Annual Stress Test - Final Rule

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Rules and Regulations

Federal Register
Vol. 77, No. 199
Monday, October 15, 2012

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. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 325

George French, Deputy Director, Policy,
(202) 898–3929, Robert Burns, Associate
Director, Mid-Tier Bank Branch, (202)
898–3905, or Ryan Sheller, Senior Large
Financial Institutions Specialist, (202)
412–4861, Division of Risk Management
and Supervision; Mark G. Flanigan,
Counsel, (202) 898–7426, Jason Fincke,
Senior Attorney, (202) 898–3659, Rachel
Jones, Attorney, (202) 898–6858, or
Ryan K. Clougherty, Senior Attorney,
(202) 898–3843, Legal Division, Federal
Deposit Insurance Corporation, 550 17th
Street NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:

RIN 3064–AD91

I. Background

Annual Stress Test

A. Overview of Section 165(i) of the
Dodd-Frank Act
The Dodd-Frank Act was enacted on
July 21, 2010.1 Section 165(i)(2) of the
Dodd-Frank Act (‘‘section 165(i)(2)’’)
requires the Corporation, as a Federal
primary financial regulatory agency, to
issue regulations that require FDICinsured state nonmember banks and
FDIC-insured state-chartered savings
associations with total consolidated
assets of more than $10 billion to
conduct annual stress tests.
Additionally, section 165(i)(2) requires
that the Corporation issue regulations
that: (1) Define the term ‘‘stress test’’ for
purposes of the regulations; (2) establish
methodologies for the conduct of the
stress tests that provide for at least three
different sets of conditions, including
baseline, adverse, and severely adverse
conditions; (3) establish the form and
content of a required report on the stress
tests that covered banks must submit to
the Corporation; and (4) require covered
banks to publish a summary of the
results of the required stress tests.
Section 165(i)(2)(C) requires the
Corporation, in coordination with the
Board of Governors and the Federal
Insurance Office, to issue regulations
implementing the stress testing
requirements that are consistent and
comparable with the other Federal
primary financial regulatory agencies.2

Federal Deposit Insurance
Corporation.
ACTION: Final rule.
AGENCY:

The Federal Deposit
Insurance Corporation (the
‘‘Corporation’’ or ‘‘FDIC’’) is issuing a
final rule that implements the
requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (the ‘‘Dodd-Frank Act’’) regarding
stress tests (‘‘final rule’’). The DoddFrank Act requires the Corporation to
issue regulations that require FDICinsured state nonmember banks and
FDIC-insured state-chartered savings
associations with total consolidated
assets of more than $10 billion to
conduct annual stress tests, report the
results of such stress tests to the
Corporation and the Board of Governors
of the Federal Reserve System
(‘‘Board’’), and publish a summary of
the results of the stress tests. The final
rule requires large covered banks to
conduct annual stress tests beginning on
the effective date of this final rule. The
Corporation, however, will delay
implementation of the annual stress test
requirements under the final rule for
institutions with total consolidated
assets of more than $10 billion but less
than $50 billion until September 30,
2013. The final rule requirement for
public disclosure of a summary of the
stress testing results for these
institutions will be implemented
starting with the 2014 stress test, with
the disclosure occurring during the
period starting June 15 and ending June
30 of 2015.
DATES: This final rule is effective
October 15, 2012.
SUMMARY:

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FOR FURTHER INFORMATION CONTACT:

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1 Public

Law 111–203, 124 Stat. 1376 (2010).
section 2(12) of the Dodd-Frank Act, the
term ‘‘Primary financial regulatory agency’’
includes the federal banking agencies, including the
Corporation, the Board of Governors, and the Office
of the Comptroller of the Currency (‘‘OCC’’); the
Securities and Exchange Commission; the
Commodity Futures Trading Commission; and the
Federal Housing Finance Agency. 12 U.S.C.
5301(12).
2 Under

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On January 23, 2012, pursuant to
section 165(i) of the Dodd-Frank Act,
the Corporation issued a notice of
proposed rulemaking in the Federal
Register that proposed to require
covered banks to conduct annual stress
tests (‘‘NPR’’ or ‘‘proposed rule’’).3 The
Corporation is now issuing a final rule
implementing the requirements of
section 165(i)(2) as proposed in the
NPR, with certain modifications as
described further below.
II. Comments Received
A. Overview
The NPR solicited public comment on
all aspects of the proposed rule. The
NPR’s comment period ended on April
30, 2012, and resulted in the FDIC
receiving 18 comment letters.
Comments were submitted by, or on
behalf of, individuals, banks and bank
holding companies, consulting firms,
and banking and financial services
industry trade groups and associations.
The comment letters generally
supported the broader goals of the NPR,
but many expressed concerns with
respect to certain aspects of the
proposed rule, as discussed in more
detail below.
B. Agency Coordination
A number of commenters expressed
concerns about the scope of the
proposed rule and the need for
coordination between the agencies in
implementing the stress test
requirements for various institutions.
These commenters generally suggested
that the agencies should seek
comparability on their respective stress
testing requirements and resolve some
of the key differences between their
respective proposals to ensure
consistent and comparable stress testing
for all covered financial institutions and
to minimize regulatory burden.
The Corporation understands and is
sensitive to commenters’ concerns
regarding the importance of issuing a
consistent and comparable set of final
stress testing rules across the banking
agencies. The FDIC understands that
there are a number of insured
depository institutions subject to the
stress testing final rules that may
operate within organizational structures
with regulated entities that may be
supervised by different federal banking
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regulators. The FDIC has developed this
rule in coordination with the FRB and
the Federal Insurance Office as required
by section 165(i)(2)(C). Additionally, the
FDIC has worked closely with the other
banking agencies to ensure the
standards of the final rule are consistent
and comparable in the areas of: scope of
application, scenarios, data collection
and reporting, and disclosure. The
Board and OCC have issued separate
final stress test rules with respect to
their supervised entities.
C. Effective Date of Proposed Rule
The NPR sought public comment on
the timing of the proposed rule, both
with respect to the proposed immediate
effectiveness and the proposed time
period allotted for completion of the
stress tests.
With respect to the proposed effective
date, several commenters recommended
delayed effective dates based on the
asset size of the bank. One commenter
suggested a delayed effective date
because, due to the complexity of the
rule’s stress testing requirements,
regional and community banks would
require additional time to build and
effectuate the systems necessary to
conduct testing. Another commenter
noted that community banks have not
participated in stress tests and have not
experienced the supervisory
expectations that accompany the stress
testing process and therefore need
additional time to comply with the
proposed rule. Several commenters
requested delaying the implementation
of the proposed rule for at least one
year.
The FDIC recognizes that a number of
state nonmember banks and state
savings associations are at different
stages in developing their stress testing
frameworks. Certain institutions may
need additional time to fully develop
their stress testing systems, processes,
and procedures, and to collect the
information that the FDIC may require
in connection with these tests. After
considering the comments, the FDIC has
decided to delay implementation of the
final rule for institutions with total
consolidated assets of more than $10
billion but less than $50 billion until
September 30, 2013, to ensure that these
institutions have sufficient time to
develop high-quality stress testing
programs. Furthermore, the FDIC has
decided to delay the initial public
disclosure requirement for these
institutions until the 2014 stress test
(with the public disclosure to be made
in 2015).
Most banks with consolidated assets
of $50 billion or more have been
involved in stress testing previously,

