor, validate, and refine their advanced systems.
    Section 3.123 sets forth ongoing qualification requirements that 
require an institution to notify the OCC of any material change to an 
advance system and to establish and submit to the OCC a plan for 
returning to compliance with the qualification requirements.
    Section 3.124 requires an institution to submit to the OCC, within 
90 days of consummating a merger or acquisition, an implementation plan 
for using its advanced systems for the merged or acquired company.
    Section 3.132(b)(2)(iii)(A) addresses counterparty credit risk of 
repo-style transactions, eligible margin loans, and over-the-counter 
(OTC) derivative contracts, and internal estimates for haircuts. With 
the prior written approval of the OCC, an institution may calculate 
haircuts using its own internal estimates of the volatilities of market 
prices and foreign exchange rates. The section requires institutions to 
satisfy certain minimum quantitative standards in order to receive OCC 
approval to use its own internal estimates.
    Section 3.132(b)(3) covers counterparty credit risk of repo-style 
transactions, eligible margin loans, and OTC derivative contracts, and 
simple Value-at-Risk (VaR) methodology. With the prior written approval 
of the OCC, an institution may estimate exposure at default (EAD) for a 
netting set using a VaR model that meets certain requirements.
    Section 3.132(d)(1) permits the use of the internal models 
methodology (IMM) to determine EAD for counterparty credit risk for 
derivative contracts with prior written approval from the OCC. Section 
3.132(d)(1)(iii) permits the use of the internal models methodology for 
derivative contracts, eligible margin loans, and repo-style 
transactions subject to a qualifying cross-product netting agreement 
with prior written approval from the OCC.
    Section 3.132(d)(2)(iv) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts, and risk-weighted assets using IMM. Under the IMM, an 
institution uses an internal model to estimate the expected exposure 
(EE) for a netting set and then calculates EAD based on that EE. An 
institution must calculate two EEs and two EADs (one stressed and one 
unstressed) for each netting as outlined in this section. An 
institution may use a conservative measure of EAD subject to prior 
written approval of the OCC.
    Section 3.132(d)(3)(vi) addresses counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts. To obtain OCC approval to calculate the distributions of 
exposures upon which the EAD calculation is based, an institution must 
demonstrate to the satisfaction of the OCC that it has been using for 
at least one year an internal model that broadly meets the minimum 
standards, with which the institution

[[Page 9960]]

must maintain compliance. The institution must have procedures to 
identify, monitor, and control wrong-way risk throughout the life of an 
exposure and they must include stress testing and scenario analysis.
    Section 3.132(d)(3)(viii) addresses counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts. When estimating model parameters based on a stress period, 
an institution must use at least three years of historical data that 
include a period of stress to the credit default spreads of the 
institution's counterparties. The institution must review the data set 
and update the data as necessary, particularly for any material changes 
in its counterparties. The institution must demonstrate at least 
quarterly that the stress period coincides with increased credit 
default swap (CDS) or other credit spreads of the institution's 
counterparties. The institution must have procedures to evaluate the 
effectiveness of its stress calibration that include a process for 
using benchmark portfolios that are vulnerable to the same risk factors 
as the institution's portfolio. The OCC may require the institution to 
modify its stress calibration to better reflect actual historic losses 
of the portfolio.
    Section 3.132(d)(3)(ix), regarding counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts, requires that an institution must subject its internal model 
to an initial validation and annual model review process that includes 
consideration of whether the inputs and risk factors, as well as the 
model outputs, are appropriate. This section requires institutions to 
have a backtesting program for its model that includes a process by 
which unacceptable model performance will be determined and remedied.
    Section 3.132(d)(3)(x), regarding counterparty credit risk of repo-
style transactions, eligible margin loans, and OTC derivative 
contracts, provides that an institution must have policies for the 
measurement, management, and control of collateral and margin amounts.
    Section 3.132(d)(3)(xi), concerning counterparty credit risk of 
repo-style transactions, eligible margin loans, and OTC derivative 
contracts, states that an institution must have a comprehensive stress 
testing program that captures all credit exposures to counterparties, 
and incorporates stress testing of principal market risk factors and 
creditworthiness of counterparties.
