83_FR_7988 83 FR 7951 - Annual Stress Test-Technical and Conforming Changes

83 FR 7951 - Annual Stress Test-Technical and Conforming Changes

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency

Federal Register Volume 83, Issue 37 (February 23, 2018)

Page Range7951-7954
FR Document2018-03687

On October 27, 2017, the Office of the Comptroller of the Currency (OCC) published a proposed rule that would have made several revisions to its stress testing regulation. The OCC is now adopting the proposed rule as final. The final rule changes the range of possible ``as-of'' dates used in the global market shock component to conform to changes already made by the Board of Governors of the Federal Reserve System (Board) to its stress testing regulations. The final rule also changes the transition process for covered institutions with $50 billion or more in assets. Under the final 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 will 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 will 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 final rule also makes certain technical changes to clarify the requirements of the OCC's stress testing regulation.

Federal Register, Volume 83 Issue 37 (Friday, February 23, 2018) 
[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Rules and Regulations]
[Pages 7951-7954]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-03687]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / 
Rules and Regulations

[[Page 7951]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 46

[Docket ID OCC-2017-0021]
RIN 1557-AE28


Annual Stress Test--Technical and Conforming Changes

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: On October 27, 2017, the Office of the Comptroller of the 
Currency (OCC) published a proposed rule that would have made several 
revisions to its stress testing regulation. The OCC is now adopting the 
proposed rule as final. The final rule changes the range of possible 
``as-of'' dates used in the global market shock component to conform to 
changes already made by the Board of Governors of the Federal Reserve 
System (Board) to its stress testing regulations. The final rule also 
changes the transition process for covered institutions with $50 
billion or more in assets. Under the final 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 will 
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 will 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 final 
rule also makes certain technical changes to clarify the requirements 
of the OCC's stress testing regulation.

DATES: The rule is effective March 26, 2018.

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 implementing the company-run stress tests.
---------------------------------------------------------------------------

    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------

    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 Final 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 have made this same change to the OCC's stress 
testing regulation. The OCC received no comments on this change and is 
adopting the change as proposed. Extending this range will 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.
---------------------------------------------------------------------------

    \2\ 82 FR 9308 (February 3, 2017).
---------------------------------------------------------------------------

B. New Applicability Transition and Terminology for Covered 
Institutions With $50 Billion or More in Assets

    The proposed rule would have changed the term ``over $50 billion 
covered institution'' to ``$50 billion or over covered institution.'' 
The change would not have altered the scope of this defined term and 
would not change the substantive requirements of the regulation. The 
OCC did not receive any comments on this change and is adopting the 
change as proposed. The new defined term will 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 final rule will 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.
---------------------------------------------------------------------------

    \3\ 12 CFR 46.2.
---------------------------------------------------------------------------

    The proposed rule would also have changed 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 
would provide additional time for bank holding companies that cross the 
$50 billion

[[Page 7952]]

asset threshold close to the April 5 submission date.\4\ The proposed 
rule would have made a parallel amendment to the OCC's stress testing 
regulation. The OCC did not receive any comments addressing this change 
and is adopting the change as proposed. Under the final 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\ will 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    The stress testing timeline and transition process for national 
banks or federal savings associations which become $10 to $50 billion 
covered institutions remain 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 final rule removes this obsolete transition language.
---------------------------------------------------------------------------

    \6\ 79 FR 71630 (December 3, 2014).
---------------------------------------------------------------------------

III. Comments

    The OCC received three comments on the proposed rule from 
individuals. Two of the comments did not address the contents of the 
proposed rule or stress testing. One comment mentioned stress testing 
but was very brief and did not make any specific recommendations. 
Accordingly, the OCC is adopting the final rule as proposed.

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 final rule amends 12 CFR part 46, which has an approved 
information collection under the PRA (OMB Control No. 1557-0319). The 
amendments 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 final rule 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 final rule, an agency 
prepare and make available for public comment a regulatory flexibility 
analysis that describes the impact of the 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 with total assets 
of less than or equal to $550 million) and publishes its certification 
and a brief explanatory statement in the Federal Register together with 
the rule.
    As discussed in the SUPPLEMENTARY INFORMATION section, the final 
rule 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 final rule 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 final rule. 
Accordingly, a regulatory flexibility analysis is not required.