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including the 2009 Supervisory Capital
Assessment Program (SCAP) and the
Board’s Comprehensive Capital
Analysis and Review (CCAR) stress
tests, and consequently have in place a
framework necessary to conduct the
stress tests required by this rule. Given
the size, complexity, and importance of
these covered banks to the safety and
soundness of the United States banking
system, the FDIC believes it is
appropriate for these covered banks to
commence stress testing as soon as
possible. Consequently, state
nonmember banks and state savings
associations with consolidated total
assets equal to or exceeding $50 billion
will be required to conduct their first
annual stress tests under this final rule
using financial data as of September 30,
2012.
The FDIC is aware, however, that
some state nonmember banks and state
savings associations with assets of $50
billion or more may not be able or ready
to conduct the annual stress test this
year in a manner that would yield
meaningful results. For example,
covered banks that were not subject to
SCAP and CCAR may need more time
to develop and implement a robust
stress testing framework. Therefore, the
FDIC is reserving authority in the rule
to permit these covered banks to delay
the application of the requirements
under this final rule on a case-by-case
basis.
D. Timing of the Stress Test
Requirements
The NPR sought public comment on
the proposed time period allotted for
completion of the stress tests. A number
of comments were received expressing
concern with respect to the proposed
rule’s timing for the annual stress test.
Several commenters noted that the
proposed rule would require covered
banks to conduct stress tests during the
busiest time of year for many
institutions. Furthermore, one
commenter argued that the narrow
timeframe between the release of
scenarios and the submission of the
required reports could present timing
issues for institutions, particularly
smaller banks, in preparing year-end
information. Additionally, several
commenters requested that the
Corporation provide flexibility with
respect to when covered banks are
required to perform stress tests. For
example, one commenter recommended
that covered banks be permitted to
choose when they will conduct stress
testing throughout the year, and also
suggested that the Corporation should
provide economic scenarios for the

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stress tests no later than September 30
of each calendar year.
After consideration of the comments,
the FDIC has decided to make changes
in the timeline in the final rule. The
Corporation intends to distribute the
scenarios to all covered banks no later
than November 15 of each year, which
aligns the development and issuance of
the scenarios with the other agencies
and which is approximately seven
weeks prior to the date by which an
over $50 billion covered bank must
report the results of its annual stress
test. The Corporation believes, based on
its supervisory experience, that over $50
billion covered banks will have
adequate time to carry out the required
stress tests. For the $10 billion to $50
billion covered banks, the final rule
extends the reporting date to March 31
of each year giving additional time to
these institutions to conduct stress tests
and report the results. The final rule
also permits these institutions to report
their stress test results under the same
timeframe as their parent holding
company.
The final rule states that a state
nonmember bank or state savings
association that becomes a covered bank
after the final rule’s effective date shall
comply with the requirements of the
final rule and conduct its stress test
beginning in the calendar year after the
date the state nonmember bank or state
savings association becomes a covered
bank. This modification to the proposed
rule is in response to commenters’
concerns that certain institutions have
not previously been subject to stresstesting requirements and may need
additional time to develop the systems
and procedures, as well as information
collection processes necessary to
conduct these tests.
E. Scenario Development
A number of the comments received
by the Corporation raised concerns with
respect to the development and use of
economic scenarios within the proposed
rule. For example, one commenter
suggested that the scenarios should be
realistic and robust enough to
illuminate potential problems, and that,
at a minimum, the ‘‘severely adverse’’
scenario should be as adverse as
conditions were during the recent
financial crisis. A trade association
recommended that the scenarios address
only general macroeconomic factors for
institutions with between $10 billion
and $50 billion in assets, while more
complex institutions or those that have
significant trading positions should
incorporate rate ‘‘shocks’’ into their
stress tests. Another commenter
requested that the banking regulators

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and the bank mutually determine stress
testing criteria that are tailored to a
bank’s specific business profile,
including unique asset mixes and
operating profiles, in order to avoid the
distortions that a ‘‘one size fits all’’
approach would create.
Several commenters requested that
banks with small geographic footprints
be permitted to develop economic
scenarios relevant to banks’ regional
operations. One such commenter argued
that the requirements could become a
costly ‘‘check the box’’ exercise if stress
scenarios are not relevant to banks with
small geographic footprints. The
commenter also recommended that the
Corporation provide guidance to banks
for developing their own scenarios,
including reports on regional economic
outlooks.
A comment submitted jointly by a
number of industry organizations
requested that the Corporation and other
federal banking agencies minimize the
burden of the multiple and overlapping
stress test requirements by consistently
using the same set of supervisory stress
scenarios and models for all stress-test
requirements. The FDIC intends to
coordinate with other federal banking
agencies on the development of
scenarios. To promote a consistent and
transparent framework to support
scenario design, the banking agencies
anticipate seeking comment on the
procedures to be used by the agencies in
the development of the scenarios. With
regard to commenters’ requests to use
their own internally generated
scenarios, the FDIC believes that all
covered banks should use the same set
of scenarios so that the results are more
directly comparable. However, to allow
for unforeseen circumstances, the FDIC
reserves the authority to require a
covered bank to use different or
additional scenarios that the FDIC
deems appropriate.
F. Reporting
Commenters also expressed concerns
about the required reports that must be
submitted to the Corporation under the
proposed rule. For example, one
commenter suggested that the
Corporation’s expectations for the
required reports should be clear and
simple enough so that institutions,
particularly smaller banks, do not have
to rely on vendors or third-party
professionals to comply with the
requirements.
A number of commenters suggested
that it would be appropriate in certain
situations to allow a covered bank that
is a subsidiary of a bank holding
company (that is itself subject to stress
testing requirements) to submit a single

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report for both the bank and the bank
holding company. One such commenter
requested that the Corporation provide
more comprehensive guidance with
respect to the standards by which the
company-run stress tests will be
analyzed.
The FDIC recently proposed reporting
templates for covered banks with
consolidated assets of $50 billion or
more.4 The Dodd-Frank Act stress
testing reporting requirements apply to
all covered banks, but the FDIC
recognizes that many covered banks
with consolidated total assets of $50
billion or more have been subject to
stress testing requirements under the
Board’s CCAR or Capital Plan Review
(CapPR) exercises. The FDIC also
recognizes that these banks’ stress tests
will be applied to more complex
portfolios and therefore warrant a
broader set of reports to adequately
capture the results of the company-run
stress tests. These reports will
necessarily require more detail than
would be appropriate for smaller, less
complex banks. Therefore, the FDIC will
propose more simplified and separate
reporting templates for institutions with
total consolidated assets of more than
$10 billion but less than $50 billion
than for covered banks with total
consolidated assets of $50 billion or
more. The general expectations for the
proposed reporting requirements are
discussed further below.
The FDIC reserves the authority to
require a $10 billion to $50 billion
covered bank to use the reporting
template for larger banks. The FDIC may
also, on a case-by-case basis, require a
covered bank to report stress test results
using a simpler format to be specified by
the FDIC.
G. Public Disclosure of Stress Test
Results
Many of the comments received by
the Corporation addressed issues
associated with the proposed rule’s
public disclosure requirement. Several
commenters expressed concern that the
publication of detailed stress test results
could be misinterpreted by the general
public which could, in turn, undermine
public confidence in banks. One such
commenter noted that the required
public disclosure of results may be used
for comparison across institutions,
suggesting that regulators run the risk of
creating an environment where banks
present a conservative bias where there
is flexibility in adopting test inputs.
Several commenters requested
additional clarity with respect to the
Corporation’s expectations for the
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required summary public disclosure.
One commenter noted that the
company-run stress tests would not be
standardized, and thus, comparison of
results across various companies may
not be possible. This commenter urged
the Corporation to provide companies
with a standardized template for
disclosure that could enable a better
understanding of the stress test results
by the capital markets and the general
public. Another commenter urged the
Corporation to require small banks to
disclose only a description of the types
of risks being included in the stress test,
a general description of the
methodologies employed, and the
capital ratios at the end of the planning
horizon.
Two commenters recommended that
the CCAR or CapPR disclosure
templates be used for disclosure of the
results of the severely adverse scenario
for company-run stress tests, at least for
covered banks with consolidated assets
of $50 billion or more. One of these
commenters supported not requiring the
publication of summary results under
the adverse scenario. Several
commenters suggested that covered
banks should not be required to disclose
baseline stress test results or other
information that could be used to
reverse-engineer earnings guidance.
After careful consideration of the
comments, the FDIC has decided to
make the following changes. First, the
public disclosure requirement will be
delayed for an additional year for
institutions with total consolidated
assets of more than $10 billion but less
than $50 billion so that these
institutions will have additional time to
develop robust stress testing
methodologies before they report
publicly. Therefore, these covered banks
will conduct their required stress tests
for the first time in 2013, with the first
disclosure of a summary of stress test
results occurring in 2015, based on the
results of the 2014 stress tests. Covered
banks with total consolidated assets of
$50 billion or more that are subject to
this final rule as of the effective date of
this final rule must conduct their first
stress test this year, with disclosure
required in 2013.
Institutions that become $10 billion to
$50 billion covered banks after the
effective date of the final rule would
begin stress testing in the calendar year
after they become covered banks. This is
a change from the proposed rule, which
would have required institutions to
begin stress testing in the same calendar
year if they became covered banks no
less than 90 days before September 30
of that year. This change was in
response to comments that requested