    Section 3.141 relates to operational criteria for recognizing the 
transfer of risk in connection with a securitization. Section 
3.141(b)(3) requires an institution to obtain a well-reasoned legal 
opinion confirming the enforceability of the credit risk mitigant in 
all relevant jurisdictions in order to recognize the transference of 
risk in connection with a synthetic securitization. An institution must 
demonstrate its comprehensive understanding of a securitization 
exposure under Sec.  3.141(c)(2) for each securitization exposure by 
conducting an analysis of the risk characteristics of a securitization 
exposure prior to acquiring the exposure and document such analysis 
within three business days after acquiring the exposure. Sections 
3.141(c)(2)(i) and (ii) require that institutions, on an on-going basis 
(at least quarterly), evaluate, review, and update as appropriate the 
analysis required under this section for each securitization exposure.
    Section 3.142(h)(2), regarding the capital treatment for 
securitization exposures, requires an institution to disclose publicly 
if it has provided implicit support to a securitization and the 
regulatory capital impact to the institution of providing such implicit 
support.
    Section 3.153(b), outlining the Internal Models Approach (IMA) for 
calculating risk-weighted assets for equity exposures, specifies that 
an institution must receive prior written approval from the OCC before 
it can use IMA.
    Section 3.172 specifies that each advanced approaches institution 
that has completed the parallel run process must publicly disclose its 
total and tier 1 risk-based capital ratios and their components.
    Section 3.173 addresses disclosures by an advanced approaches 
institution that is not a consolidated subsidiary of an equity that is 
subject to the Basel III disclosure requirements. An advanced 
approaches institution that is subject to the disclosure requirements 
must make the disclosures described in Tables 1 through 12. The 
institution must make these disclosures publicly available for each of 
the last three years (that is, twelve quarters) or such shorter period 
beginning on the effective date of this subpart E.
    The tables to Sec.  3.173 require qualitative and quantitative 
public disclosures for capital structure, capital adequacy, capital 
conservation and countercyclical buffers, credit risk, securitization, 
operational risk, equities not subject to the market risk capital 
requirements, and interest rate risk for non-trading activities.
    Burden Estimates:
    Estimated Number of Respondents: 1,365.
    Estimated Total Annual Burden Hours: 240,711.
    Comments submitted in response to this notice will be summarized 
and included in the request for OMB approval. All comments will become 
a matter of public record. Comments are invited on:
    (a) Whether the collections of information are necessary for the 
proper performance of the OCC's functions, including whether the 
information has practical utility;
    (b) The accuracy of the OCC's estimates of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (d) Ways to minimize the burden of information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.

    Dated: February 1, 2017.
Karen Solomon,
Deputy Chief Counsel, Office of the Comptroller of the Currency.
[FR Doc. 2017-02583 Filed 2-7-17; 8:45 am]
 BILLING CODE 4810-33-P



                                                    9958                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    criteria given in § 388.4 of MARAD’s                    DATES:  Comments must be submitted on                   Title: Capital Adequacy Standards.
                                                    regulations at 46 CFR part 388.                         or before April 10, 2017.                               OMB Control No.: 1557–0318.
                                                                                                            ADDRESSES: Because paper mail in the                    Frequency of Response: On occasion.
                                                    Privacy Act                                                                                                     Affected Public: Business or other for-
                                                                                                            Washington, DC area and at the OCC is
                                                       In accordance with 5 U.S.C. 553(c),                  subject to delay, commenters are                      profit.
                                                    DOT/MARAD solicits comments from                        encouraged to submit comments by                      Section-by-Section-Analysis
                                                    the public to better inform its                         email, if possible. Comments may be
                                                    rulemaking process. DOT/MARAD posts                     sent to: Legislative and Regulatory                      Twelve CFR part 3 sets forth the
                                                    these comments, without edit, to                        Activities Division, Office of the                    OCC’s minimum capital requirements
                                                    www.regulations.gov, as described in                    Comptroller of the Currency, Attention:               and overall capital adequacy standards
                                                    the system of records notice, DOT/ALL–                  1557–0318, 400 7th Street SW., Suite                  for national banks and Federal savings
                                                    14 FDMS, accessible through                             3E–218, mail stop 9W–11, Washington,                  associations (institutions).