Unfunded Mandates Reform Act

    The OCC has analyzed the final 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 final 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 final 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 final rule 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, disclosure, 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 final rule would not 
impose

[[Page 7953]]

additional reporting, disclosure, or other requirements; therefore the 
requirements of the RCDRIA do not apply.
---------------------------------------------------------------------------

    \7\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

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 
final rule in a simple and straightforward manner. The OCC did not 
receive any comments on its use of plain language.

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 amends 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).

0
2. Section 46.2 is amended by:
0
a. Removing the phrase ``an over $50 billion covered institution'' and 
adding the phrase ``a $50 billion or over covered institution'' in its 
place in the definition of ``covered institution''; and
0
b. Removing the definition of ``over $50 billion covered institution'' 
and adding the definition for ``$50 billion or over covered 
institution'' in alphabetical order.
    The addition reads as follows:


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
3. Section 46.3 is amended by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraphs (c) through (e) as paragraphs (b) through 
(d), respectively;
0
c. Revising newly redesignated paragraphs (b) and (c); and
0
d. Removing the phrase ``an over $50 billion covered institution'' and 
adding the phrase ``a $50 billion or over covered institution'' in its 
place wherever it appears in newly redesignated paragraph (d).
    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 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
4. 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
5. 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 Federal Reserve Board.

    (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

[[Page 7954]]

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
6. 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: February 13, 2018.
Joseph Otting,
Comptroller of the Currency.
[FR Doc. 2018-03687 Filed 2-22-18; 8:45 am]
 BILLING CODE 4810-33-P