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that the Corporation’s final rule be
consistent with the OCC’s and the
Board’s final rules under Section 165(i).
Additionally, the final rule removes
the requirement that covered banks
publicly disclose results under the
baseline scenario and adverse scenario.
The FDIC agrees with the commenters
that publicly disclosing the above items
under a baseline or adverse scenario
could be construed as long-term
earnings forecasts.

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H. Other Issues
In addition to the issues identified
above, the Corporation received a
number of comments that addressed a
wide range of other topics associated
with the proposed rule. A number of
commenters suggested establishing a
threshold to determine when a covered
bank that is a subsidiary of an
institution that is itself subject to stresstesting requirements would be required
to perform independent stress tests and
comply with the requirements of the
proposed rule. Commenters suggested
that the proposed rule may create
duplicative efforts when a subsidiary
covered bank comprises greater than 90
percent of its holding company’s total
consolidated assets. One of these
commenters suggested that in order to
eliminate duplicate stress testing, the
Corporation should accept the CCAR
and the Board of Governors’ Board FR
Y–14A form submissions for annual
stress tests of a covered bank that
comprises greater than 90 percent of its
bank holding company’s total
consolidated assets and that also serves
as the lead depository institution for the
bank holding company covered by the
CCAR process.
Another commenter noted that the
completion of the stress testing and
related supervisory evaluation process
should not hinder or delay covered
banks’ ability to take necessary strategic
capital actions not otherwise set forth in
previously approved capital plans. One
of the comments received requested that
the Corporation set forth a robust and
transparent process for responding to
inquiries in a timely manner and
suggested that experienced examiners
should offer instruction, assistances,
and feedback to facilitate the good faith
efforts of smaller banks to implement
the proposed rule. This commenter also
suggested that the Corporation offer a
dedicated email address that banks
could use to submit questions and
receive answers in a timely manner.
The FDIC has carefully considered the
comments and has made appropriate
revisions to the final rule as described
below.

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III. The Final Rule
The Corporation is now issuing this
final rule to implement the
requirements of section 165(i)(2) as
proposed in the NPR, with certain
modifications, as discussed below.
Under this final rule, FDIC-insured state
nonmember banks and FDIC-insured
state-chartered savings associations with
total consolidated assets of more than
$10 billion would be required to
conduct an annual stress test. The FDIC
is delaying the application of the annual
stress test requirements by one year for
state nonmember banks and statechartered savings associations with
consolidated assets of more than $10
billion but less than $50 billion.
A. The Purpose of the Annual Stress
Test
The FDIC views the stress tests
conducted under the final rule as
providing forward-looking information
to supervisors to assist in their overall
assessments of a covered bank’s capital
adequacy and to aid in identifying
downside risks and the potential impact
of adverse outcomes on the covered
bank. In addition, the FDIC may use
stress tests to determine whether
additional analytical techniques and
exercises are appropriate for a covered
bank to employ in identifying,
measuring, and monitoring risks to the
financial soundness of the covered
bank, and may require a covered bank
to implement such techniques and
exercises in conducting its stress tests.
Further, these stress tests are expected
to support ongoing improvement in a
covered bank’s internal assessments of
capital adequacy and overall capital
planning.
The FDIC expects that the annual
stress tests required under the final rule
will be only one component of the
broader stress testing activities
conducted by covered banks. In this
regard, the FDIC notes that the agencies
have recently issued final joint guidance
on ‘‘Stress Testing for Banking
Organizations with More Than $10
Billion in Total Consolidated Assets.’’ 5
These broader stress testing activities
should address the impact of a range of
potentially adverse outcomes across a
set of risk types affecting aspects of the
covered bank’s financial condition
including, but not limited to, capital
adequacy. In addition, a full assessment
of a covered bank’s capital adequacy
should take into account a range of
factors, including evaluation of its
capital planning processes, the
governance over those processes,
5 See

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regulatory capital measures, results of
supervisory stress tests where
applicable, and market assessments.
B. Applicability
The final rule will apply to covered
banks that are FDIC-insured state
nonmember banks and FDIC-insured
state savings associations with more
than $10 billion in total consolidated
assets. Covered banks will be required
conduct stress in accordance with the
requirements of the final rule. However,
the final rule separates a ‘‘covered
bank’’ into two categories: a state
nonmember bank or state savings
association that is either a $10 billion to
$50 billion covered bank or an over $50
billion covered bank. The final rule
defines a $10 billion to $50 billion
covered bank as any state nonmember
bank or state savings association with
average total consolidated assets that are
greater than $10 billion but less than
$50 billion. The final rule defines an
over $50 billion covered bank as any
state nonmember bank or state savings
association with average total
consolidated assets that are not less than
$50 billion. The stress testing, reporting,
and disclosure requirements, and
deadlines of the final rule differ
depending on whether the covered bank
is a $10 billion to $50 billion covered
bank or an over $50 billion covered
bank.
The FDIC recognizes that some
covered bank subsidiaries may be
affiliated with larger institutions also
subject to requirements for stress
testing, reporting, and disclosure. In
such cases, it may be less burdensome
and more appropriate for the covered
bank subsidiaries to follow the timing
requirements of their parent holding
companies. The final rule permits
covered bank subsidiaries to choose to
conduct their stress tests using the same
timeline requirements as their parent
holding companies.
A state nonmember bank or state
savings association becomes a covered
bank for purposes of the final rule based
on its total consolidated assets averaged
over each of the institution’s four most
recent consecutive quarters as reported
on its Call Reports. The date on which
a state nonmember bank or state savings
association becomes a covered bank is
the as-of date of the fourth consecutive
Call Report in which its reported
average total consolidated assets are
greater than $10 billion. Similarly, a
covered bank will remained subject to
the stress testing requirements of the
final rule until it has $10 billion or less
in total consolidated assets for each of
the four most recent consecutive
quarters as reported in the covered