                                                    www.dot.gov/privacy. In order to                                                                                 Section 3.3(c) allows for the
                                                                                                            DC 20219. In addition, comments may
                                                    facilitate comment tracking and                                                                               recognition of netting across multiple
                                                                                                            be sent by fax to (571) 465–4326 or by
                                                    response, we encourage commenters to                                                                          types of transactions or agreements if an
                                                                                                            electronic mail to prainfo@occ.treas.gov.
                                                    provide their name, or the name of their                                                                      institution obtains a written legal
                                                                                                            You may personally inspect and
                                                    organization; however, submission of                                                                          opinion verifying the validity and
                                                                                                            photocopy comments at the OCC, 400
                                                    names is completely optional. Whether                                                                         enforceability of the agreement under
                                                                                                            7th Street SW., Washington, DC 20219.
                                                    or not commenters identify themselves,                                                                        certain circumstances and maintains
                                                                                                            For security reasons, the OCC requires
                                                    all timely comments will be fully                                                                             sufficient written documentation of this
                                                                                                            that visitors make an appointment to
                                                    considered. If you wish to provide                                                                            legal review.
                                                                                                            inspect comments. You may do so by                       Section 3.22(h)(2)(iii)(A) permits the
                                                    comments containing proprietary or                      calling (202) 649–6700 or, for persons
                                                    confidential information, please contact                                                                      use of a conservative estimate of the
                                                                                                            who are deaf or hard of hearing, TTY,                 amount of an institution’s investment in
                                                    the agency for alternate submission                     (202) 649–5597. Upon arrival, visitors
                                                    instructions.                                                                                                 its own capital or the capital of
                                                                                                            will be required to present valid                     unconsolidated financial institutions
                                                      Authority: 49 CFR 1.93(a), 46 U.S.C.                  government-issued photo identification                held through the index security with
                                                    55103, 46 U.S.C. 12121                                  and submit to security screening in                   prior approval by the OCC.
                                                      By Order of the Maritime Administrator,               order to inspect and photocopy                           Section 3.35(b)(3)(i)(A) requires, for a
                                                                                                            comments.                                             cleared transaction with a qualified
                                                      Dated: February 2, 2017.
                                                                                                               All comments received, including                   central counterparty (QCCP), that a
                                                    T. Mitchell Hudson, Jr.,                                attachments and other supporting
                                                    Secretary, Maritime Administration.                                                                           client bank apply a risk weight of two
                                                                                                            materials, are part of the public record              percent, provided that the collateral
                                                    [FR Doc. 2017–02500 Filed 2–7–17; 8:45 am]              and subject to public disclosure. Do not              posted by the bank to the QCCP is
                                                    BILLING CODE 4910–81–P                                  include any information in your                       subject to certain arrangements and the
                                                                                                            comment or supporting materials that                  client bank has conducted a sufficient
                                                                                                            you consider confidential or                          legal review (and maintains sufficient
                                                    DEPARTMENT OF THE TREASURY                              inappropriate for public disclosure.                  written documentation of the legal
                                                                                                            FOR FURTHER INFORMATION CONTACT:                      review) to conclude with a well-
                                                    Office of the Comptroller of the                        Shaquita Merritt, OCC Clearance                       founded basis that the arrangements, in
                                                    Currency                                                Officer, (202) 649–5490 or, for persons               the event of a legal challenge, would be
                                                                                                            who are deaf or hard of hearing, TTY,                 found to be legal, valid, binding, and
                                                    Agency Information Collection                           (202) 649–5597, Legislative and
                                                    Activities: Information Collection                                                                            enforceable under the law of the
                                                                                                            Regulatory Activities Division, Office of             relevant jurisdictions.
                                                    Renewal; Comment Request; Capital                       the Comptroller of the Currency, 400 7th
                                                    Adequacy Standards                                                                                               Section 3.37(c)(4)(i)(E), regarding
                                                                                                            Street SW., Washington, DC 20219.                     collateralized transactions, requires that
                                                    AGENCY: Office of the Comptroller of the                SUPPLEMENTARY INFORMATION: Under the                  an institution have policies and
                                                    Currency (OCC), Treasury.                               PRA (44 U.S.C. 3501–3520), Federal                    procedures in place describing how it
                                                    ACTION: Notice and request for comment.                 agencies must obtain approval from                    determines the period of significant
                                                                                                            OMB for each collection of information                financial stress used to calculate its own
                                                    SUMMARY:   The OCC, as part of its                      that they conduct or sponsor.                         internal estimates for haircuts and be
                                                    continuing effort to reduce paperwork                   ‘‘Collection of information’’ is defined              able to provide empirical support for the
                                                    and respondent burden, invites the                      in 44 U.S.C. 3502(3) and 5 CFR                        period used.