7951 Rules and Regulations Federal Register Vol. 83, No. 37 Friday, February 23, 2018 This section of the FEDERAL REGISTER changes to clarify the requirements of significant trading activities to include contains regulatory documents having general the OCC’s stress testing regulation. trading and counterparty components in applicability and legal effect, most of which DATES: The rule is effective March 26, its adverse and severely adverse are keyed to and codified in the Code of scenarios. The trading and counterparty Federal Regulations, which is published under 2018. position data to be used in this 50 titles pursuant to 44 U.S.C. 1510. FOR FURTHER INFORMATION CONTACT: component is as of a date between Hein Bogaard, Lead Economic Expert, January 1 and March 1 of a calendar The Code of Federal Regulations is sold by International Analysis and Banking the Superintendent of Documents. year. On February 3, 2017, the Board Condition, (202) 649–5450; Andrew issued a final rule that extended this Tschirhart, Financial Analyst, Large range to run from October 1 of the DEPARTMENT OF THE TREASURY Bank Supervision, (202) 649–6210; Kari calendar year preceding the year of the Falkenborg, Senior Financial Analyst, stress test to March 1 of the calendar Office of the Comptroller of the Midsize and Community Bank year of the stress test.2 The proposed Currency Supervision, (312) 917–5000; Henry rule would have made this same change Barkhausen, Counsel, or Ron to the OCC’s stress testing regulation. 12 CFR Part 46 Shimabukuro, Senior Counsel, The OCC received no comments on this Legislative and Regulatory Activities change and is adopting the change as [Docket ID OCC–2017–0021] Division, (202) 649–5490; for persons proposed. Extending this range will who are deaf or hearing impaired, TTY, increase the OCC’s flexibility to choose RIN 1557–AE28 (202) 649–5597. an appropriate as-of date. The OCC SUPPLEMENTARY INFORMATION: continues to coordinate its stress testing Annual Stress Test—Technical and program with the Board in order to Conforming Changes I. Background minimize regulatory burden. AGENCY: Office of the Comptroller of the Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer Protection B. New Applicability Transition and Currency, Treasury. Terminology for Covered Institutions Act 1 (‘‘Dodd-Frank Act’’) requires two ACTION: Final rule. With $50 Billion or More in Assets types of stress tests. Section 165(i)(1) SUMMARY: On October 27, 2017, the requires the Board to conduct annual The proposed rule would have stress tests of holding companies with changed the term ‘‘over $50 billion Office of the Comptroller of the $50 billion or more in assets covered institution’’ to ‘‘$50 billion or Currency (OCC) published a proposed (‘‘supervisory stress tests’’). Section over covered institution.’’ The change rule that would have made several 165(i)(2) requires the federal banking would not have altered the scope of this revisions to its stress testing regulation. agencies to issue regulations requiring defined term and would not change the The OCC is now adopting the proposed financial companies with more than $10 substantive requirements of the rule as final. The final rule changes the billion in assets to conduct annual stress regulation. The OCC did not receive any range of possible ‘‘as-of’’ dates used in tests themselves (‘‘company-run stress comments on this change and is the global market shock component to tests’’). In October 2012, the OCC, the adopting the change as proposed. The conform to changes already made by the Board, and the Federal Deposit new defined term will be a more precise Board of Governors of the Federal Insurance Corporation issued final rules description of the entities included Reserve System (Board) to its stress within this category, which includes all testing regulations. The final rule also implementing the company-run stress tests. national banks and federal savings changes the transition process for associations ‘‘with average total covered institutions with $50 billion or The Dodd-Frank Act requires that the OCC and other federal primary financial consolidated assets . . . that are not less more in assets. Under the final rule, a than $50 billion.’’ 3 While the final rule covered institution that becomes an over regulatory agencies issue consistent and comparable regulations to implement will change the defined term ‘‘over $50 $50 billion covered institution, as that billion covered institution’’ to ‘‘$50 term is defined in the OCC stress testing the statutory stress testing requirement. In order to fulfill this requirement and billion or over covered institution,’’ this regulation, before September 30 will supplementary information section will become subject to the requirements minimize regulatory burden, the OCC has worked to ensure that its stress continue to use the defined term ‘‘over applicable to an over $50 billion $50 billion covered institution’’ since covered institution beginning on testing regulation remains consistent and comparable to the regulations that is the term used in the current January 1 of the second calendar year regulatory text. after the covered institution becomes an enacted by other regulatory agencies, The proposed rule would also have over $50 billion covered institution, and including the Board. changed the transition process for a covered institution that becomes an II. Description of the Final Rule covered institutions that become an over $50 billion covered institution after ‘‘over $50 billion covered institution.’’ September 30 will become subject to the A. New Range of Possible As-Of Dates daltland on DSKBBV9HB2PROD with RULES On February 3, 2017, the Board issued requirements applicable to an over $50 for Trading and Counterparty Scenario a final rule that would provide billion covered institution beginning on Component additional time for bank holding January 1 of the third calendar year after Under 12 CFR 46.5(c) the OCC may companies that cross the $50 billion the covered institution becomes an over require a covered institution with $50 billion covered institution. The 2 82 FR 9308 (February 3, 2017). final rule also makes certain technical 1 Public Law 111–203, 124 Stat. 1376 (2010). 3 12 CFR 46.2. VerDate Sep<11>2014 16:46 Feb 22, 2018 Jkt 244001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1