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bank’s four most recently filed Call
Reports. Public comments requested
that the Corporation’s final rule be
consistent with the OCC’s and the
Board’s final rules under Section 165(i).
Therefore, in order to maintain
consistency with the OCC’s and the
Board’s final rules and to provide clarity
in the application of standards of
coverage, the Corporation will use the
measure described in the final rule to
determine whether an institution meets
the definition of a covered bank and at
which point a state nonmember bank or
state savings association ceases to be a
covered bank.
The date by which a state nonmember
bank or state savings association must
conduct its first annual stress test under
this final rule depends on its size
category and whether it becomes a
covered bank before or after the effective
date of this final rule. A state
nonmember bank or state savings
association that is subject to this final
rule as of October 15, 2012 must
conduct the annual stress test under this
final rule beginning this year if it is an
over $50 billion covered bank, whereas
a $10 billion to $50 billion covered bank
would conduct its first annual stress test
in 2013. Further, the final rule
requirement for public disclosure of a
summary of the stress testing results for
a $10 billion to $50 billion covered bank
will not occur until the 2014 stress test.
A state nonmember bank or state
savings association that becomes a
covered bank after October 15, 2012
would be required to conduct its first
annual stress test in the calendar year
following the year in which it becomes
a covered bank. For example, a bank for
which the four-quarter average of total
consolidated assets exceeded $10 billion
on its June 2013 Call Report (based on
the average from its September 2012,
December 2012, March 2013, and June
2013 Call Reports) would become a
covered bank on June 30, 2013, and
would conduct their first stress test in
2014.
C. Shell Holding Companies and MultiBank Holding Companies
When a covered bank comprises the
bulk of the assets for a given parent
holding company, the inputs to the
stress tests conducted by that institution
and the holding company, and the
conclusions reached, would be expected
to be similar. The FDIC expects to take
this into account in applying the
requirements of this rule. For example,
for a holding company that is essentially
a shell holding company with a single
state nonmember or state savings
association that has total consolidated
assets of more than $10 billion, the

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Board and the FDIC would coordinate
efforts and communicate with the
holding company and the covered bank
on how to adequately address their
respective stress testing requirements
while avoiding duplication of effort.
The FDIC recognizes that certain
parent company structures may include
one or more subsidiary banks or savings
associations, each with total
consolidated assets greater than $10
billion. The stress test requirements of
section 165(i)(2) apply to the parent
company and to each subsidiary bank or
savings association of the covered
company that has $10 billion or more in
total consolidated assets. The FDIC
anticipates addressing, on a case-by-case
basis through the supervisory process,
instances in which it may be
appropriate to modify stress testing
requirements when there are multiple
covered banks within a single parent
organization.
D. Scenarios
Under the final rule, each covered
bank would be required to conduct an
annual stress test using its financial data
as of September 30 of that year, unless
the FDIC communicates, in the fourth
quarter of that year, a different required
as-of date for any or all categories of
financial data. Additionally, the
Corporation could accelerate or extend
any specified deadline for stress testing
if the Corporation determined that such
modification is appropriate in light of
the institution’s activities, level of
complexity, scope of operations, risk
profile, or regulatory capital.
The stress test must assess the
potential impact of different scenarios
on the capital of the covered bank and
certain related items over a forwardlooking, nine-quarter planning horizon
(that is, through the December 31
reporting date of the second calendar
year following the year containing the
September 30 as-of date), taking into
account all relevant exposures and
activities.
The FDIC will provide a minimum of
three economic scenarios, (baseline,
adverse, and severely adverse), or such
additional scenarios as the FDIC
determines appropriate, no later than
November 15, which the covered bank
must use for the stress test. While each
scenario includes the paths of a number
of economic variables that are typically
considered in stress test models, the
FDIC expects that covered banks may
use all or a subset of the economic
variables provided, and may extrapolate
other variables (such as local economic
variables) from the paths of the
economic variables provided, as
appropriate, to conduct the stress test.

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62421

The FDIC may require a covered bank
to include one or more additional
scenarios in its stress test based on the
institutions activities, level of
complexity, risk profiles, scope of
operations and regulatory capital, in
addition to any other relevant factors.
The FDIC will notify the institution in
writing that it will be required to
include one or more additional
scenarios in its stress test, and the
notification will include a description of
the scenario and the basis for requiring
the institution to include the scenario in
its stress test.
The FDIC has established provisions
within the final rule that apply to
covered banks having significant trading
activities. For those covered banks, an
additional trading and counterparty risk
scenario may be included as a
component of their stress test scenarios.
The FDIC will select an as-of date
between October 1 and December 1 of
that calendar year for the trading and
counterparty risk scenario which will be
communicated to the covered bank no
later than December 1. This provision is
necessary to allow the FDIC to tailor the
scenarios and other stress test
requirements for those covered banks to
ensure that the stress tests provide a
meaningful identification of downside
risks and assessment of the potential
impact of adverse outcomes on the
covered bank’s capital. Typically, the
scenarios would include market price
and rate ‘‘shocks’’ consistent with
historical or hypothetical adverse
market events.
The FDIC expects that the annual
stress test scenarios will be revised from
time to time to ensure that each scenario
remains relevant under current
economic and industry conditions. The
FDIC will consult closely with the
Board and OCC on the development of
the annual stress test scenarios to ensure
consistent and comparable stress tests
for all covered financial institutions and
to minimize regulatory burden.
The FDIC expects to issue for
comment proposed guidance and
procedures for scenario development at
a later date.
E. Stress Test Methodologies and
Practices
The final rule requires each covered
bank to use the annual stress test
scenarios provided by the FDIC in
conducting its annual stress tests. Each
covered bank must use a planning
horizon of at least nine quarters over
which the impact of specified scenarios
would be assessed. The nine-quarter
planning horizon would permit the
covered bank to make informed
projections of its financial and capital

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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Rules and Regulations

positions for a two-calendar-year period.
The covered bank is required to
calculate, for each quarter-end within
the planning horizon, estimates of
losses, pre-provision net revenues, net
income, and provision for loan and
lease losses that result from the
conditions specified in each scenario.
Such a covered bank also is required to
calculate, for each quarter-end within
the planning horizon, the potential
impact on its capital levels and
regulatory capital ratios applicable to
the institution under 12 CFR Part 325
(and any other capital ratios specified
by the Corporation), incorporating the
effects of any expected capital actions
over the planning horizon.
The final rule also requires the senior
management of each covered bank to
establish and maintain a system of
controls, oversight, and documentation,
including policies and procedures,
designed to ensure that the stress testing
processes used by the covered bank are
effective in meeting the requirements of
the final rule. The covered bank’s
policies and procedures must, at a
minimum, outline the covered bank’s
stress testing practices and
methodologies, and processes for
validating and updating its stress testing
practices consistent with applicable
laws, regulations and supervisory
guidance.6 The covered bank’s board of
directors (or a committee thereof) must
approve and review the policies and
procedures of the stress testing
processes as frequently as economic
conditions may warrant, but no less
than annually. The covered bank’s
board of directors and senior
management must receive a summary of
the results of the annual stress test.

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F. Reporting and Disclosures
Section 165(i)(2)(B) requires a covered
bank to submit a report to the Board and
its primary financial regulatory agency
at such time, in such form, and
containing such information as the
primary financial regulatory agency
shall require. Section 165(i)(2)(C)(iv)
mandates that the primary financial
regulatory agencies require a covered
bank to publish a summary of its stress
test results.
The final rule requires that each over
$50 billion covered bank submit a report
of the stress test results and
documentation to the FDIC and to the
6 See Supervisory Guidance on Stress Testing for
Banking Organizations With More Than $10 Billion
in Total Consolidated Assets, 77 FR 29458 (May 17,
2012).