                                                    general public and other Federal                        1320.3(c) to include agency requests or                  Section 3.41(b)(3) which sets forth
                                                    agencies to take this opportunity to                    requirements that members of the public               operational requirements for
                                                    comment on a continuing information                     submit reports, keep records, or provide              securitization exposures, allows an
                                                    collection as required by the Paperwork                 information to a third party. Section                 institution to recognize for risk-based
                                                    Reduction Act of 1995 (PRA).                            3506(c)(2)(A) of title 44 requires Federal            capital purposes, in the case of synthetic
                                                      In accordance with the requirements                   agencies to provide a 60-day notice in                securitizations, a credit risk mitigant to
                                                    of the PRA, the OCC may not conduct                     the Federal Register concerning each                  hedge underlying exposures if certain
                                                    or sponsor, and the respondent is not                   proposed collection of information,                   conditions are met, including a
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    required to respond to, an information                  including each proposed extension of an               requirement that the institution obtain a
                                                    collection unless it displays a currently               existing collection of information,                   well-reasoned opinion from legal
                                                    valid Office of Management and Budget                   before submitting the collection to OMB               counsel that confirms the enforceability
                                                    (OMB) control number.                                   for approval. To comply with this                     of the credit risk mitigant in all relevant
                                                      The OCC is soliciting comment                         requirement, the OCC is publishing                    jurisdictions.
                                                    concerning renewal of its information                   notice of the renewal of the collection                  Section 3.41(c)(2)(i) requires that an
                                                    collection titled ‘‘Capital Adequacy                    of information set forth in this                      institution demonstrate its
                                                    Standards.’’                                            document.                                             comprehensive understanding of a


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9959

                                                    securitization exposure by conducting                   institution’s common equity tier 1                       Section 3.124 requires an institution
                                                    and documenting an analysis of the risk                 capital, additional tier 1 capital, tier 2            to submit to the OCC, within 90 days of
                                                    characteristics of each securitization                  capital, tier 1 and total capital ratios,             consummating a merger or acquisition,
                                                    exposure prior to its acquisition, taking               including the regulatory capital                      an implementation plan for using its
                                                    into account a number of specified                      elements and all the regulatory                       advanced systems for the merged or
                                                    considerations.                                         adjustments and deductions needed to                  acquired company.
                                                       If an institution provides non-                      calculate the numerator of such ratios;                  Section 3.132(b)(2)(iii)(A) addresses
                                                    contractual support to a securitization,                total risk-weighted assets, including the             counterparty credit risk of repo-style
                                                    § 3.42(e)(2) requires the institution to                different regulatory adjustments and                  transactions, eligible margin loans, and
                                                    publicly disclose that it has provided                  deductions needed to calculate total                  over-the-counter (OTC) derivative
                                                    implicit support to a securitization and                risk-weighted assets; regulatory capital              contracts, and internal estimates for
                                                    the risk-based capital impact to the bank               ratios during any transition periods,                 haircuts. With the prior written
                                                    of providing such implicit support.                     including a description of all the                    approval of the OCC, an institution may
                                                       Section 3.62 sets forth disclosure                   regulatory capital elements and all                   calculate haircuts using its own internal
                                                    requirements related to the capital                     regulatory adjustments and deductions                 estimates of the volatilities of market
                                                    requirements of an institution. These                   needed to calculate the numerator and                 prices and foreign exchange rates. The
                                                    requirements apply to an institution                    denominator of each capital ratio during              section requires institutions to satisfy
                                                    with total consolidated assets of $50                   any transition period; and a                          certain minimum quantitative standards
                                                    billion or more that is not a                           reconciliation of regulatory capital                  in order to receive OCC approval to use
                                                    consolidated subsidiary of an entity that               elements as they relate to its balance                its own internal estimates.