7952 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Rules and Regulations asset threshold close to the April 5 conduct its first stress test in the stress $550 million) and publishes its submission date.4 The proposed rule testing cycle beginning January 1, 2019. certification and a brief explanatory would have made a parallel amendment statement in the Federal Register C. Remove Obsolete Transition to the OCC’s stress testing regulation. together with the rule. Language As discussed in the SUPPLEMENTARY The OCC did not receive any comments addressing this change and is adopting In 2014 the OCC, in coordination with INFORMATION section, the final rule will the change as proposed. Under the final the Board and Federal Deposit only affect institutions with more than rule, a national bank or federal savings Insurance Corporation, shifted the dates $10 billion in total assets. Therefore, the association that becomes an over $50 of the annual stress testing cycle by rule will not affect any small entities. As billion covered institution in the fourth approximately three months.6 The such, pursuant to section 605(b) of the quarter of a calendar year 5 will not be OCC’s stress testing regulation RFA, the OCC certifies that this final subject to the stress testing requirements continues to include transition language rule would not have a significant applicable to over $50 billion covered to facilitate this schedule shift. The economic impact on a substantial institutions until the third year after it transition to the new schedule is now number of small entities because no crosses the asset threshold. For complete, and the final rule removes small national banks or federal savings example, if a national bank or federal this obsolete transition language. associations would be affected by the savings association became an over $50 III. Comments final rule. Accordingly, a regulatory billion covered institution on September flexibility analysis is not required. The OCC received three comments on 15, 2017, the institution would be Unfunded Mandates Reform Act the proposed rule from individuals. expected to comply with the Two of the comments did not address The OCC has analyzed the final rule requirements applicable to over $50 the contents of the proposed rule or under the factors in the Unfunded billion covered institutions beginning in stress testing. One comment mentioned Mandates Reform Act of 1995 (UMRA) 2019 and file the OCC DFAST–14A in stress testing but was very brief and did (2 U.S.C. 1532). Under this analysis, the April 2019. If a national bank or federal not make any specific OCC considered whether the final rule savings association became an over $50 recommendations. Accordingly, the includes a federal mandate that may billion covered institution on October OCC is adopting the final rule as result in the expenditure by state, local, 15, 2017, the institution would be proposed. and tribal governments, in the aggregate, required to comply with the stress IV. Regulatory Analysis or by the private sector, of $100 million testing requirements applicable to over or more in any one year (adjusted $50 billion covered institutions Paperwork Reduction Act annually for inflation). The OCC has beginning in 2020 and file the OCC Under the Paperwork Reduction Act determined that this final rule will not DFAST–14A in April 2020. (PRA) (44 U.S.C. 3501–3520), the OCC result in expenditures by state, local, The stress testing timeline and and tribal governments, or the private may not conduct or sponsor, and a transition process for national banks or person is not required to respond to, an sector, of $100 million or more in any federal savings associations which information collection unless the one year. Accordingly, this final rule is become $10 to $50 billion covered information collection displays a valid not subject to section 202 of the UMRA. institutions remain unchanged. A Office of Management and Budget national bank or federal savings Riegle Community Development and (OMB) control number. This final rule Regulatory Improvement Act of 1994 association that becomes a $10 to $50 amends 12 CFR part 46, which has an billion covered institution on or before approved information collection under The Riegle Community Development March 31 of a given year would be the PRA (OMB Control No. 1557–0319). and Regulatory Improvement Act of required to conduct its first stress test in The amendments do not introduce any 1994 (RCDRIA) requires that each the next calendar year. For example, a new collections of information, nor do federal banking agency, in determining national bank or federal savings they amend 12 CFR part 46 in a way the effective date and administrative association that becomes a $10 to $50 that modifies the collection of compliance requirements for new billion covered institution as of March information that OMB has approved. regulations that impose additional 31, 2017, would be required to conduct Therefore, this final rule does not reporting, disclosure, or other its first stress test in the stress testing require a PRA submission to OMB. requirements on insured depository cycle beginning January 1, 2018. A institutions, consider, consistent with national bank or federal savings Regulatory Flexibility Act principles of safety and soundness and association that becomes a $10 to $50 The Regulatory Flexibility Act (RFA), the public interest, any administrative billion covered institution after March 5 U.S.C. 601 et seq., requires generally burdens that such regulations would 31 of a given year would be required to that, in connection with a final rule, an place on depository institutions, conduct its first stress test in the second agency prepare and make available for including small depository institutions, calendar year after the date the national public comment a regulatory flexibility and customers of depository bank or federal savings association analysis that describes the impact of the institutions, as well as the benefits of becomes a covered institution. For rule on small entities. However, the such regulations. In addition, new example, a national bank or federal regulatory flexibility analysis otherwise regulations and amendments to savings association that becomes a $10 required under the RFA is not required regulations that impose additional to $50 billion covered institution on if an agency certifies that the rule will reporting, disclosure, or other new June 30, 2017 would be required to not have a significant economic impact requirements on insured depository daltland on DSKBBV9HB2PROD with RULES on a substantial number of small entities institutions generally must take effect 4 82 FR 9308 (February 3, 2017). (defined in regulations promulgated by on the first day of a calendar quarter 5 An institution becomes an over $50 billion the Small Business Administration that begins on or after the date on which covered institution when its average total (SBA) to include banking organizations the regulations are published in final consolidated assets, as reported on the covered institution’s Call Reports, for the four most recent with total assets of less than or equal to form.7 The final rule would not impose consecutive quarters, equals $50 billion or more. 12 CFR 46.3(a). 6 79 FR 71630 (December 3, 2014). 7 12 U.S.C. 4802. VerDate Sep<11>2014 16:46 Feb 22, 2018 Jkt 244001 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1

Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Rules and Regulations 7953 additional reporting, disclosure, or other § 46.3 Applicability. unless that time is extended by the OCC requirements; therefore the * * * * * in writing. requirements of the RCDRIA do not * * * * * (b) Covered institutions that become apply. ■ 4. Revise § 46.5 to read as follows: subject to stress testing requirements. A Plain Language national bank or Federal savings § 46.5 Annual stress test. Section 722 of the Gramm-Leach- association that becomes a $10 to $50 Each covered institution must Bliley Act requires the federal banking billion covered institution on or before conduct the annual stress test under this agencies to use plain language in all March 31 of a given year shall conduct part subject to the following proposed and final rules published after its first annual stress test under this part requirements: January 1, 2000. The OCC has sought to in the next calendar year after the date (a) Financial data. A covered present the final rule in a simple and the national bank or Federal savings institution must use financial data as of straightforward manner. The OCC did association becomes a $10 to $50 billion December 31 of the previous calendar not receive any comments on its use of covered institution, unless that time is year. plain language. extended by the OCC in writing. A (b) Scenarios provided by the OCC. In national bank or Federal savings conducting the stress test under this List of Subjects in 12 CFR Part 46 association that becomes a $10 to $50 part, each covered institution must use Banking, Banks, Capital, Disclosures, billion covered institution after March the scenarios provided by the OCC. The National banks, Recordkeeping, Risk, 31 of a given year shall conduct its first scenarios provided by the OCC will Savings associations, Stress test. annual stress test under this part in the reflect a minimum of three sets of second calendar year after the calendar economic and financial conditions, Authority and Issuance year in which the national bank or including baseline, adverse, and For the reasons set forth in the Federal savings association becomes a severely adverse scenarios. The OCC preamble, the OCC amends 12 CFR part $10 to $50 billion covered institution, will provide a description of the 46 as follows: unless that time is extended by the OCC scenarios required to be used by each in writing. covered institution no later than PART 46—ANNUAL STRESS TEST (c) Ceasing to be a covered institution February 15 of that calendar year. or changing categories. (1) A covered (c) Significant trading activities. The ■ 1. The authority citation for part 46 OCC may require a covered institution institution shall remain subject to the continues to read as follows: with significant trading activities, as stress test requirements based on its Authority: 12 U.S.C. 93a; 1463(a)(2); applicable category, as defined in § 46.2, determined by the OCC, to include 5365(i)(2); and 5412(b)(2)(B). unless and until total consolidated trading and counterparty components in ■ 2. Section 46.2 is amended by: assets of the covered institution falls its adverse and severely adverse ■ a. Removing the phrase ‘‘an over $50 below the relevant size threshold for scenarios. The trading and counterparty billion covered institution’’ and adding each of four consecutive quarters as position data to be used in this the phrase ‘‘a $50 billion or over reported by the covered institution’s component will be as of a date between covered institution’’ in its place in the most recent Call Reports. The October 1 of the previous calendar year definition of ‘‘covered institution’’; and calculation shall be effective on the ‘‘as and March 1 of that calendar year in ■ b. Removing the definition of ‘‘over of’’ date of the fourth consecutive Call which the stress test is performed, and $50 billion covered institution’’ and Report. the OCC will communicate a adding the definition for ‘‘$50 billion or description of the component to the (2) Notwithstanding paragraph (c)(1) covered institution no later than March over covered institution’’ in alphabetical of this section, a national bank or order. 1 of that calendar year. Federal savings association that (d) Use of stress test results. The board The addition reads as follows: becomes a $50 billion or over covered of directors and senior management of § 46.2 Definitions. institution, whether by migrating from each covered institution must consider being a $10 to $50 billion covered the results of the stress tests conducted * * * * * institution or by directly becoming a under this section in the normal course $50 billion or over covered institution $50 billion or over covered institution, of business, including but not limited to means a national bank or Federal after September 30 of a calendar year the covered institution’s capital savings association with average total must comply with the requirements planning, assessment of capital consolidated assets, calculated as applicable to a $50 billion or over adequacy, and risk management required under this part, that are not covered institution beginning on practices. less than $50 billion. January 1 of the third calendar year after * * * * * ■ 5. Section 46.7 is amended by revising the national bank or Federal savings ■ 3. Section 46.3 is amended by: paragraphs (a) and (b) to read as follows: association becomes a $50 billion or ■ a. Removing paragraph (b); over covered institution, unless that § 46.7 Reports to the Office of the ■ b. Redesignating paragraphs (c) time is extended by the OCC in writing. Comptroller of the Currency and the Federal through (e) as paragraphs (b) through A national bank or Federal savings Reserve Board. (d), respectively; association that becomes a $50 billion or (a) $10 to $50 billion covered ■ c. Revising newly redesignated over covered institution on or before institution. A $10 to $50 billion covered paragraphs (b) and (c); and September 30 of a calendar year must institution must report to the OCC and ■ d. Removing the phrase ‘‘an over $50 comply with the requirements daltland on DSKBBV9HB2PROD with RULES to the Board of Governors of the Federal billion covered institution’’ and adding applicable to a $50 billion or over Reserve System, on or before July 31, the phrase ‘‘a $50 billion or over covered institution beginning on the results of the stress test in the covered institution’’ in its place January 1 of the second calendar year manner and form specified by the OCC. wherever it appears in newly after the national bank or Federal (b) $50 billion or over covered redesignated paragraph (d). savings association becomes a $50 institution. A $50 billion or over The revisions read as follows: billion or over covered institution, covered institution must report to the VerDate Sep<11>2014 16:46 Feb 22, 2018 Jkt 244001 PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1