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Board by January 5. The FDIC published
for notice and comment specific annual
stress test reporting requirements for
over $50 billion covered banks in a
separate information collection under
the Paperwork Reduction Act (44 U.S.C.
3501–3521).7 The Corporation plans to
publish for comment separately the
required report for covered banks with
total consolidated assets of more than
$10 billion but less than $50 billion. For
$10 billion to $50 billion covered banks,
the final rule requires that each bank
submit a report of the stress test results
to the FDIC and to the Board by March
31.
The confidentiality of information
submitted to the Corporation under the
final rule will be determined in
accordance with applicable law
including any available exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the FDIC’s Rules
and Regulations regarding the
Disclosure of Information (12 CFR Part
309).
Based on information submitted by a
covered bank in the required report to
the Corporation, as well as other
relevant information, the Corporation
will conduct an analysis of the quality
of the bank’s stress test processes and
related results. The Corporation
envisions that feedback concerning such
analysis will be provided to a covered
bank through the supervisory process.
In addition, each covered bank must
consider the results of the stress tests
conducted under the final rule in the
normal course of business including,
but not limited to, the banking
organization’s capital planning,
assessment of capital adequacy, and risk
management practices. The Corporation
may also require other actions
consistent with safety and soundness of
the covered bank.
Consistent with section 165(i)(2), the
final rule also requires each covered
bank to publish a summary of the
results of its annual stress tests after
submitting its annual stress test report
to the FDIC and the Board. Under the
final rule, a $10 billion to $50 billion
covered bank must publish a summary
of the results of its annual stress test
from the period beginning on June 15
and ending June 30 and an over $50
billion covered bank must publish its
summary disclosures from the period
beginning on March 15 and ending on
March 31.
7 77

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FR 52718 (Aug. 30, 2012).

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The timing of the disclosures in the
final rule has changed from the timing
sequence proposed in the NPR. The
proposed rule would have required all
disclosures to be made no later than
April 5. The final rule extends the
disclosure due date for $10 billion to
$50 billion covered banks to June 30.
Therefore, this final rule replaces the
specific disclosure due date with a 15day period in which disclosures must be
made. This change ensures adequate
time for review of stress test results
prior to disclosure.
The summary may be published on a
covered bank’s Web site or any other
forum that is reasonably accessible to
the public. The required information
publicly disclosed by each covered bank
for the severely adverse scenario, at a
minimum, includes:
i. A description of the types of risks
being included in the stress test;
ii. A summary description of the
methodologies used in the stress test;
iii. Estimates of aggregate losses, preprovision net revenue, net income,
provision for loan and lease losses,
capital ratios (including regulatory and
any other capital ratios specified by the
FDIC); and
iv. An explanation of the most
significant causes for the changes in
regulatory capital ratios, such as the
amount of losses attributable to a
particular portfolio.
Covered banks that are consolidated
subsidiaries of a bank holding company
or savings and loan holding company
will be permitted to publish abbreviated
disclosures with the parent’s summary
and on the same timeline as the parent
holding company. These disclosures
will include a summary of changes in
regulatory capital ratios of the
depository institution subsidiary over
the planning horizon, including an
explanation of the most significant
causes for changes in regulatory capital
ratios, such as the amount of losses
attributable to a particular portfolio.
However, the FDIC reserves the right to
require additional disclosures if the
FDIC believes that the disclosures at the
holding company level do not
accurately capture the potential impact
of the scenarios on the condition of the
covered bank.
G. Summary of Steps for Annual Stress
Test
The table below describes the steps
and timeframes for the annual stress test
for covered banks.

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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Rules and Regulations
Process Overview of Annual Stress Test (Using Data as of September 30th)
Step

Timeframe for over $50 billion covered
banks

1. FDIC provides covered banks with scenarios for annual stress tests.
2. Covered banks submit required regulatory reports to
the FDIC on their stress tests.
3. Covered banks make required public disclosures .......

No later than November 15th ...................

No later than November 15th.

No later than January 5th .........................

No later than March 31st.8

Between March 15th and March 31st ......

Between June 15th and June 30th.

H. Administrative Law Matters
Administrative Procedure Act
The final rule will be effective
immediately upon publication in the
Federal Register. Section 553(d)(3) of
the Administrative Procedure Act
(‘‘APA’’) provides that publication of a
rule shall be made not less than 30 days
before its effective date, except ‘‘* * *
(3) as otherwise provided by the agency
for good cause found and published
with the rule.’’ Consistent with section
553(d)(3) and for the reasons discussed
below, the FDIC finds good cause exists
to publish this final rule with an
immediate effective date.9
The FDIC believes the final rule is
necessary to address the continuing
exposure of the banking industry to
potentially adverse economic
conditions. The FDIC expects that all
covered banks should have the capacity
to understand their risks and the
potential impact of stressful events and
circumstances on their financial
condition. The stress test requirements
contained in the final rule will help
covered banks and the FDIC to better
understand such banks’ financial
condition in stressed environments,
including the potential impact on
covered banks’ capital adequacy.
Further, stress tests serve as an ongoing
risk management tool that supports a
covered bank’s forward-looking
assessment of its risks and better equips

such organizations to address a range of
adverse outcomes. As adverse economic
conditions can occur quickly, the
process of stress testing needs to begin
promptly. Ensuring that covered banks
are prepared for adverse economic
situations is essential for their health
and the overall financial stability of the
economy. Accordingly, the FDIC finds
good cause for the final rule to take
effect immediately upon publication in
the Federal Register.
Paperwork Reduction Act Analysis
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (‘‘PRA’’)
prohibits the Corporation from
conducting or sponsoring, and
respondents are not required to respond
to, an information collection unless it
displays a currently valid Office of
Management and Budget (‘‘OMB’’)
control number. In accordance with the
PRA, the Corporation published notice
of the proposed information collection
for over $50 billion covered banks on
August 30, 2012.10 Following the close
of the sixty-day comment period
associated with the Corporation’s
proposed information collection notice,
the Corporation will review the public
comments and submit a proposed
information collection to the OMB
director for approval. If approved,
covered banks would then be subject to
the Corporation’s stress test reporting
requirements contained in the final rule.

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Number of
respondents

Timeframe for $10 billion to $50 billion
covered banks

Additionally, prior to the 2013 stress
test, the Corporation intends to publish
in the Federal Register a proposed
information collection notice for $10
billion to $50 billion covered banks.
Title of Information Collection:
Annual Stress Test Reporting Template
and Documentation for Covered Banks
under the Dodd-Frank Wall Street
Reform and Consumer Protection Act.
For over $50 billion covered banks,
following the close of the sixty-day
comment period associated with the
Corporation’s proposed information
collection notice, the Corporation will
submit its proposed information
collection to the OMB director for
approval. For $10 billion to $50 billion
covered banks, the Corporation will
submit a proposed information
collection to OMB following the
publication and 60-day comment period
of a proposed information collection
notice for $10 billion to $50 billion
covered banks.
OMB Number: 3064–0187.
Frequency of Response: Annually.
Affected Public: State nonmember
banks and state savings associations
supervised by the Corporation with
more than $10 billion in total
consolidated assets.
Estimated Total Burden (includes all
covered banks):
The estimated burden for the
reporting and disclosure requirements is
as follows:
Annual
frequency

Hourly
estimate

Total hours

Initial Paperwork Burden:
Initial Report .............................................................................................

25

1

2,000

50,000

Total ...................................................................................................

25

1

2,000

50,000

Ongoing Paperwork Burden:
Annual Report ...........................................................................................

25

1

1,040

26,000

Total ...................................................................................................

25

1

1,040

26,000

Abstract: The information collection
requirements are found in sections
325.205, 325.206, and 325.207 of the

final rule. These requirements
implement the stress testing and stress
testing reporting requirements set forth

8 A covered bank subsidiary may elect to report
and issue its required public disclosure on its

parent bank holding company’s or savings and loan
holding company’s timeline.

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in Section 165(i) of the Dodd-Frank Act.
Section 325.205(a) identifies the
calculations of the potential impact on
95

U.S.C. 553(d)(3).
FR 52718 (Aug. 30, 2012).

10 77

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capital that must be made during each
quarter of the planning horizon. Section
325.205(c) requires that each covered
bank must establish and maintain a
system of controls, oversight, and
documentation, including policies and
procedures that describe the covered
bank’s stress test practices and
methodologies, as well as processes for
updating such bank’s stress test
practices. Section 325.206 sets forth the
requirements for stress test reports to be
filed annually with the Corporation and
the Board in the time, manner, and form
specified by the Corporation. Section
325.207 requires that a covered bank
must publish a summary of the results
of its annual stress tests. The summary
must include a description of the types
of risks being included in the stress test,
a summary description of the
methodologies used in the stress test,
and estimates of losses, pre-provision
net revenue, provision for loan and
lease losses, net income and pro forma
capital ratios (including regulatory and
any other capital ratios specified by the
FDIC) over the planning horizon, under
the severely adverse scenario.

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Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the
Regulatory Flexibility Act (‘‘RFA’’),11
the regulatory flexibility analysis
otherwise required under section 604 of
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 for purposes of the RFA to
include banks with assets less than or
equal to $175 million) 12 and publishes
its certification and a short, explanatory
statement in the Federal Register along
with its rule. For the reasons provided
below, the FDIC certifies that the final
rule does not have a significant
economic impact on a substantial
number of small entities. Since the final
rule applies only to state nonmember
banks and state savings associations
with more than $10 billion in total
consolidated assets, the Corporation
does not expect that the final rule will
directly affect a substantial number of
small entities. Accordingly, a regulatory
flexibility analysis is not required.
Plain Language
Section 722 of the Gramm-LeachBliley Act 13 requires federal banking
agencies to use plain language in all
proposed and final rules published after
January 1, 2000. The Corporation sought
11 5

U.S.C. 605(b).
U.S.C. 601, et seq.
13 Public Law 106–102, 113 Stat. 1338, 1471, 12
U.S.C. 4809 (1999).
12 5

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to present the proposed rule in a simple
and straightforward manner and invited
comment on how to make the proposed
rule easier to understand. The FDIC
received no comments on the use of
plain language.
Riegle Community Development and
Regulatory Improvement Act
Section 302 of Riegle Community
Development and Regulatory
Improvement Act (‘‘RCDRIA’’) generally
requires that regulations prescribed by
federal banking agencies which impose
additional reporting, disclosures or
other new requirements on insured
depository institutions take effect on the
first day of a calendar quarter which
begins on or after the date on which the
regulations are published in final form
unless an agency finds good cause that
the regulations should become effective
sooner. The final rule will be effective
immediately upon publication in the
Federal Register. The first day of a
calendar quarter which begins on or
after the date on which the regulations
are published will be January 1, 2013.
Accordingly, the FDIC invokes the good
cause exception to the publication
requirement because the final rule is
necessary to address the continuing
exposure of the banking industry to
potentially adverse economic factors.
For the same reasons discussed in
support of the good cause waiver from
the 30-day delayed effective date
required by the APA, the FDIC finds
that good cause exists for an immediate
effective date for the final rule.
Small Business Regulatory Enforcement
Fairness Act
The Office of Management and Budget
has determined that the final rule is not
a ‘‘major rule’’ within the meaning of
the relevant sections of the Small
Business Regulatory Enforcement
Fairness Act of 1996 14 (‘‘SBREFA’’). As
required by SBREFA, the FDIC will file
the appropriate reports with Congress
and the Government Accountability
Office so that the final rule may be
reviewed.
List of Subjects in 12 CFR Part 325
Administrative practice and
procedure, banks, banking, Federal
Deposit Insurance Corporation,
reporting and recordkeeping
requirements, state savings associations,
stress tests.
Authority and Issuance
The Corporation amends part 325 of
chapter III of title 12 of the Code of
Federal Regulations as follows:
14 5

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U.S.C. 801, et seq.

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PART 325—CAPITAL MAINTENANCE
1. The authority citation for part 325
is revised to read as follows:

■

Authority: 12 U.S.C. 1815(a), 1815(b),
1816, 1818(a), 1818(b), 1818(c), 1818(t),
1819(Tenth), 1828(c), 1828(d), 1828(i),
1828(n), 1828(o), 1831o, 1831p-1, 1835, 3907,
3909, 4808; Pub. L. 102–233, 105 Stat. 1761,
1789, 1790 (12 U.S.C. 1831n note); Pub. L.
102–242, 105 Stat. 2236, as amended by Pub.
L. 103–325, 108 Stat. 2160, 2233 (12 U.S.C.
1828 note); Pub. L. 102–242, 105 Stat. 2236,
2386, as amended by Pub. L. 102–550, 106
Stat. 3672, 4089 (12 U.S.C. 1828 note); 12
U.S.C. 5365(i); 12 U.S.C. 5412(b)(2)(B).
■

2. Add subpart C to read as follows:

Subpart C—Annual Stress Test
Sec.
325.201 Authority, purpose, and
reservation of authority.
325.202 Definitions.
325.203 Applicability.
325.204 Annual stress tests required.
325.205 Methodologies and practices.
325.206 Required reports of stress test
results to the FDIC and the Board of
Governors of the Federal Reserve
System.
325.207 Publication of stress test results.

Subpart C—Annual Stress Test
§ 325.201 Authority, purpose, and
reservation of authority.

(a) Authority. This subpart is issued
by the Federal Deposit Insurance
Corporation (the ‘‘Corporation’’ or
‘‘FDIC’’) under 12 U.S.C. 5365(i)(2), 12
U.S.C. 5412(b)(2)(B), 12 U.S.C. 1818, 12
U.S.C. 1819(a)(Tenth), 12 U.S.C. 1831o,
and 12 U.S.C. 1831p-1.
(b) Purpose. This subpart implements
12 U.S.C. 5365(i)(2), which requires the
Corporation (in coordination with the
Board of Governors of the Federal
Reserve System (‘‘Board’’) and the
Federal Insurance Office) to issue
regulations that require each covered
bank to conduct annual stress tests and
establishes a definition of stress test,
methodologies for conducting stress
tests, and reporting and disclosure
requirements.
(c) Reservation of authority.
Notwithstanding any other provisions of
this subpart, the Corporation may
modify some or all of the requirements
of this subpart.
(1) The Corporation may accelerate or
extend any deadline for stress testing,
reporting, or publication of the stress
test results.
(2) The Corporation may require
different or additional tests not
otherwise required by this subpart or
may require or permit different or
additional analytical techniques and
methodologies, different or additional
scenarios (including components for the

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scenarios), or different assumptions for
the covered bank to use in meeting the
requirements of this subpart. In
addition, the FDIC may specify a
different as-of date for any or all
categories of financial data used by the
stress test.
(3) The Corporation may modify the
reporting requirements of a report under
this subpart or may require additional
reports. The Corporation may modify
the publication requirements of this
subpart and or may require different or
additional publication disclosures.
(4) Factors considered: Any exercise
of authority under this section by the
Corporation will be in writing and will
consider the activities, level of
complexity, risk profile, scope of
operations, and the regulatory capital of
the covered bank, in addition to any
other relevant factors.
(5) Notice and comment procedures:
In exercising its authority to require
different or additional stress tests and
different or additional scenarios
(including components for the
scenarios) under paragraph (c)(2) of this
section, the Corporation will apply
notice and response procedures in the
same manner and to the same extent as
the notice and response procedures in
12 CFR 325.6, as appropriate.
(6) Nothing in this subpart limits the
authority of the Corporation under any
other provision of law or regulation to
take supervisory or enforcement action,
including action to address unsafe and
unsound practices or conditions, or
violations of law or regulation.

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§ 325.202

Definitions.