                                                    is itself subject to Basel III disclosures.             sheet in any audited consolidated                        Section 3.132(b)(3) covers
                                                    Section 3.62(a) requires quarterly                      financial statements. Tables 1 through                counterparty credit risk of repo-style
                                                    disclosure of information in the                        10 to § 3.63 set forth qualitative and/or             transactions, eligible margin loans, and
                                                    applicable tables in section 3.63 and, if               quantitative requirements for scope of                OTC derivative contracts, and simple
                                                    a significant change occurs, such that                  application, capital structure, capital               Value-at-Risk (VaR) methodology. With
                                                    the most recent reported amounts are no                 adequacy, capital conservation buffer,                the prior written approval of the OCC,
                                                    longer reflective of the institution’s                  credit risk, counterparty credit risk-                an institution may estimate exposure at
                                                    capital adequacy and risk profile,                      related exposures, credit risk mitigation,            default (EAD) for a netting set using a
                                                    § 3.62(a) requires the institution to                   securitizations, equities not subject to              VaR model that meets certain
                                                    disclose as soon as practicable                         Subpart F (Market Risk requirements) of               requirements.
                                                    thereafter, a brief discussion of the                                                                            Section 3.132(d)(1) permits the use of
                                                                                                            the rule, and interest rate risk for non-
                                                    change and its likely impact. Section                                                                         the internal models methodology (IMM)
                                                                                                            trading activities.
                                                    3.62(a) permits annual disclosure of                                                                          to determine EAD for counterparty
                                                    qualitative information that typically                     Section 3.121 requires an institution              credit risk for derivative contracts with
                                                    does not change each quarter, provided                  subject to the advanced approaches risk-              prior written approval from the OCC.
                                                    that any significant changes are                        based capital requirements to adopt a                 Section 3.132(d)(1)(iii) permits the use
                                                    disclosed in the interim. Section 3.62(b)               written implementation plan to address                of the internal models methodology for
                                                    requires that an institution have a                     how it will comply with the advanced                  derivative contracts, eligible margin
                                                    formal disclosure policy approved by                    capital adequacy framework’s                          loans, and repo-style transactions
                                                    the board of directors that addresses its               qualification requirements and also                   subject to a qualifying cross-product
                                                    approach for determining the                            develop and maintain a comprehensive                  netting agreement with prior written
                                                    disclosures it makes. The policy must                   and sound planning and governance                     approval from the OCC.
                                                    address the associated internal controls                process to oversee the implementation                    Section 3.132(d)(2)(iv) addresses
                                                    and disclosure controls and procedures.                 efforts described in the plan. Section                counterparty credit risk of repo-style
                                                    Section 3.62(c) permits an institution to               3.122 further requires these institutions             transactions, eligible margin loans, and
                                                    disclose more general information about                 to: Develop processes for assessing                   OTC derivative contracts, and risk-
                                                    certain subjects if the institution                     capital adequacy in relation to an                    weighted assets using IMM. Under the
                                                    concludes that the specific commercial                  organization’s risk profile; establish and            IMM, an institution uses an internal
                                                    or financial information required to be                 maintain internal risk rating and                     model to estimate the expected
                                                    disclosed under § 3.62 is exempt from                   segmentation systems for wholesale and                exposure (EE) for a netting set and then
                                                    disclosure under the Freedom of                         retail risk exposures, including                      calculates EAD based on that EE. An
                                                    Information Act (5 U.S.C. 552), and the                 comprehensive risk parameter                          institution must calculate two EEs and
                                                    institution provides the reason the                     quantification processes and processes                two EADs (one stressed and one
                                                    specific items of information have not                  for annual reviews and analyses of                    unstressed) for each netting as outlined
                                                    been disclosed.                                         reference data to determine their                     in this section. An institution may use
                                                       Section 3.63 sets forth the specific                 relevance; document their processes for               a conservative measure of EAD subject
                                                    disclosure requirements for a non-                      identifying, measuring, monitoring,                   to prior written approval of the OCC.