7954 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Rules and Regulations OCC and to the Board of Governors of NATIONAL CREDIT UNION addition to its chartering and the Federal Reserve System, on or before ADMINISTRATION supervisory responsibilities, the Board April 5, the results of the stress test in also administers the NCUSIF, a the manner and form specified by the 12 CFR Part 741 revolving fund within the U.S. Treasury OCC. RIN 3133–AE77 that provides federal share insurance * * * * * coverage to more than 106 million credit Requirements for Insurance; National union members for member accounts ■ 6. Section 46.8 is amended by revising Credit Union Share Insurance Fund held at FICUs and provides assistance in paragraph (a) to read as follows: Equity Distributions connection with the liquidation or threatened liquidation of FICUs in § 46.8 Publication of disclosures. AGENCY: National Credit Union troubled condition.2 (a) Publication date. (1) $50 billion or Administration (NCUA). The Federal Credit Union Act (FCU over covered institution. A $50 billion ACTION: Final rule. Act) requires each FICU to pay and or over covered institution must publish maintain a capitalization deposit with SUMMARY: The NCUA Board (Board) is the NCUSIF equal to one percent of the a summary of the results of its annual adopting amendments to its share stress test in the period starting June 15 FICU’s insured shares to capitalize the insurance requirements rule to provide NCUSIF.3 The amount of the FICU’s and ending July 15 provided: stakeholders with greater transparency required capitalization deposit is (i) Unless the OCC determines regarding the calculation of each eligible adjusted annually for a FICU with less otherwise, if the $50 billion or over financial institution’s pro rata share of than $50 million in assets and covered institution is a consolidated a declared equity distribution from the semiannually for a FICU with $50 subsidiary of a bank holding company National Credit Union Share Insurance million in assets or more.4 A FICU that or savings and loan holding company Fund (NCUSIF). The Board is also terminates federal share insurance subject to supervisory stress tests adopting a temporary provision to coverage is entitled to have its conducted by the Board of Governors of govern all NCUSIF equity distributions capitalization deposit returned within a the Federal Reserve System pursuant to related to the Corporate System reasonable time.5 12 CFR part 252, then within the June Resolution Program (CSRP), a special The FCU Act also requires each FICU 15 to July 15 period such covered purpose program established by the to pay a federal share insurance institution may not publish the required Board to stabilize the corporate credit premium equal to a percentage of the union system following the 2007–2009 FICU’s insured shares to ensure that the summary of its annual stress test earlier financial crisis. Furthermore, the Board NCUSIF has sufficient reserves to pay than the date that the Board of is making technical and conforming potential share insurance claims by Governors of the Federal Reserve amendments to other aspects of the credit union members and to provide System publishes the supervisory stress share insurance requirements rule to assistance in connection with the test results of the covered bank’s parent account for these changes. holding company. DATES: This rule is effective March 26, FCU Act (12 U.S.C. 1781–1790e). Title III of the (ii) If the Board of Governors of the 2018, except for the addition of FCU Act (12 U.S.C. 1795–1795k) governs the Federal Reserve System publishes the Board’s responsibilities overseeing the NCUA § 741.13, which is effective from March Central Liquidity Facility, a federal instrumentality supervisory stress test results of the 26, 2018, until December 31, 2022. that provides liquidity for member credit unions. covered institution’s parent holding FOR FURTHER INFORMATION CONTACT: 2 12 U.S.C. 1783. company prior to June 15, then such Benjamin M. Litchfield, Staff Attorney, 3 Id. at 1782(c)(1)(A)(i). 