For purposes of this subpart—
(a) Adverse scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
bank that are more adverse than those
associated with the baseline scenario
and may include trading or other
additional components.
(b) Average total consolidated assets
means the average of the covered bank’s
total consolidated assets, as reported on
the covered bank’s Consolidated Report
of Condition and Income (Call Report)
for the four most recent consecutive
quarters. If the covered bank has not
filed a Call Report for each of the four
most recent consecutive quarters, the
covered bank’s average total
consolidated assets means the average of
the covered bank’s total consolidated
assets, as reported on the covered bank’s
Call Reports, for the most recent one or
more consecutive quarters. The date on
which the state nonmember bank or the
state savings association becomes a
covered bank will be the as-of date of

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the most recent Call Report used in the
calculation of the average.
(c) Baseline scenario means a set of
conditions that affect the U.S. economy
or the financial condition of a covered
bank, and that reflect the consensus
views of the economic and financial
outlook.
(d) Covered bank means any state
nonmember bank or state savings
association subject to the following
categories:
(1) $10 billion to $50 billion covered
bank. Any state nonmember bank or
state savings association with average
total consolidated assets calculated as
required under this subpart that are
greater than $10 billion but less than
$50 billion.
(2) Over $50 billion covered bank.
Any state nonmember bank or state
savings association with average total
consolidated assets calculated as
required under this subpart that are not
less than $50 billion.
(e) Planning horizon means the period
of at least nine quarters over which the
relevant projections extend.
(f) Pre-provision net revenue means
the sum of net interest income and noninterest income, less expenses, before
adjusting for loss provisions.
(g) Provision for loan and lease losses
means the provision for loan and lease
losses as reported by the covered bank
on its Call Report.
(h) Regulatory capital ratio means a
capital ratio for which the Corporation
established minimum requirements by
regulation or order, including the
leverage ratio and tier 1 and total riskbased capital ratios applicable to that
covered bank as calculated under the
Corporation’s regulations.
(i) Scenarios are those sets of
conditions that affect the U.S. economy
or the financial condition of a covered
bank that the Corporation annually
determines are appropriate for use in
the company-run stress tests, including,
but not limited to, baseline, adverse,
and severely adverse scenarios.
(j) Severely adverse scenario means a
set of conditions that affect the U.S.
economy or the financial condition of a
covered bank and that overall are more
severe than those associated with the
adverse scenario and may include
trading or other additional components.
(k) State nonmember bank and state
savings association have the same
meanings as those terms are defined in
section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(l) Stress test means the process to
assess the potential impact of scenarios
on the consolidated earnings, losses,
and capital of a covered bank over the
planning horizon, taking into account

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the current condition of the covered
bank and the covered bank’s risks,
exposures, strategies, and activities.
§ 325.203

Applicability.

(a) First stress test for covered banks
subject to stress testing requirements as
of October 15, 2012.
(1) A $10 billion to $50 billion
covered bank as of October 15, 2012
must conduct its first stress test under
this subpart using financial statement
data as of September 30, 2013, and
report the results of its stress test on or
before March 31, 2014.
(2) A $10 billion to $50 billion
covered bank that is subject to its first
annual stress test pursuant to section
203(a)(1) of this subpart must make its
initial public disclosure in the period
starting June 15 and ending June 30 of
2015, by disclosing the results of a stress
test conducted in 2014, using financial
statement data as of September 30, 2014.
(3) A state nonmember bank or state
savings association that is an over $50
billion covered bank as of October 15,
2012, must conduct its first stress test
under this subpart using financial
statement data as of September 30, 2012,
and report the results of its stress test on
or before January 5, 2013.
(b) Covered banks that become subject
to stress testing requirements after
October 15, 2012. A state nonmember
bank or state savings association that
becomes a covered bank after October
15, 2012 will conduct its first annual
stress test under this subpart beginning
in the next calendar year after the date
the state nonmember bank or state
savings association becomes a covered
bank.
(c) Ceasing to be a covered bank or
changing categories. (1) A covered bank
will remain subject to the stress test
requirements based on its applicable
category unless and until total
consolidated assets of the covered bank
falls below the relevant size threshold
for each of four consecutive quarters as
reported on the covered bank’s most
recent Call Reports. The calculation will
be effective on the as-of date of the
fourth consecutive Call Report.
(2) Notwithstanding paragraph (c)(1)
of this section, a state nonmember bank
or state savings association that migrates
from a $10 billion to $50 billion covered
bank to an over $50 billion covered
bank will be subject to the stress test
requirements applicable to an over $50
billion covered bank immediately as of
the date the state nonmember bank or
state savings association satisfies the
size threshold for an over $50 billion
covered bank.
(d) Covered bank subsidiaries of a
bank holding company or savings and

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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Rules and Regulations

loan holding company subject to annual
stress test requirements. (1)
Notwithstanding the requirements
applicable to covered banks under this
section, a covered bank that is a
consolidated subsidiary of a bank
holding company or savings and loan
holding company that is required to
conduct an annual company-run stress
test under applicable regulations of the
Board of Governors of the Federal
Reserve System may elect to conduct its
stress test and report to the FDIC on the
same timeline as its parent bank holding
company or savings and loan holding
company.
(2) A covered bank that elects to
conduct its stress test under paragraph
(d)(1) of this section will remain subject
to the same timeline requirements of its
parent company until otherwise
approved by the FDIC.

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§ 325.204

Annual stress tests required.

(a) General requirements. (1) $10
billion to $50 billion covered bank. A
$10 billion to $50 billion covered bank
must conduct a stress test on or before
March 31 of each calendar year based on
financial data as of September 30 of the
preceding calendar year.
(2) Over $50 billion covered bank. An
over $50 billion covered bank must
conduct a stress test on or before
January 5 of each calendar year based on
financial data as of September 30 of the
preceding calendar year.
(b) Scenarios provided by the
Corporation. In conducting the stress
test under this subpart, each covered
bank must use the scenarios provided
the Corporation. The scenarios provided
by the Corporation will reflect a
minimum of three sets of economic and
financial conditions, including:
Baseline, adverse, and severely adverse
scenarios. The Corporation will provide
a description of the scenarios required
under this section to each covered bank
no later than November 15 of that
calendar year.
(c) Significant trading activities. The
Corporation may require a covered bank
with significant trading activities, as
determined by the Corporation, to
include a trading and counterparty
component for the scenarios used in its
stress test. The trading and counterparty
position data used in this component of
the scenarios will be as of a date
between October 1 and December 1 of
that calendar year selected by the
Corporation and communicated to the
covered bank no later than December 1
of the calendar year.
§ 325.205

Methodologies and practices.

(a) Potential impact on capital. In
conducting a stress test under this

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subpart, during each quarter of the
planning horizon, each covered bank
must estimate the following for each
scenario required to be used:
(1) Pre-provision net revenues, losses,
loan loss provisions and net income;
and
(2) The potential impact on the
regulatory capital levels and ratios
applicable to the covered bank, and any
other capital ratios specified by the
Corporation, incorporating the effects of
any capital action over the planning
horizon and maintenance of an
allowance for loan losses appropriate for
credit exposures throughout the
planning horizon.
(b) Controls and oversight of stress
testing processes. (1) The senior
management of a covered bank must
establish and maintain a system of
controls, oversight, and documentation,
including policies and procedures, that
are designed to ensure that its stress test
processes satisfy the requirements in
this subpart. These policies and
procedures must, at a minimum,
describe the covered bank’s stress test
practices and methodologies, and
processes for validating and updating
the covered bank’s stress test practices
and methodologies consistent with
applicable laws, regulations, and
supervisory guidance.
(2) The board of directors, or a
committee thereof, of a covered bank
must approve and review the policies
and procedures of the stress testing
processes as frequently as economic
conditions or the condition of the
covered bank may warrant, but no less
than annually. The board of directors
and senior management of the covered
bank must receive a summary of the
results of the stress test.
(3) The board of directors and senior
management of each covered bank must
consider the results of the stress tests in
the normal course of business, including
but not limited to, the covered bank’s
capital planning, assessment of capital
adequacy, and risk management
practices.
§ 325.206 Required reports of stress test
results to the FDIC and the Board of
Governors of the Federal Reserve System.

(a) Report required for annual stress
test results—(1) $10 billion to $50
billion covered bank. A $10 billion to
$50 billion covered bank must report to
the FDIC and to the Board on or before
March 31 the results of the stress test in
the manner and form specified by the
FDIC.
(2) Over $50 billion covered bank. An
over $50 billion covered bank must
report to the FDIC and to the Board, on
or before January 5, the results of the

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stress test in the manner and form
specified by the FDIC.
(b) Content of reports. (1) The reports
required under paragraph (a) of this
section must include under the baseline
scenario, adverse scenario, severely
adverse scenario and any other scenario
required by the Corporation under this
subpart, a description of the types of
risks being included in the stress test, a
summary description of the
methodologies used in the stress test,
and, for each quarter of the planning
horizon, estimates of aggregate losses,
pre-provision net revenue, provision for
loan and lease losses, net income, and
pro forma capital ratios (including
regulatory and any other capital ratios
specified by the FDIC). In addition, the
report must include an explanation of
the most significant causes for the
changes in regulatory capital ratios and
any other information required by the
Corporation.
(2) The description of aggregate losses
and net income must include the
cumulative losses and cumulative net
income over the planning horizon, and
the description of each regulatory
capital ratio must include the beginning
value, ending value, and minimum
value of each ratio over the planning
horizon.
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Corporation under this subpart
and related materials will be determined
in accordance with applicable law
including any available exemptions
under the Freedom of Information Act
(5 U.S.C. 552(b)) and the FDIC’s Rules
and Regulations regarding the
Disclosure of Information (12 CFR Part
309).
§ 325.207
results.

Publication of stress test

(a) Publication date. (1) A $10 billion
to $50 billion covered bank must
publish a summary of the results of its
annual stress test in the period starting
June 15 and ending June 30.
(2) An over $50 billion covered bank
must publish a summary of the results
of its annual stress tests in the period
starting March 15 and ending March 31.
(b) Publication method. The summary
required under this section may be
published on the covered bank’s Web
site or in any other forum that is
reasonably accessible to the public. A
covered bank that is a consolidated
subsidiary of a bank holding company
or savings and loan holding company
that is required to conduct an annual
company-run stress test under
applicable regulations of the Board of
Governors of the Federal Reserve

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Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / Rules and Regulations
System will be deemed to have satisfied
the public disclosure requirements
under this subpart if it publishes a
summary of its stress test results with its
parent bank holding company’s or
savings and loan holding company’s
summary of stress test results.
Subsidiary covered banks electing to
satisfy their public disclosure
requirement in this manner must
include a summary of changes in
regulatory capital ratios of such covered
bank over the planning horizon, and an
explanation of the most significant
causes for the changes in regulatory
capital ratios.
(c) Information to be disclosed in the
summary. A covered bank must disclose
the following information regarding the
severely adverse scenario if it is not a
consolidated subsidiary of a parent bank
holding company or savings and loan
holding company that has elected to
make its disclosure under section
203(d):
(1) A description of the types of risks
included in the stress test;
(2) A summary description of the
methodologies used in the stress test;
(3) Estimates of aggregate losses, preprovision net revenue, provision for
loan and lease losses, net income, and
pro forma capital ratios (including
regulatory and any other capital ratios
specified by the FDIC); and
(4) An explanation of the most
significant causes for the changes in the
regulatory capital ratios.
(d) Content of results. (1) The
disclosure of aggregate losses, preprovision net revenue, provisions for
loan and lease losses, and net income
under this section must be on a
cumulative basis over the planning
horizon.
(2) The disclosure of regulatory
capital ratios and any other capital
ratios specified by the Corporation
under this section must include the
beginning value, ending value, and
minimum value of each ratio over the
planning horizon.

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Dated at Washington, DC, this 9th day of
October, 2012.
By order of the Board of Directors.
Robert E. Feldman,
Executive Secretary, Federal Deposit
Insurance Corporation.
[FR Doc. 2012–25194 Filed 10–12–12; 8:45 am]
BILLING CODE 6714–01–P

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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 97
[Docket No. 30865; Amdt. No. 3500]

Standard Instrument Approach
Procedures, and Takeoff Minimums
and Obstacle Departure Procedures;
Miscellaneous Amendments
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:

This rule establishes, amends,
suspends, or revokes Standard
Instrument Approach Procedures
(SIAPs) and associated Takeoff
Minimums and Obstacle Departure
Procedures for operations at certain
airports. These regulatory actions are
needed because of the adoption of new
or revised criteria, or because of changes
occurring in the National Airspace
System, such as the commissioning of
new navigational facilities, adding new
obstacles, or changing air traffic
requirements. These changes are
designed to provide safe and efficient
use of the navigable airspace and to
promote safe flight operations under
instrument flight rules at the affected
airports.
DATES: This rule is effective October 15,
2012. The compliance date for each
SIAP, associated Takeoff Minimums,
and ODP is specified in the amendatory
provisions.
The incorporation by reference of
certain publications listed in the
regulations is approved by the Director
of the Federal Register as of October 15,
2012.
ADDRESSES: Availability of matter
incorporated by reference in the
amendment is as follows:
For Examination—
1. FAA Rules Docket, FAA
Headquarters Building, 800
Independence Avenue SW.,
Washington, DC 20591;
2. The FAA Regional Office of the
region in which the affected airport is
located;
3. The National Flight Procedures
Office, 6500 South MacArthur Blvd.,
Oklahoma City, OK 73169 or,
4. The National Archives and Records
Administration (NARA). For
information on the availability of this
material at NARA, call 202–741–6030,
or go to:http://www.archives.gov/
federal_register/
code_of_federal_regulations/
ibr_locations.html.
Availability—All SIAPs are available
online free of charge. Visit nfdc.faa.gov
SUMMARY:

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to register. Additionally, individual
SIAP and Takeoff Minimums and ODP
copies may be obtained from:
1. FAA Public Inquiry Center (APA–
200), FAA Headquarters Building, 800
Independence Avenue SW.,
Washington, DC 20591; or
2. The FAA Regional Office of the
region in which the affected airport is
located.
FOR FURTHER INFORMATION CONTACT:

Richard A. Dunham III, Flight Procedure
Standards Branch (AFS–420) Flight
Technologies and Programs Division,
Flight Standards Service, Federal
Aviation Administration, Mike
Monroney Aeronautical Center, 6500
South MacArthur Blvd., Oklahoma City,
OK. 73169 (Mail Address: P.O. Box
25082 Oklahoma City, OK. 73125)
telephone: (405) 954–4164.
SUPPLEMENTARY INFORMATION: This rule
amends Title 14, Code of Federal
Regulations, Part 97 (14 CFR part 97) by
amending the referenced SIAPs. The
complete regulatory description of each
SIAP is listed on the appropriate FAA
Form 8260, as modified by the National
Flight Data Center (FDC)/Permanent
Notice to Airmen (P–NOTAM), and is
incorporated by reference in the
amendment under 5 U.S.C. 552(a), 1
CFR part 51, and § 97.20 of Title 14 of
the Code of Federal Regulations.
The large number of SIAPs, their
complex nature, and the need for a
special format make their verbatim
publication in the Federal Register
expensive and impractical. Further,
airmen do not use the regulatory text of
the SIAPs, but refer to their graphic
depiction on charts printed by
publishers of aeronautical materials.
Thus, the advantages of incorporation
by reference are realized and
publication of the complete description
of each SIAP contained in FAA form
documents is unnecessary. This
amendment provides the affected CFR
sections and specifies the types of SIAP
and the corresponding effective dates.
This amendment also identifies the
airport and its location, the procedure
and the amendment number.
The Rule
This amendment to 14 CFR part 97 is
effective upon publication of each
separate SIAP as amended in the
transmittal. For safety and timeliness of
change considerations, this amendment
incorporates only specific changes
contained for each SIAP as modified by
FDC/P–NOTAMs.
The SIAPs, as modified by FDC P–
NOTAM, and contained in this
amendment are based on the criteria
contained in the U.S. Standard for

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