                                                    advanced approaches institution with                    controlling, and internally reporting                    Section 3.132(d)(3)(vi) addresses
                                                    total consolidated assets of $50 billion                operational risk; verify the accurate and             counterparty credit risk of repo-style
                                                    or more that is not a consolidated                      timely reporting of risk-based capital                transactions, eligible margin loans, and
                                                    subsidiary of an entity that is itself                  requirements; and monitor, validate,                  OTC derivative contracts. To obtain
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                                                    subject to Basel III disclosure                         and refine their advanced systems.                    OCC approval to calculate the
                                                    requirements. Section 3.63(a) requires                     Section 3.123 sets forth ongoing                   distributions of exposures upon which
                                                    those institutions to make the                          qualification requirements that require               the EAD calculation is based, an
                                                    disclosures in Tables 1 through 10 to                   an institution to notify the OCC of any               institution must demonstrate to the
                                                    § 3.63 and in § 3.63(b) for each of the                 material change to an advance system                  satisfaction of the OCC that it has been
                                                    last three years beginning on the                       and to establish and submit to the OCC                using for at least one year an internal
                                                    effective date of the rule. Section 3.63(b)             a plan for returning to compliance with               model that broadly meets the minimum
                                                    requires quarterly disclosure of an                     the qualification requirements.                       standards, with which the institution


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                                                    9960                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    must maintain compliance. The                           institution to obtain a well-reasoned                   Estimated Total Annual Burden
                                                    institution must have procedures to                     legal opinion confirming the                          Hours: 240,711.
                                                    identify, monitor, and control wrong-                   enforceability of the credit risk mitigant              Comments submitted in response to
                                                    way risk throughout the life of an                      in all relevant jurisdictions in order to             this notice will be summarized and
                                                    exposure and they must include stress                   recognize the transference of risk in                 included in the request for OMB
                                                    testing and scenario analysis.                          connection with a synthetic                           approval. All comments will become a
                                                       Section 3.132(d)(3)(viii) addresses                  securitization. An institution must                   matter of public record. Comments are
                                                    counterparty credit risk of repo-style                  demonstrate its comprehensive                         invited on:
                                                    transactions, eligible margin loans, and                understanding of a securitization                       (a) Whether the collections of
                                                    OTC derivative contracts. When                          exposure under § 3.141(c)(2) for each                 information are necessary for the proper
                                                    estimating model parameters based on a                  securitization exposure by conducting                 performance of the OCC’s functions,
                                                    stress period, an institution must use at               an analysis of the risk characteristics of            including whether the information has
                                                    least three years of historical data that               a securitization exposure prior to                    practical utility;
                                                    include a period of stress to the credit                acquiring the exposure and document                     (b) The accuracy of the OCC’s
                                                    default spreads of the institution’s                    such analysis within three business                   estimates of the burden of the
                                                    counterparties. The institution must                    days after acquiring the exposure.                    information collections, including the
                                                    review the data set and update the data                 Sections 3.141(c)(2)(i) and (ii) require              validity of the methodology and
                                                    as necessary, particularly for any                      that institutions, on an on-going basis               assumptions used;
                                                    material changes in its counterparties.                 (at least quarterly), evaluate, review, and             (c) Ways to enhance the quality,
                                                    The institution must demonstrate at                     update as appropriate the analysis                    utility, and clarity of the information to
                                                    least quarterly that the stress period                  required under this section for each                  be collected; and
                                                    coincides with increased credit default                 securitization exposure.                                (d) Ways to minimize the burden of
                                                    swap (CDS) or other credit spreads of                      Section 3.142(h)(2), regarding the                 information collections on respondents,
                                                    the institution’s counterparties. The                   capital treatment for securitization                  including through the use of automated
                                                    institution must have procedures to                     exposures, requires an institution to                 collection techniques or other forms of
                                                    evaluate the effectiveness of its stress                disclose publicly if it has provided                  information technology.
                                                    calibration that include a process for                  implicit support to a securitization and
                                                    using benchmark portfolios that are                     the regulatory capital impact to the                    Dated: February 1, 2017.
                                                    vulnerable to the same risk factors as the              institution of providing such implicit                Karen Solomon,
                                                    institution’s portfolio. The OCC may                    support.                                              Deputy Chief Counsel, Office of the
                                                    require the institution to modify its                      Section 3.153(b), outlining the                    Comptroller of the Currency.
                                                    stress calibration to better reflect actual             Internal Models Approach (IMA) for                    [FR Doc. 2017–02583 Filed 2–7–17; 8:45 am]
                                                    historic losses of the portfolio.                       calculating risk-weighted assets for                  BILLING CODE 4810–33–P
                                                       Section 3.132(d)(3)(ix), regarding                   equity exposures, specifies that an
                                                    counterparty credit risk of repo-style                  institution must receive prior written
                                                    transactions, eligible margin loans, and                approval from the OCC before it can use               DEPARTMENT OF THE TREASURY
                                                    OTC derivative contracts, requires that                 IMA.
                                                    an institution must subject its internal                   Section 3.172 specifies that each                  Office of Foreign Assets Control
                                                    model to an initial validation and                      advanced approaches institution that
                                                    annual model review process that                        has completed the parallel run process                Sanctions Actions Pursuant to
                                                    includes consideration of whether the                   must publicly disclose its total and tier             Executive Orders 13382
                                                    inputs and risk factors, as well as the                 1 risk-based capital ratios and their                 AGENCY:  Office of Foreign Assets
                                                    model outputs, are appropriate. This                    components.                                           Control, Treasury.
                                                    section requires institutions to have a                    Section 3.173 addresses disclosures                ACTION: Notice.
                                                    backtesting program for its model that                  by an advanced approaches institution
                                                    includes a process by which                             that is not a consolidated subsidiary of              SUMMARY:    The U.S. Department of the
                                                    unacceptable model performance will                     an equity that is subject to the Basel III            Treasury’s Office of Foreign Assets
                                                    be determined and remedied.                             disclosure requirements. An advanced                  Control (OFAC) is publishing the names
                                                       Section 3.132(d)(3)(x), regarding                    approaches institution that is subject to             of nine individuals and eight entities
                                                    counterparty credit risk of repo-style                  the disclosure requirements must make                 whose property and interests in
                                                    transactions, eligible margin loans, and                the disclosures described in Tables 1                 property are blocked pursuant to
                                                    OTC derivative contracts, provides that                 through 12. The institution must make                 Executive Order (E.O.) 13382.
                                                    an institution must have policies for the               these disclosures publicly available for              DATES: OFAC’s actions described in this
                                                    measurement, management, and control                    each of the last three years (that is,                notice were effective on February 3,
                                                    of collateral and margin amounts.                       twelve quarters) or such shorter period               2017, as further specified below.
                                                       Section 3.132(d)(3)(xi), concerning                  beginning on the effective date of this
                                                    counterparty credit risk of repo-style                                                                        FOR FURTHER INFORMATION CONTACT: The
                                                                                                            subpart E.
                                                    transactions, eligible margin loans, and                   The tables to § 3.173 require                      Department of the Treasury’s Office of
                                                    OTC derivative contracts, states that an                qualitative and quantitative public                   Foreign Assets Control: Assistant
                                                    institution must have a comprehensive                   disclosures for capital structure, capital            Director for Licensing, tel.: 202–622–
                                                    stress testing program that captures all                                                                      2480, Assistant Director for Regulatory
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                                                                                                            adequacy, capital conservation and
                                                    credit exposures to counterparties, and                 countercyclical buffers, credit risk,                 Affairs, tel.: 202–622–4855, Assistant
                                                    incorporates stress testing of principal                securitization, operational risk, equities            Director for Sanctions Compliance &
                                                    market risk factors and creditworthiness                not subject to the market risk capital                Evaluation, tel.: 202–622–2490; or the
                                                    of counterparties.                                      requirements, and interest rate risk for              Department of the Treasury’s Office of
                                                       Section 3.141 relates to operational                 non-trading activities.                               the Chief Counsel (Foreign Assets
                                                    criteria for recognizing the transfer of                   Burden Estimates:                                  Control), Office of the General Counsel,
                                                    risk in connection with a securitization.                  Estimated Number of Respondents:                   tel.: 202–622–2410.
                                                    Section 3.141(b)(3) requires an                         1,365.                                                SUPPLEMENTARY INFORMATION:



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Document Created: 2017-02-08 02:59:08
Document Modified: 2017-02-08 02:59:08
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice and request for comment.
DatesComments must be submitted on or before April 10, 2017.
ContactShaquita Merritt, OCC Clearance Officer, (202) 649-5490 or, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
FR Citation82 FR 9958 

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