4 Id. at 1782(c)(1)(A)(iii)(I)–(II) (‘‘The amount of covered institution may publish its Office of General Counsel, at (703) 518– each insured credit union’s deposit shall be stress test results prior to June 15, but 6540; or Steve Farrar, Supervisory adjusted as follows, in accordance with procedures no later than July 15, through actual Financial Analyst, Office of determined by the Board, to reflect changes in the publication by the covered institution or Examination and Insurance, at (703) credit union’s insured shares: (I) Annually, in the case of an insured credit union with total assets of through publication by the parent 518–6360. You may also contact them at not more than $50,000,000; and (II) semi-annually, holding company pursuant to paragraph the National Credit Union in the case of an insured credit union with total (b) of this section. Administration, 1775 Duke Street, assets of $50,000,000 or more.’’). Because the Alexandria, Virginia 22314–3428. statutory text can be read to require the Board to (2) $10 to $50 billion covered adjust the capitalization deposit of a FICU with institution. A $10 to $50 billion covered SUPPLEMENTARY INFORMATION: exactly $50,000,000 in assets both annually and institution must publish a summary of I. Background semi-annually, the Board interprets the phrase ‘‘not more than’’ to mean ‘‘less than’’ to give full effect the results of its annual stress test in the II. Summary of the Proposed Rule to Congress’ intended meaning of this phrase. See period starting October 15 and ending III. Summary of Comments to the Proposed Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, October 31. Rule 571 (1982) (if the meaning of the statutory provision IV. Section-by-Section Analysis is clear from its text, the sole responsibility of a * * * * * V. Technical and Conforming Amendments federal agency is to enforce the statute according to VI. Regulatory Procedures its terms unless literal application of the statute Dated: February 13, 2018. ‘‘will produce a result demonstrably at odds with Joseph Otting, I. Background the intention of its drafters.’’). 5 Id. at 1782(c)(1)(B)(i). A FICU may terminate Comptroller of the Currency. The NCUA is the chartering and federal share insurance coverage by converting to, [FR Doc. 2018–03687 Filed 2–22–18; 8:45 am] supervisory authority for federal credit or merging into, a non-federally insured credit BILLING CODE 4810–33–P unions (FCUs) and the federal union or a non-credit union financial institution daltland on DSKBBV9HB2PROD with RULES supervisory authority for federally such as a mutual savings bank. If permitted under applicable state law, a federally insured, state- insured credit unions (FICUs).1 In chartered credit union may also convert to private share insurance. See 12 CFR 708b (NCUA’s 1 The NCUA’s authority to charter federal credit regulation governing mergers and conversions to unions is contained in Title I of the FCU Act (12 private share insurance). A FICU may also U.S.C. 1752–1775), and its various authorities as terminate federal share insurance coverage through federal share insurer are contained in Title II of the voluntary or involuntary liquidation. VerDate Sep<11>2014 16:46 Feb 22, 2018 Jkt 244001 PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1


Document Created: 2018-02-23 01:32:55
Document Modified: 2018-02-23 01:32:55
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule.
DatesThe rule is effective March 26, 2018.
ContactHein 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.
FR Citation83 FR 7951 
RIN Number1557-AE28
CFR AssociatedBanking; Banks; Capital; Disclosures; National Banks; Recordkeeping; Risk; Savings Associations and Stress Test
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR